Points to note regarding value added tax (VAT) refunds for companies exporting goods and services
- Mai Thi Dung
Businesses exporting goods and services can receive a VAT refund if they meet the conditions stipulated by law. This article explains the regulations and points to note regarding VAT refunds for companies exporting goods and services.
1. Conditions for VAT refund
Pursuant to Circular 130/2016/TT-BTC, companies exporting goods and services may apply for VAT refund if they meet the following conditions:
If a company engages in both exports and domestic sales, only input VAT that can be deducted from exports of goods and exports of services is eligible for VAT refund. Input VAT that can be deducted from exports of goods and services can be calculated based on the ratio of sales from exports of goods and services to the company’s total sales during the application period for VAT refund.
2. VAT refund application form and process
(1) Application form for VAT refund and related documents
In order to apply for VAT refund on export of goods and export of services, the following documents need to be prepared:
In addition to the above, it is necessary to prepare the following documents in advance so that you can respond smoothly when the tax bureau requests an explanation.
i) Purchase VAT invoice, sales VAT invoice
Original VAT invoice (Currently, Decree 123/2020/ND-CP applies and invoices are required to be issued in electronic format. Therefore, currently, all you need to do is prepare an XML file for the electronic invoice)
If the contract is signed in a foreign language, a Vietnamese translation must also be prepared. In addition, the most recent payment bank account information and deposit bank account information must be specified in the contract, and the bank account information written in the contract must match the payment bank account information on the bank remittance certificate. Please keep this in mind as more and more cases are being pointed out by the Tax Bureau.
iii) Customs documents (for export transactions)
iv)Bank remittance certificate (for transactions of 20 million VND or more)
Payee information must be specified on the bank remittance certificate. If the payee information is not specified, you will need to prepare remittance authorization documents from your bank.
iiv) Other documents
Inventory export/import table showing information on each import/export transaction, list of exports of goods and services, acceptance certificates, statements of delivery, debt offset agreements, etc.
(2) VAT refund process
After a company submits an application for VAT refund and receives an acknowledgment from the tax authority, the tax authority will process the application within 3 business days from the date recorded in the acknowledgment and issue an acknowledgment or notification of acceptance of the application for VAT refund. Issue a notice of denial of refund.
After the business receives notification of acceptance of the VAT refund application, the tax authorities will examine the VAT refund application documents, request clarification and additional data/documents related to the VAT refund application, classify the documents, and conduct a tax audit. Within 40 days from the date the tax authority receives the refund application, if the conditions for a VAT refund are met, a refund approval notice will be issued, and if the conditions are not met, a refund denial notice will be issued.
3. Recent VAT refund practices and points to keep in mind
(1) Recent VAT refund practices
According to the regulations regarding VAT refund procedures, it will take approximately one and a half to two months from the time the VAT refund application documents are received until the result notification is issued. However, in practice, the investigation period for VAT refunds is getting longer, especially from around the end of 2022. In some cases, this can last for more than a year, which can have a serious impact on cash flow for companies facing cash shortages.
One of the reasons why the investigation period has become longer is that the investigation has become more rigorous as a number of violations and irregularities regarding VAT refunds have been discovered. For example, the Tax Bureau will now investigate whether the following companies’ VAT invoices are included in the input VAT invoices of companies applying for refunds, and if applicable, they will be excluded from deductions.
Additionally, an official letter (No. 1798/TCT-TTKT) was issued by the Directorate General of Taxation on May 16, 2023. In the letter, a list of 524 companies at risk as mentioned above was made public, and each tax bureau and tax office was requested to pay attention to the detection of fraudulent invoices.
(2) Points to note regarding VAT refund when performing deemed export
When conducting deemed exports, companies need to pay attention to whether their customers have a base in Vietnam. Under the current regulations (Circular 38/2015/TT-BTC), a deemed export is a sale from a Vietnamese company to a “foreign company that does not have a base in Vietnam” and delivery to another Vietnamese company designated by the foreign company.
In this regard, the Vietnam Trade Management Law (Law 05/2017/QH14 foreign trade management in Vietnam) stipulates that companies that do not carry out business activities in Vietnam, companies that do not invest in Vietnamese companies, and employees expatriated in Vietnam. Companies without offices or branches are defined as “foreign companies that do not have a base in Vietnam.” Therefore, transactions with foreign companies that have branches or representative offices or investment activities in Vietnam are not recognized as deemed exports, and there is a risk that they will be pointed out in a tax audit for VAT refunds.
If you export as a foreign company with a base in Vietnam, you will not be able to receive a refund of the related input VAT, and there is also a risk that you will be subject to additional sales VAT. Therefore, it is necessary to be careful not to conduct deemed export transactions with foreign companies based in Vietnam.
(3) Points to note regarding VAT refunds when carrying out construction and installation activities in non-tariff areas
Article 2 of Circular 219/2013/TT-BTC states that customs declaration is not required for raw materials brought into construction and installation activities overseas or in non-tariff areas. However, Circular 80/2021/TT-BTC stipulates that “a list of customs declaration forms for exported goods cleared in accordance with the Customs Law” is a necessary document for VAT refunds. In addition, Article 75 of Circular 38/2015/TT-BTC (subsequently amended by Circular 39/2018/TT-BTC) provides that export processing enterprises (EPEs) are exempted from customs duty for the construction and installation of production plants and offices. It stipulates that when bringing raw materials into the region, it is necessary to go through customs formalities at the EPE’s jurisdictional customs office.
Based on these provisions, there is a recent tendency for tax authorities to require taxpayers carrying out construction and installation activities in non-tariff areas to submit customs declarations. Therefore, when carrying out construction or installation activities in non-tariff areas, it is recommended that you consider filing a customs declaration or, in order to avoid risks, submit an official letter to the competent tax bureau of customs bureau to obtain their opinion in advance.
We explained the regulations and precautions regarding VAT refunds when exporting goods or services. Investigation of VAT refunds takes a long time and is often fraught with difficulties. However, by properly understanding the current regulations and carefully preparing and storing documents, you can smoothly respond to refund investigations. In addition, by knowing that refunds will take time and taking measures in advance, companies can prevent their business and financial plans from being affected.
・Decree 38/2019/QH14 (Tax Management Law)