Experts speak out about the need to amend Article 15 of the Draft Law on VAT

Experts speak out about the need to amend Article 15 of the Draft Law on VAT

The draft Law stipulates tax refund cases that are not suitable for business practices, according to experts.

Two or more taxes will not be refunded?

The Draft Law stipulates in Clause 3, Article 15 on tax refund cases as follows: "Business establishments that only produce goods and provide services subject to a VAT rate of 5%, if they have input VAT that has not been fully deducted from VND 300 million or more after 12 months or 4 quarters, will be entitled to a VAT refund".

With this regulation, businesses with only one VAT rate of 5% will be refunded, while businesses with two or more VAT rates will not be refunded. This makes businesses worry about unfair treatment for businesses with two or more VAT rates.

For example, a business has product A with a VAT rate of 5%, product B with a VAT rate of 10%, the business has output VAT of 200 billion VND, input VAT of 300 billion VND, the VAT refunded is 100 billion VND.

According to the draft Law, enterprises will not be refunded in case there are 2 types of output VAT rates. This leads to the VAT amount not being refunded but being converted into a deduction, enterprises cannot account for it in the valid reasonable expenses because this is a receivable that is not clear when it will be collected, this amount of 100 billion VND per year will increase gradually over the years, causing difficulties for the cash flow of the enterprise. The consequence is that the cost and selling price of products cannot be reduced as expected, but there is also inequality when there may be other enterprises with only 1 type of tax rate of 5%, which is refunded.

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

Mr. Nguyen Van Duoc, Standing Member of Vietnam Tax Consultants Association: Unfair to businesses

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 operate in multiple 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.

Lawyer Nguyen Tien Lap, Arbitrator of Vietnam International Arbitration Center.

Lawyer Nguyen Tien Lap: add the phrase "including"

According to Lawyer Nguyen Tien Lap, Arbitrator of the Vietnam International Arbitration Center, Executive Member of NHQuang and Associates Law Firm, the draft Law lists tax refunds in specific cases, but Article 15, Clause 3 stipulates that in cases where an enterprise only produces and trades goods subject to 5% VAT, an enterprise that produces and trades fertilizer from 100% imported raw materials and only has fertilizer as its output product will be eligible for a tax refund.

However, in reality, it is rare for a fertilizer enterprise to only import raw materials with a tax rate of 5%, but it can flexibly change from importing to purchasing raw materials domestically or combining both importing and purchasing domestically. In addition, enterprises can also produce and trade many types of goods and services, so having many types of VAT rates is entirely possible, in which case, the enterprise will not be refunded.

“The concerns of enterprises are completely reasonable. Therefore, to be consistent with the business reality of enterprises in general and fertilizer enterprises in particular, the phrase “including” should be added to the regulation in this case: “Establishments producing goods and providing services, including goods and services subject to 5% tax…”, Lawyer Nguyen Tien Lap proposed.

Tax expert Nguyen Van Phung: The word "only" should be removed.

Mr. Nguyen Van Phung - senior tax expert, former Director of the Department of Large Enterprise Tax Management

As a tax expert, Mr. Phung also said that in reality, enterprises are free to do business, so most enterprises operate in multiple 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...

For example, company A is a fertilizer manufacturer and chemical trader. If fertilizers are subject to 5% VAT and chemicals are subject to 10% tax, company A will not be refunded. Meanwhile, company B only produces fertilizers and does not do business in other industries, but is refunded. This would be unfair to other businesses 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...

Therefore, Mr. Phung proposed to remove the word "only" in the phrase "... Business establishments that only produce goods and provide services subject to the 5% VAT rate, 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 refunded VAT".

"This will satisfy the policy requirements and the interconnected nature of VAT. I will also have a written proposal to the National Assembly Standing Committee on this issue" - with the passion of a person who has "worked his whole life" in Taxation, Mr. Phung emphasized.

Manh Tuong - Phuong Thao - Minh Tien

Source: https://www.pvn.vn/chuyen-muc/tap-doan/tin/4240e5f2-512b-43d5-8ca4-73e9b0c64d64