Specifically: Trang 12 not been fully deducted non-refundable to deducted from the VAT amount in the following period to ensure conformity with the nature of VAT - Clear regulations on
TAX AND VALUE ADDED TAX
Rationale
Taxes are mandatory contributions that a government entity collects from people or businesses Tax revenues can be used for government activities, such as building public infrastructures like roads and schools The big difference between taxation and other payment methods like market exchanges is that it isn't directly related to any services provided
In accordance with Decision 508/QD-TTg, which was approved by the Prime Minister, Vietnam adopted a strategy to overhaul its tax system through 2030 The goal of Vietnam's tax reform policy is to modernize the tax system in accordance with international standards The strategy's implementation has been delegated to the Ministry of Finance (MoF) Along with assisting in tax revenue collection, the strategy also intends to achieve Vietnam's 10-year socioeconomic policy until 2030 In particular, the administration intends to increase the tax base and implement a single VAT rate Refunds will also be simpler thanks to government agencies
Due to the Covid-19 outbreak and the subsequent economic crisis, the indirect tax, often known as the value-added tax, played an even larger role According to Decree
No 15/2022/ND-CP, which governs tax reduction and exemption policies, the government provides tax relief year 2022 in order to promote the socio-economic recovery and development following the pandemic The VAT will be reduced from 10% to 8% from 1 February 2022 to 31 December 2022 as part of this tax break The 2% change in the VAT rate may not be transparent to consumers but it would create a massive impact on the government revenue and, as a result, the socioeconomic development objectives for the years 2021 2030 In order to fully understand the potential implications of the upcoming reform on the structure of Vietnam's tax system and on society as a whole, it is essential to first analyze the VAT situation in Vietnam.
Objectives
The goal of this research is to combine theoretical concerns and practices related to VAT, analyze the current environment, and assess it using real-world examples Besides, the study also looks into VAT-related regulations around the world The following real-world concerns are clarified by this assignment.
Contribution
In order to give a complete overview of the current state of the VAT system in Vietnam, this study clarifies and summarizes many facets of the VAT system The study also identifies the gaps between theory and practice regarding VAT in Vietnam Analyzing and evaluating VAT policy among countries to examine the efficiency of tax collection and find out the factors that cause the significant difference, along with investigating the general future trend of VAT all over the world, are some other perspectives to reinforce the Law on VAT in Vietnam
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Tax ML143 K58CLC Detailed outline…
VALUE ADDED TAX LAW AND THE CASE OF VIETNAM
Overview of VAT
Value added tax is the tax that is charged on goods and services It means that each time, when the product is on sale, a certain value of tax will be added And when this product comes to the consumer, the total amount of VAT levied on can be counted First promulgated in France, VAT has been widely applied in many countries around the world Up to date, about 130 countries, including Vietnam, have officially applied VAT
-added tax is a tax imposed on the added value of goods or services arising in the process from production,
2 Characteristics of VAT a VAT is an indirect tax :
The indirect nature of this tax is shown when the buyer of goods and services is the person who will bear this tax through the purchase and sale of goods Buyers will not have to pay taxes directly to the state budget but will pay taxes through the payment of goods and services The buyer will pay the seller and the seller will pay tax at the state budget Consumers will bear the heaviest tax b VAT is a broad-based tax:
VAT includes the value that each business adds to each thing during all stages of manufacturing and distribution In addition, a variety of products and services are subject to VAT
Taxation on all subjects demonstrates the fairness of taxes, and at the same time shows the attitude of the State towards all kinds of consumption in society In cases it is necessary to encourage consumption or limit the payment of taxes by consumers, the State will not impose tax or tax with the lowest tax rate c VAT is a consumption-based tax:
Vat is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in Vietnam and on importation of goods into Vietnam As a result of the tax burden being transferred to the end users by the suppliers of these goods or services, it is ultimately the end user of consumer goods who is responsible for paying it Thus, a sizable amount of consumer spending is made up of the VAT d VAT is a percentage tax:
The main characteristic that sets VAT apart from other indirect taxes is the ad valorem tax The actual tax burden is evident at every level of the production and distribution chain, from the manufacturing process through the circulation of products and even the consuming phase, because VAT is levied as a precise proportion of the product's price Taxes are only levied on the value that is added, not the whole cost of the goods and services e VAT is a multi-stage tax:
Value-added tax is levied on the added value of goods arising in stages From production, and circulation, to consumption And at the consumption stage, the consumer will be the one to pay taxes through the payment f VAT is collected fractionally with different rates at each stage:
The amount of tax that a taxable person has to pay to another taxable person on a purchase made for business purposes can be deducted from the VAT they have received Additionally, as was already indicated, VAT is charged at every stage, from manufacture to consumption A variable VAT rate applies at each level A value-added tax amount is a figure that is present from production to circulation, and it differs from the amount present from circulation to consumption The ultimate tax on the whole value of products and services is the sum of all primary taxes paid, and consumers will pay this tax through higher prices g VAT has a wide range of taxpayers:
VAT applies to almost all items in society Taxes are fair since they are levied on all items It also demonstrates how the State feels about all forms of consumerism in society The State will either not tax or tax at the lowest rate when it is required to promote consumption or restrict consumer tax payments
One of the prominent roles of taxes is to increase revenue for the state budget Value-added tax is even more special than other taxes when it is one of the most popular taxes contributing to social management and regulation
The long-term purpose when setting taxes, tax rates, and subjects subject to government taxes is not merely to satisfy the need to increase state budget revenue, but also to satisfy the requirements of economic growth and income redistribution at the same time
Meeting all those requirements requires the government to calculate and consider carefully when issuing taxes, because the revenue of the tax comes from national income, the mobilizing ability of the tax depends on the owner weak on the development of production, the efficiency of production VAT is a source of revenue, accounting for 50% to 60% of the total revenue of indirect taxes in the period 2006 -
Moreover, VAT contributes to perfecting the tax policy system, making the tax policy system step by step consistent with international practices, and creating favorable b Avoiding tax avoidance and tax evasion
VAT is imposed to decrease tax evasion and to simplify and make visible the process of paying taxes The VAT system does not provide exemptions Each stage of the production process being taxed provides improved compliance and fewer opportunities for abuse Taxing all items demonstrates the fairness of taxation Additionally, it shows how much the State values all societal consumption The government will either not tax or tax at the lowest rate when it is necessary to encourage consumption or limit consumer tax payments
Additionally, the VAT charge will vary depending on the stage Due to the various VAT rates, it will be impossible for buyers to know the exact amount of VAT they would be required to pay and so avoid paying it c Encouraging on exporting
On the other hand, the Law on VAT has contributed to encouraging exports, protecting domestic production, and restructuring the economy According to the provisions of the VAT Law, exported goods are entitled to a tax rate of 0%, which means that the entire VAT paid on the input is refunded Exporting goods has helped exporters to focus on domestic sources of goods for export, so it has helped exporters focus on domestic goods for export and compete with goods in the global market
VAT in Vietnam
1 Legislation on VAT in Vietnam
- 13/2008/QH12; Value added tax law; 01/01/2009
- 31/2013/QH13; Amending and supplementing some articles of the Law on Value Added Tax; 01/01/2014
- 71/2014/QH13; Amending and supplementing some articles of the Law on Taxation; 01/01/2015
- 106/2016/QH13; Amending and supplementing some articles of the Law on Value Added Tax, the Law on Sp ecial Consumption Tax and the Law on Tax Administration; 01/07/2016
Law on Value Added Tax (VAT) was passed in 2008 Total, there are three times which The National Assembly promulgates the Law on amendments to the Law on Value- added tax
The law has changed a lot from year to year to suit the growing needs of Vietnam Specifically:
- Law has always changes to reduce legal procedures to save time for businesses and related tax authorities (enterprises are allowed to transfer the VAT amount that has not been fully deducted (non-refundable) to deducted from the VAT amount in the following period to ensure conformity with the nature of VAT)
- Clear regulations on tax calculation methods suitable for each type of enterprise help increase transparency in the tax collection process as well as increase competition for domestic enterprises Tax refund cases are also added many case can promote the export of goods and transparency in the tax refund process
- Specifying the principle of determining exported goods and services reflects the rapid increase of exports of goods and services in Vietnam
- Besides, other documents (decree, circulars, consolidated documents) are always promulgated along with the amending and supplementing process of the Law on VAT to provide detail information and guide the implementation of a number of articles
2 Law of VAT in Vietnam a Rates of VAT in Vietnam
The present Vietnam Value Added Tax Law establishes three tax rates for different categories of products and services: 0%, 5%, and 10% The regulation of various tax rates represents the policy of managing income and restricting consumption of goods and services Value-added tax rates for various categories of products and services are determined by the socioeconomic development circumstances in each distinct time According to
- The 0% tax rate: Applicable to goods and services for export, international transport and goods and services that are not subject to VAT upon export
- The 5% tax rate is applied to these industries: preventing pests and diseases for plants; processing and preserving agricultural products
Street; by-products in sugar production
Preliminarily processed rubber latex; preliminarily processed turpentine; nets, ropes and yarns for knitting fishing nets
Fresh food; unprocessed forest products, except timber, bamboo shoots and regulated products that are not subject to tax
Clean water for production and daily life
Ore for fertilizer production; pesticides and growth stimulants for livestock and plants
Unprocessed crop, livestock and aquatic products, except for products specified
- The 10% tax rate will be applied to goods and services that are not subject to value-added tax, those subject to the tax rate of 5%, and those subject to the tax rate of 0%
This February 2022 publication of Tax and Accounting Updates looks at Decree 15/2022/ND-CP reducing VAT to 8% from 1 February 2022, instructions how to declare VAT at 8% on the VNACCS/VCIS system
- Value-added tax (VAT) reduction for goods and services currently applying the tax rate of 10%, except for goods and services in: telecommunications, information technology, finance activities and banking, insurance, stock trading, real estate business, metal production and mining industries (except coal), petroleum, chemicals, and commodities and services that are subject to special consumption tax
- Reduction of the VAT rate to 8% for business establishments that calculate VAT by the credit method and a reduction of 20% for business establishments that calculate VAT according to the percentage method on revenue
- Different order and procedures for implementation for business establishments that calculate VAT by the credit method and according to the percentage method on revenue
- Other mentioned support policies regarding instructions to determine the deductible expenses for COVID-19 when calculating CIT 2022 b Tax payer, taxable and non-taxable objects: goods and services, a
-Added Tax 2008 (amended over the years 2013, 2014, 2016) as follows: Goods and services used for production, business and consumption in Vietnam are subject to value added tax, except
Non-taxable objects -added tax specified in Article 5 of the Law on Value-Added Tax 2008 (amended over the years 2013, 2014,
- Certain Agriculture and aquaculture (related) products which are un-processed or primary processed The law makes an exception for a VAT credit here: Companies and cooperatives, which purchase un-processed or primary processed products of cultivation, husbandry, aquaculture, fisheries and then sell to other companies and cooperatives, are entitled to credit the input VAT from 1 July 2016
- Fertilizers; feed for cattle, poultry and other livestock
- Offshore fishing boats; specialized machinery and equipment serving exploitation and preservation of products for fishing boats
- Specialized machinery and equipment serving agricultural production v Certain infrastructure constructions
- Certain insurance services vii Transfer of land use rights/houses under certain conditions
- Certain financial banking and securities services
- Medical health and veterinary services; caring services for the elderly and disabled people
- Certain cultural and educational services
- Certain postal, radio and television services and publications
- Certain imported machinery and equipment that cannot be produced in Vietnam
- Exploited natural resources and minerals not yet processed into other products
- Donations, gifts, hand luggage and private assets under specific conditions
- Technology transfers under specific conditions xviii Goods and services provided by business households or business individuals with the yearly turnover of under 100 million VND
There are two methods of calculating VAT: Tax deduction and direct calculation on VAT Based on the conditions of the business to determine the appropriate tax calculation method
- Tax deduction method (Article 10 Tax deduction method (Law 31/2013)) The tax deduction method is usually applied to companies, enterprises or business locations, representative offices that fully conduct accounting, vouchers and invoices according to specific provisions of the law on documents, words, accountants, invoices and at the same time register for the calculation of VAT by the deduction method
Payable amount of VAT = Output VAT - Input VAT
Output VAT is equal to the total VAT charged on the products and services that were sold
Input VAT is deducted equal to the total amount of VAT stated on the VAT invoice for purchase of goods and services (including fixed assets)
The tax deduction method has the advantages of clearly determining the amount of tax payable at each stage and at the same time simplifying the process of tax management and collection, so that the tax amount incurred at each stage is clearly reflected on the invoice voucher
There are also disadvantages that to validate, many businesses have used fake invoices to qualify for the withholding method This has made it difficult for tax authorities to manage whether the invoice is real or fake As a result, businesses will successfully evade taxes, leading to state budget deficits
- Direct calculation on VAT method: Article 11 Method of direct calculation on value added (Law 31/2013)
Businesses must use the direct approach to determine the amount of VAT they must pay that is directly related to the added value to their commercial activity in the purchase and sale of gold, silver or precious stones and activities of creating products containing gold, silver or precious stones, by using the following formula:
VAT - payable = (payment price of goods and services sold payment price of relevant goods and services purchased) x tax rate
VAT - payable = Added value of sold goods or services x tax rate (percentage)
This method helps the tax authority to conduct tax arrears quickly, only having to collect it once In addition, determining the amount of tax payable by business establishments is also quite simple, thereby facilitating tax administration agencies in the process of applying tax calculation in practice
In contrast, from the perspective of tax authorities, this method is a complicated problem because when determining the amount of tax to be paid, the tax authority cannot determine the exact amount of revenue of the business This easily leads to incorrect declaration to evade taxes d Tax refund
In certain circumstances, business establishments subject to tax under the tax credit system will be given consideration for a tax refund:
- business yet and having a remaining amount of input VAT being 300 million VND or more it is entitled to a tax refund on a monthly/quarterly basis
- Where the input VAT not credited on exported goods and services of a business exceeds 300 million VND in a month/quarter, input VAT is refundable for that period2
CONCLUSION
Value Added Tax is the tax that is charged on goods and services, levied at each stage of a supply chain At every stage, a certain value (a small amount of the total tax) is added from the point of production to sales
The present Vietnam Value Added Tax Law establishes three tax rates for different categories of products and services: 0%, 5%, and 10% The regulation of various tax rates represents the policy of managing income and restricting consumption of goods and services Value-added tax rates for various categories of products and services are determined by the socioeconomic development circumstances in each distinct time Tax refund is a benefit for businesses, so businesses must carefully check tax refund articles to ensure your rights
Tax authorities should emphasis on developing the infrastructure for promoting online tax payment activities This may helps not only business to save cost and time but also brings more transparency, clarity, convenience for tax collecting
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