Only 01 type of VAT rate of 5% is eligible for tax refund, which is unfair to businesses.

Only 01 type of VAT rate of 5% is eligible for tax refund, which is unfair to businesses.

Only one VAT rate of 5% is eligible for tax refund, which is unfair to businesses in the same industry/Illustration photo

The VAT Law was first promulgated in 1997, replacing the turnover tax, and has undergone many important amendments, especially in 2008, 2013, 2015 and 2016. After 15 years since the 2008 amendment, the way VAT is implemented has undergone fundamental changes, reflecting the development in business invoice management and the transformation in the consumption and supply of goods and services thanks to technological advances.

However, this law also reveals many shortcomings, such as the wide range of non-taxable subjects, affecting the ability to deduct input tax and increasing production costs for businesses. The structure of tax rates needs to be reviewed to be consistent with the Reform Strategy and general trends. In addition, many problems in VAT management, such as input tax deduction without declaring and paying output tax, have also arisen, along with shortcomings in VAT refund implementation...

Regarding the content of amending the regulations on VAT refunds in the project to amend the Law on VAT stated in the Report of the Ministry of Finance sent to the Government. Accordingly, in Clause 3, Article 15 of the Draft - Cases of tax refunds: “... Business establishments that only produce goods and provide services subject to the VAT rate of 5%, if the input VAT amount that has not been fully deducted is three hundred million VND or more after 12 months or 04 quarters, will be entitled to a VAT refund”.

With this regulation, if a business has only one VAT rate of 5%, it will be refunded, but businesses with two or more VAT rates will not be refunded. This is unfair to businesses with two or more VAT rates.

Mr. Nguyen Van Duoc - Standing Member of Vietnam Tax Consultants Association.

Talking to PetroTimes reporter about the above issue, Mr. Nguyen Van Duoc - General Director of Trong Tin Accounting and Tax Consulting Company Limited, Standing Member of Vietnam Tax Consulting Association said that, in reality, enterprises are free to do business, so most enterprises do business in many industries, very few enterprises only produce in one field subject to 5% VAT. Therefore, amending the VAT law needs to ensure fairness for enterprises in the same industry producing goods and providing services subject to 5% VAT...

Mr. Duoc gave an example, enterprise A is a fertilizer manufacturer and chemical trader. If fertilizer goods are subject to 5% VAT and chemicals are subject to 10% tax rate, enterprise A will not be refunded. Meanwhile, enterprise B only produces fertilizers and does not do business in other industries, but is refunded. Thus, it will be unfair to enterprises in the same industry.

Therefore, the term "only" will limit the subjects eligible for tax refunds and does not ensure fairness for businesses in the same industry that produce goods and provide services subject to 5% VAT...

Further analyzing this, expert Nguyen Van Duoc said that taxpayers must separately account for the production and business activities of goods and services subject to 5% VAT to be refunded. In case it is not possible to separately account for the VAT amount of the production and business activities of goods and services subject to 5% VAT, VAT will be refunded according to the ratio of revenue from production and business activities of goods and services subject to 5% VAT to total revenue in the period, but not exceeding 5% of total revenue from production and business activities of goods and services subject to 5% VAT.

The above regulations on calculating the amount of tax refund and controlling the amount of tax refunded are similar to those for taxpayers with export activities and domestic business activities and have been applied stably for many years.

Therefore, Mr. Duoc proposed to remove the word "only" to allow tax refunds for subjects producing and trading goods and providing services subject to 5% VAT in accordance with the nature, but must "offset with other taxable goods and services", and at the same time must "allocate" the VAT amount according to the tax rate of 5% compared to the total goods and services of the taxpayer.

Thus, “if the word “only” is removed, all businesses with one or more VAT rates will be treated equally. This will help businesses have the conditions and motivation to continuously invest in development, innovation, and product diversification; and gain more resources to benefit the economy ,” expert Nguyen Van Duoc emphasized.

Tax expert Nguyen Van Duoc proposed to amend Clause 3, Article 15 as follows:

Business establishments producing goods and providing services subject to the VAT rate of 5% (except for asset liquidation activities) if the input VAT amount that has not been fully deducted after offsetting with the VAT amount of other VAT taxable goods and services is three hundred million VND or more after 12 consecutive months or 04 consecutive quarters, will be refunded VAT. Taxpayers must separately account for the production and business activities of goods and services subject to the VAT rate of 5% that are eligible for a refund. In case it is not possible to separately account for the VAT amount of production and business activities of goods and services subject to the VAT rate of 5%, VAT refund will be made according to the ratio of revenue from production and business activities of goods and services subject to the VAT rate of 5% to total revenue in the period, but not exceeding 5% of the total revenue from production and business activities of goods and services subject to the VAT rate of 5%.

Huy Tung

Source: https://www.pvn.vn/chuyen-muc/tap-doan/tin/0ca77dd5-3284-4a13-9e17-64ebc42c643d