The article is made in collaboration between VCCI-HCM and HM&P Law Firm. In this article, our Managing Partner Nguyen Van Phuc and Vu Trung Thanh (HM&P) would like to mention some new points in the Draft of Law on amendments to the Law on VAT so that businesses can pay attention to their activities.
Currently, the National Assembly is in the process of amending the Law on Value Added Tax (“VAT”). For most companies, VAT is one of the most important legal documents that directly affects their business activities. Therefore, the timely updating of the amendments to the Law on VAT will help businesses to be more proactive in their business activities, based on compliance with legal regulations. In this article, we would like to mention some new points in the Draft of Law on amendments to the Law on VAT so that businesses can pay attention to their activities.
1. More specific regulations on capital transfers not subject to VAT
For businesses, although capital transfers may occur often in reality, VAT is still a regular concern due to the specific high value of transfer transactions. Although currently, according to the provisions of the Law on Amendments to the Law on VAT 2013, capital transfer transactions are not subject to VAT. However, given the increasingly diverse methods of conducting capital transfer transactions today, many businesses still struggle to determine whether the transactions they conduct are subject to VAT or not. Therefore, the Draft Law on Amendments to the VAT Law provides more detailed regulations on this case, specifically as follows[1]:
“Capital transfer includes the transfer of part or all of the capital invested in another economic organization (regardless of whether a new legal entity is established or not), the transfer of securities, the transfer of capital contribution rights and other forms of capital transfer as prescribed by law, including cases where an enterprise is sold to another enterprise for production and the purchasing enterprise inherits all the rights and obligations of the selling enterprise as prescribed by law. The capital transfer referred to in this Clause does not include the transfer of investment projects or the sale of assets".
In addition to the more specific regulations on capital transfers that are not subject to VAT, the transfer of investment projects and the sale of assets are not included. The remaining regulations are essentially just a codification of the existing regulations, which are available in Circular 219/2013/TT-BTC. Therefore, what enterprises need to pay attention to is that M&A transactions in the form of transfer of investment projects or sale of assets are subject to VAT.
2. Amendment to the regulations on taxable prices for imported goods
This is one of the new regulations that companies that import goods must pay attention to. According to the provisions of Item b, Clause 1, Article 7 of the Draft Law on Amendments to the Value Added Tax Law, the taxable price of imports is the import value according to the provisions of the Law on Export and Import Taxes, plus taxes that are additional import taxes prescribed by law (if any), plus special excise tax (if any), and plus environmental protection tax (if any). The import price at the border gate is determined in accordance with the regulations on the taxable price of imports.
This change is based on the current regulations of the Export Tax Law 2016, on the taxable value of imports and additional import taxes such as anti-dumping tax, anti-subsidy tax, safeguard tax. In the coming period, companies must pay attention to the taxes payable on expected imports and the value of these imports in order to have a basis for accurately determining the value of VAT.
3. Amending and supplementing the regulations on VAT deduction
Currently, most enterprises calculate VAT using the VAT deduction method, so the regulations on VAT deduction are always one of the top concerns of enterprises.
The Draft Law on Amendments to the VAT Law amends and supplements some regulations related to VAT deduction as follows:
Firstly, it extends the period for declaration and deduction of the missing amount of VAT, namely, if the enterprise discovers that the input VAT amount is missing when declaring and deducting, it can be declared and deducted in the period in which the tax errors are calculated before the tax authority announces the decision on tax audit or tax inspection at the taxpayer's headquarters. This provision limits the period of time in which businesses can perform VAT deduction and declaration instead of additional VAT deduction and declaration later, as long as before the tax authority announces the decision on tax audit, tax inspection at the taxpayer's headquarters, as prescribed in the Law on Amendments to the Law on VAT 2013.
Second, change the conditions for input VAT deduction, specifically, according to the provisions of the Law on Amendments to the Law on VAT 2013, the condition for input VAT deduction is to have non-cash proof of payment for purchased goods and services, except for goods or services valued at less than twenty million Vietnam dong at each time of purchase. However, according to the new regulations in item b, paragraph 2, Article 13 of the Law on Amendments to the Law on VAT, the amount of twenty million VND has been changed to five million VND.
4. Elimination of some cases of VAT refund
In addition to tax deduction, VAT refund is one of the regulations that many companies pay special attention to. The Draft Law on Amendments to the Law on VAT has abolished a number of cases related to the refund of VAT as follows:
First, in cases where an enterprise does not contribute enough charter capital as registered, but has an investment project, according to the provisions of the Draft Law on Amendments to the Law on VAT 2013, the enterprise will not receive a VAT refund, but the VAT that has not been deducted will not be refunded, but will be carried forward to the next period. However, the Draft Law on Amendments to the Law on VAT has abolished this case[2].
Secondly, if an enterprise has input VAT that has not been fully deducted, but this enterprise is transformed, merged, amalgamated or split, the enterprise is not entitled to a VAT refund. With this regulation, if enterprises have input VAT that has not been fully deducted, they must fully deduct it before carrying out the above activities.
Here are some new, typical regulations in the draft law on amendments to the VAT Act, which we believe may affect business activities. In case this draft is approved and promulgated, businesses should pay attention to make appropriate changes in their activities to ensure business efficiency based on compliance with legal regulations.
Read more at: Dự thảo Luật Thuế giá trị gia tăng sửa đổi và những quy định có thể tác động tới doanh nghiệp
