VAT refunds in Vietnam are a key aspect of doing business in the country that foreign entrepreneurs must comply with. Although the standard VAT rate in Vietnam is 10%, it was reduced briefly in 2022 to recover from the COVID-19 pandemic hardship. The National Assembly approved a resolution on fiscal and monetary policies. The Vietnam authorities reduced VAT by 2%, making the standard rate 8% until the end of 2024 to stimulate the economic growth of the country.
Read More about InCorp Vietnam’s Comprehensive Accounting Outsourcing Services
Later in April 2023, the Vietnam VAT refund was initiated to ease the financial burden on businesses in the country. In this article, we have discussed the many rules related to VAT tax refunds, including how to claim VAT.
Overview of VAT in Vietnam
In Vietnam, VAT is regulated by the country’s Law on Value-Added Tax. According to the law, companies should finalize, declare, and submit their VAT to the local authorities. This can be either done through accounting outsourcing consultancy services like InCorp Vietnam or the company’s accountants.
This VAT can be calculated in two ways: the direct credit method used by specific industries, like gemstone and gold processing, and the indirect credit method that most companies use. The payable VAT of companies is the VAT that remains after the input VAT is deducted from the output VAT.
This output VAT is the value-added tax imposed on the consumers who use the company’s goods and services. It is added to the price of the goods on the receipts. On the contrary, the input VAT is levied on the company when it buys raw materials, equipment, and other products from the suppliers to do business. Subtracting input VAT while calculating the payable VAT ensures that the VAT for these materials is eradicated since the company isn’t the end consumer of the products.
Read More: Value-Added Tax in Vietnam: Guide to Navigating VAT for Business Success
What is Vietnam’s VAT Refund and Reduction?
Vietnam VAT refund is defined as the amount of VAT the taxpayer gets from the state budget due to certain issues, like the company miscalculating and overpaying their VAT. However, the Vietnamese government can also offer VAT returns as tax reductions to promote business growth.
As per the new law, foreigners and overseas Vietnamese companies can claim VAT refunds for purchases made in Vietnam while leaving the country. This can be done at the point of sale by furnishing the invoice you get at the VAT refund stores when you purchase goods.
The invoice from the VAT refund stores acts as the tax declaration here. You can also claim a VAT tax refund at the VAT Refund Office for Foreigners Counter by providing your passport, boarding pass, tax invoice, and unused goods details. After inspection of the documents, the Vietnamese authorities will sign a confirmation letter and issue you the VAT refunds in cash.
Under this plan, foreigners can file for a VAT refund within 60 days of departure. They can get up to 85% VAT refunds in Vietnamese currency for paying VAT on eligible goods at the VAT refund stores.
Eligibility for VAT Refund Vietnam
A VAT refund in Vietnam is issued to a company when its total input VAT for 4 quarters or 12 months has not been deducted from its output VAT. This is because the company didn’t file the input VAT deductions, resulting in an overpayment in its annual payable VAT. However, only businesses that use the credit method for filing VAT are eligible for a Vietnam VAT refund, as it takes into account both input and output VAT.
The Vietnamese government also provides VAT refunds as a tax incentive in cases like these:
- Registered oil and gas companies that have been investing for more than 12 months and have spent at least VND 300 million (about US$12,600) on goods and services for their investment
- Termination of operation, ownership transfer, enterprise transformation, dissolution, bankruptcy, M&A, consolidation, division, and separation within companies if there is overpaid VAT or input VAT has been fully deducted.
- Companies that have filed over VND 300 million or US$12,600 of uncredited input VAT on exported goods and services.
Companies have to keep in mind that the answer to “How to claim a VAT refund?” lies in strictly following certain requirements, like
- Investment Registration Certificate (IRC),
- Enterprise Registration Certificate (ERC),
- The company stamp,
- The accounting documents, including the financial statements,
- The company bank account, which is used for investment capital,
- An accurately filed refund application.
According to the Ministry of Finance, VAT-refunded goods should fulfill the following conditions:
1. The purchase of unused goods allowed on aircraft can be subject to VAT.
2. Goods you have bought should not be on the list of export prohibitions or restrictions.
3. The goods bought can’t have VAT refund declarations or invoices issued after 30 days of departure.
4. The purchased goods must be bought from only one particular VAT refund store over a one-day period, provided they have a valuation of VND 2.000.000.
Most foreigners are not aware of how to claim VAT refunds in Vietnam. Here’s a brief explanation of the process:
- The first step is to inform the staff at the payment counter that you want a tax refund receipt, for which you have to show your passport so that the VAT refund declaration form can be created. Once this is done, you will get an original tax refund receipt. You need to furnish the original receipts of purchase and the tax refund receipt later to get the refund.
- The next step is to pack your purchased goods, passport, and VAT declaration form separately so that you can easily show them to the airport staff when they ask for them for customs clearance and inspection.
- At the airport, head straight to the VAT refund customs inspection office for clearance. Once all the paperwork is done, you will be asked for the boarding pass, which will then lead you to submit the check-in luggage at the Tax Refund Desk to get the refund in Vietnamese dong. A maximum 15% service fee can be charged at customs clearance.
- Since the refund is in cash and Vietnamese currency, you have to convert it to your desired currency at the currency exchange center. At the Noi Bai airport, you can do this at Vietcom or the Maritime Bank, while at Tan Son Nhat airport, you can head to VietinBank and BIDV exchanges.
As per the new rules, foreigners and businesses that adopt the VAT credit method can get the reduced VAT tax benefit until December 2024 at all stages, including manufacturing, processing, imports, and trading. However, certain products and services like banking, insurance, real estate trading, telecommunications, financial activities, securities, mining products (except coal), petroleum and chemical products, coke, metals, and prefabricated metal products are exempt. Also, information technology services and goods under the Special Consumption Tax aren’t subjected to the reduced VAT rate.
Read Related: A Comprehensive Guide to Corporate Tax and Compliance Obligations in Vietnam
Applying for VAT Refund Vietnam
Applications for a VAT refund in Vietnam are done online through the government’s online tax management platform, which is only available in Vietnamese. Another hurdle in the application process is that specific types of businesses have to follow specific procedures, like furnishing details of new investments and importing activities.
Hence most companies outsource the VAT refund application process to corporate consultancies like InCorp, which have an expert team supported by adequate resources, which expedites it. Businesses can outsource payroll and recruitment, legal representative, and secretarial requirements, along with accounting and tax compliance.
Consultancies like InCorp can help you get the VAT tax refund after fully assessing your eligibility status, which requires the following steps:
- Collecting all the relevant information and documents of your company
- Conducting a thorough compliance check
- Consulting the conditions of the VAT refund.
- Liaising with the company’s local authorities to meet the requirements of your specific field and business type.
InCorp Vietnam prepares and submits the VAT refund application only when all conditions are fulfilled and both the company and the officials are satisfied. To achieve this, the consultancy does all the research and legal inspection for the company and prepares company dossiers. This also includes settling disputes in the application by speaking to the Vietnamese tax authorities.
Once all is in order, you can go through the procedure yourself by submitting the prepared documents from the Tax Department for the tax refund.
As per Vietnamese law, dossiers for VAT tax refunds for businesses with conditional business lines need the following details:
- Form No. 01/HT duly filled
- IRC and investment license copy
- Land Use Right Certificate (LUR) copy issued by a competent authority ensuring lease or land allocation
- Construction Permission Certificate copy for projects involving construction works.
- Charter capital contribution certificate copy
- List of invoices and documents designated in Form No. 01-1/HT
- The decision on the establishment of the project management board/assignment of project management tasks by the project owner
- The organization and operation regulations of the branch or project management board if the tax refund is applied for by the branch or project management board
Impact of VAT Reductions
Similar to other countries across the world, Vietnam introduced temporary VAT reductions to recover from the COVID-19 pandemic’s effect on businesses. This was done to boost those sectors that were heavily impacted during the pandemic by supporting companies and increasing demand.
In China, VAT was exempted for small businesses selling goods in Hubei, along with a 2% reduced rate in other areas from March 1 to May 31, 2020. Meanwhile, South Korea introduced a 70% VAT reduction on car purchases from March to June 2020. Whereas Thailand reduced import duties on GG products classified as medical supplies from March 26 to September 30, 2020.
The reduced rate of VAT (down from 10% to 8%) in Vietnam which has been extended to the end of 2024, has helped businesses in the following ways:
- Lowered input costs: Businesses across sectors could lower their input costs because of the reduced tax;
- Increased consumption: Stimulated domestic consumption by allowing people to save on expenses and living costs.
- Bolstered economic growth: Supported economic growth and maintained macroeconomic stability.
- Helped to recover: Helped businesses recover from the financial strains of the past few years.
Getting Updated on Vietnam’s Value-Added Tax (VAT) with InCorp Vietnam
At InCorp Vietnam, we know the importance of tax reliefs, and hence, we help businesses navigate the ever-changing tax laws. Our skilled tax and compliance team stays updated on the latest tax regulations in Vietnam and can help you update your tax refund applications accordingly, ensuring that you experience no rejections and penalties.
A Guide to Corporate Taxes and Compliance Work in Vietnam
About Us
InCorp Vietnam is a leading market entry and corporate services firm in Vietnam. We are part of InCorp Group, a regional leader in corporate solutions that encompasses 9 countries in Asia-Pacific, headquartered in Singapore. With over 1,500 legal experts serving over 20,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business fit into the market perfectly with healthy growth.
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