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. However, in practice, 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 both 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. In this way, the 2024 VAT Law is regulated in accordance with the concept of investment projects as defined in the Investment Law.
ii. Purchase VAT incurred during the investment phase is refundable.
Under the current law, the refundable tax amount was defined as “the VAT on goods and services purchased for use in investment.” In contrast, the 2024 VAT Law clearly specifies this as the ‘input VAT incurred during the investment stage.’ As a result, VAT incurred, for example, on marketing and advertising expenses will be subject to refund.
iii. Definition of the completion date of an investment project
Under the current law, since the completion date of investment projects is not clearly defined, it has been difficult to determine the input tax amount eligible for refund or the commencement date for VAT filing according to business operations. The 2024 VAT Law stipulates that the completion date of an investment project is defined as “the date on which sales are generated from the investment project or investment phase/item.” However, the following sales are not included.
– Sales generated during the testing phase
– Sales from financial activities
– Revenue from the sale of raw materials of the investment project
iv. Deadlines for VAT refund applications
According to the 2024 VAT Law, if no refund application has been submitted for the investment phase, a refund application must be filed within one year after the completion of the investment project. Previously, there were no clear regulations regarding the deadline, but under the new law, it should be noted that no refund will be permitted if the deadline is missed.
v. Requirements for Contribution of Articles of Incorporation Capital
Under the system, VAT refunds are not permitted for investment projects in which the company has not contributed the entire amount of registered capital stipulated in its articles of incorporation. Under current law, there are no clear regulations regarding the timing of capital contributions, and in practice, various interpretations have been adopted.
Under investment laws and corporate laws, it is permitted to contribute the registered capital in stages according to the progress of the investment project, and there is no need to pay in the entire amount at the time of company establishment. In light of this situation, the 2024 VAT Law clearly states, “If the registered capital has not been contributed as registered at the time of a refund application, the VAT refund will not be allowed.” Therefore, in order to receive a VAT refund, it is necessary that the entire amount of the registered capital has been paid in at the time of the refund application.
2. Changes to VAT Refunds for Exporters
Under the previous regulations, VAT refunds were permitted when companies exported imported goods to other countries and completed the export procedures within customs areas in accordance with the Customs Law. However, the 2024 VAT Act explicitly states the abolition of VAT refunds for export transactions conducted within customs areas (transactions exporting imported goods to other countries).
Therefore, export companies are advised to apply for VAT refunds by July 1, 2025. Furthermore, VAT refunds for sales to export processing enterprises (EPE) can continue to be processed as before
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 often procure goods and services at the 10% VAT rate. However, since VAT refunds for this difference have not been allowed until now, uncredited VAT has accumulated, affecting the cash flow of companies.
Under the 2024 VAT law, a new refund system has been introduced for businesses that provide goods and services subject to a VAT rate of 5%.
– If there is unused VAT totaling 300,000,000 VND or more over 12 consecutive months or four consecutive quarters, a VAT refund is possible.
– If multiple VAT rates apply to sales, a refund can be claimed based on allocation ratios specified by the government.
4. Abolition of VAT refund provisions related to corporate ownership transfers, business conversions, etc.
Under the current law, businesses that pay VAT via the deduction method can receive refunds for overpaid or undeducted VAT in cases of transfer of business ownership, business transformation, mergers, consolidations, splits, separations, dissolution, bankruptcy, or suspension of activities (such as the closure of a branch).
However, under the 2024 VAT Law, the eligibility for refunds has been limited as follows:
– The VAT refund provisions related to the transfer of business ownership, business transformation, mergers, consolidations, splits, separations, or suspension of activities (such as the closure of a branch) have been abolished.
– VAT refunds are only permitted in cases of company dissolution or bankruptcy.
Therefore, companies planning to change to these business formats are recommended to apply for a 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 as follows.
| Category | Changes |
| Investment Projects | ・Investment projects based on the Investment Law are eligible for VAT refunds. ・The refundable tax amount is the input VAT incurred during the investment phase. ・A refund application must be submitted within one year after the completion of the investment project. ・Full payment of the stated capital in the articles of incorporation is required at the time of refund application. |
| Exporting Enterprises | The abolition of VAT refunds for transactions involving the export of imported goods from within a customs area according to the Customs Act (transactions where imported goods are exported to other countries). |
| Companies that provide goods and services subject to the 5% VAT rate | A new system will be introduced to allow refunds when unclaimed VAT exceeds a certain amount. |
| VAT refund regulations regarding transfer of business ownership, business restructuring, mergers, consolidations, spin-offs, separations, or suspension of activities (such as branch closures). | Abolished |
Companies are required to take early action to prepare for the enforcement of the new law. It is important to assess the impact of transactions that are not subject to reimbursement and to particularly consider reviewing investment projects and funding plans.
References:
・ Value Added Tax Law 2008 (13/2008/QH12)
・ Value Added Tax Law 2024 (48/2024/QH15)
This article was translated by Yarakuzen.
