Changes in Refund Applications under the New Value Added Tax Law Effective July 1, 2025
2025/07/14
- Pham Van Huong
On November 26, 2024, the National Assembly passed the new Value Added Tax Law (48/2024/QH15, hereinafter referred to as the “2024 VAT Law”). This replaces the current VAT Law (13/2008/QH12, hereafter “2008 VAT Law”) and its amendments and supplements. 2024 VAT Law will enter into force on July 1, 2025 and has important changes, especially regarding VAT refunds. This report will summarize those changes.
1.Changes to VAT Refunds for Investment Projects
i. Investment projects under the Investment Law are eligible for VAT refunds
The 2008 VAT Law specified that only “new investment projects” were eligible for investment. In practice, however, there are many cases where tax authorities allow refunds for multiple investment phases in an initial investment project as well as for expansion investment projects. In light of this, the 2024 VAT Law stipulates that investment projects eligible for refunds are “investment projects under the Investment Law. This includes new investment projects and expansion investment projects that are in the investment phase. Projects with multiple investment phases or projects with a wide variety of investment items are also eligible for refund, but investment projects that do not form fixed assets of the enterprise are excluded. Thus, the 2024 VAT Law is regulated in a manner consistent with the concept of investment projects in the Law on Investment.
ii. Purchase VAT incurred during the investment phase is refundable.
Under the current law, the amount of tax to be refunded was defined as “VAT on goods and services purchased for use in investments. In contrast, the 2024 VAT Law clarifies that it is “purchase VAT incurred during the investment phase. This makes VAT on marketing and advertising expenses, for example, refundable.
iii. Definition of the completion date of an investment project
Under the current law, the completion date of an investment project is not clearly defined, which makes it difficult to determine the purchase tax to be refunded and the start date of VAT declaration according to the business activity The VAT Law 2024 defines the completion date of an investment project as “the date when the sales of the investment project or investment phase or investment item date on which the sales are generated,” was stipulated. However, the following sales are not included.
・Sales generated during the testing phase
・Sales from financing activities
・Proceeds from the sale of raw materials of the investment project
iv. Deadlines for VAT refund applications
Under the 2024 VAT Law, if a refund application for the investment phase has not been submitted, a refund application must be submitted within one year of the completion of the investment project. While there was no clear deadline in the past, it should be noted that under the new law, refunds will no longer be granted if the deadline is missed.
v. Requirements for Contribution of Articles of Incorporation Capital
Under the system, VAT refunds are not allowed for investment projects where the company has not fully contributed its registered articles of incorporation capital.
Under the current law, there is no clear provision regarding the timing of capital contribution, which has been interpreted in various ways in practice. Under the Investment Law and the Enterprise Law, it is permitted to invest the charter capital in stages according to the progress of the investment project, and it is not necessary to invest the entire amount in a lump sum at the time of the establishment of the enterprise. In light of this situation, the 2024 VAT Law clearly states that “if the articles of incorporation capital is not funded as registered at the time of application for refund, no VAT refund will be granted. Therefore, in order to receive a VAT refund, the articles of incorporation capital must be fully funded at the time of the refund application.
2. Changes to VAT Refunds for Exporters
Under the previous regulations, VAT refunds were allowed when a company exports imported goods to another country, and the export procedures are carried out within the customs territory in accordance with the Customs Law.
However, the 2024 VAT Law clearly states that VAT refunds on export transactions (exporting imported goods to other countries) for which export procedures are carried out in this customs territory will be abolished. Therefore, exporters are encouraged to apply for VAT refund by July 1, 2025.
Additionally, VAT refunds on sales to export processing enterprises (EPEs) will remain available.
3. Establishment of a new refund system for companies that provide goods and services subject to a 5% VAT rate.
Companies that provide goods and services subject to the 5% VAT rate also often make purchases at the 10% VAT rate. However, until now, VAT refunds for this difference have not been allowed, resulting in an accumulation of undeducted VAT and affecting the cash flow of the company.
The VAT Law of 2024 introduced the following new refund system for companies that provide goods and services subject to the 5% VAT rate.
・VAT refund is available if the undeducted VAT is more than VND300,000,000 for 12 consecutive months or 4 consecutive quarters.
・If more than one VAT rate is applied to the sales, the refund will be based on the allocation ratio determined by the government.
4. Abolition of VAT refund provisions related to corporate ownership transfers, business conversions, etc.
Under current law, businesses that pay VAT on a deduction basis are eligible for a refund of overpaid or undeducted VAT in the event of corporate ownership transfer, business conversion, merger, consolidation, split, separation, dissolution, bankruptcy, or cessation of activity (branch closure).
However, the 2024 VAT Law limits the eligibility for refunds as follows
・VAT refunds on ownership transfers, business conversions, mergers, consolidations, divestitures, divestitures, and inactivity (branch closures) are eliminated.
・VAT refunds are only allowed in the event of dissolution or bankruptcy of an enterprise.
Therefore, it is recommended that companies planning to change their business form should apply for a VAT refund by July 1, 2025.
5. Conclusion
The 2024 VAT Law made significant changes to the provisions regarding VAT refunds. The main points are summarized below.
| Category | Changes |
| Investment Projects | ・Investment projects under the Investment Law are eligible for VAT refund ・Taxes eligible for refund are purchase VAT incurred during the investment phase ・Refund application must be made within one year after completion of the investment project ・Full contribution of charter capital at the time of refund application is required |
| Exporting Enterprises | Eliminate VAT refunds for transactions in which imported goods are exported within the customs territory (i.e., transactions in which imported goods are exported to other countries) under the Customs Law. |
| Companies that provide goods and services subject to the 5% VAT rate | Introduced a new system to allow refunds when undeducted VAT exceeds a certain amount. |
| VAT refund provisions for corporate ownership transfers, business conversions, mergers, consolidations, divestitures, separations, and inactivations (branch closings) | Abolished |
Companies are urged to take early action to prepare for the implementation of the new law. It is important to identify the impact of transactions that will not be eligible for refunds and to consider reviewing investment projects and financial plans in particular.
References:
・ Value Added Tax Law 2008 (13/2008/QH12)
・ Value Added Tax Law 2024 (48/2024/QH15)
