Legal News

[Taxation] Key Points of the 2024 Value Added Tax Law Amendments

2024/12/20

On November 26, 2024, the 15th Diet’s 8th session passed the “2024 Value Added Tax Act” (hereinafter referred to as the “2024 VAT Act”). This law will replace the 2008 Value Added Tax Act and will come into effect on July 1, 2025. This news article explains the important changes that will have a significant impact on businesses.

1. Amendments to provisions regarding the taxable value of imported goods
Previously, the taxable value of imported goods was calculated by adding import duties, special consumption taxes, and environmental protection taxes to the import price at the border gate, as applicable. However, under the 2024 VAT Act, in addition to these taxes, supplementary import duties specified by law (a. anti-dumping duties (AD), b. countervailing duties (CVD), and c. industrial protection duties) will be added to the taxable value in applicable transactions.

2. Adjustments to tax rates for certain goods and services

2.1. Changes to the conditions for applying a 0% export tax exemption for goods and services provided to non-tariff zones
An additional condition has been added that goods and services directly sold or provided to companies in non-tariff zones must be “consumed within the non-tariff zone and directly related to export production activities.” However, the specific details of what constitutes “directly related to export production activities” are not clearly defined and are expected to be clarified in future notifications or ordinances.

2.2. Change from non-taxable goods to 5% taxable goods
The following goods will now be subject to a 5% tax rate
• Fertilizers
• Fishing vessels engaged in fishing activities in coastal areas

3. Change in conditions for input VAT deduction
The cash payment limit criterion has been removed as a condition for input VAT deduction. This criterion may be addressed separately in a cabinet order or notification. Additionally, a new provision has been established requiring additional documents such as packing lists, bills of lading, and cargo insurance documents (if applicable) to deduct input VAT related to exported goods and services.

4. Principles for additional VAT returns
If there are errors or omissions in the monthly or quarterly VAT returns filed by taxpayers, resulting in a reduction in the amount of tax payable or an increase or decrease in the amount of tax deductible in subsequent returns, additional returns may be filed in the month or quarter in which the errors or omissions are discovered.

5. Clarification of VAT Refund Provisions

5.1. VAT Refunds for Investment Projects
The deadline for applying for VAT refunds for investment projects is within one year from the date of completion of the project or investment phase/item. The completion date is defined as the date on which sales were generated for the project or phase/item. However, revenue from trial operation periods, sales from financial activities, and income from the sale of raw materials are not included in these sales. This provision is advantageous for taxpayers.

5.2. Abolition of Other VAT Refund Provisions
VAT refund provisions related to changes in corporate ownership, business conversions, mergers, consolidations, divisions, and separations have been officially abolished.

5.3. Additional Conditions for VAT Refunds
A new condition has been added requiring that the issuer of the relevant invoice be registered for VAT and have filed VAT returns.
To comply with the amendments to the 2024 VAT Law, early preparation and appropriate procedures within the company are essential. In particular, the current practices regarding the taxable value of imported goods, conditions for deducting input VAT, and methods for additional VAT filings should be reviewed, and necessary adjustments should be made. Procedures for VAT refunds related to investment projects must also be applied for smoothly within the deadline.

Companies should continue to pay close attention to detailed guidance and notifications and remain flexible in responding to changes.

References
・VAT Law No. 48/2024/QH15