Analysis on the Decree No. 15/2022/ND-CP on tax exemption and reduction policy

On January 28, 2022, the Government issues the Decree No. 15/2022/ND-CP detailing the regulations on policies of reduction of value-added tax (VAT) and the deductible expenses for determining income subject to enterprise income tax (EIT).

All the contents that enterprises need to pay attention are as follows:

I. REDUCTION OF VAT

1. Groups of goods and services under the reduction of VAT

The Article 1 of the Decree prescribes that: To reduce VAT for groups of goods and services currently subject to the tax rate of 10%, except for the groups of goods and services:

- Telecommunications, finance and banking activities, securities, insurance, trading of real estate, metal, precast metal products, mining products (excluding coal mining), coke, refined oil, chemical products;

- Goods and services subject to excise tax: Cigarette, cigar; Spirit; Beer; Motor vehicles for transport of fewer than 24 people, Motorbikes, three-wheel motorcycles with cylinder capacity of over 125cm3; Aircraft, yachts; Gasoline of all kinds; Playing cards; Joss paper, votive objects; Nightclub business; Massage and karaoke business; Casino business; prize-winning electronic games; Betting business; Golf course business; Lottery business....

- Information technology: Smart cards, Sound cards, computers, calculators, goods-vending machines, ATM and similar machines, capable of connecting to a data processing machine or to a network, computers and peripherals, storage units and other storage devices, television cameras, cellular telephones of common kind, tablets...

Details of the groups of goods and services that are not eligible for 2% VAT are prescribed at the Appendix I, II, III of this Decree.

Note:

- In case goods and services mentioned above are not subject to VAT, or subject to 5% value-added tax, they shall not be entitled to VAT reduction.

The reduction of VAT for each type of goods and services shall be applied consistently at the stages of import, production, processing and trading.

[LVN’s recommendations] Methods for enterprises to search whether their goods and services are entitled to VAT reduction or not?

Method 1: Definition by product codes

Step 1: Defining the Groups of products and services

By:  

- Searching in the National Business Registration Portal on Business Registration at the link:

- List all the actual products and service in the business lines (including the products and services which are not in the business registration or changes in business lines must be issued with the invoice). 

Step 2: Search the codes of products and services

Step 3: Compare products and services with the codes prescribed at the Appendix I, II, III issued with the Decree No. 15/2022/ND-CP to define whether these products and services are eligible to VAT deduction or not.

*Not use the business codes in the business lines which are registered with the Departments of Planning and Investment for searching.

Method 2: Definition in accordance with the HS codes (applicable to the commodities at the import stage)

Pursuant to the List of HS codes of the goods and services when making import procedure (customs declaration), the business establishments shall compare with the HS codes at the Column 10 at the Appendix I, II, III to define the services and goods whether they are eligible to VAT deduction or not.

2. Reduced rate of VAT

In accordance with the Clause 2, Article 1 of the Decree No. 15/2022/ND-CP the reduced rates of VAT are relevant as follows:

(1) Business establishments that calculate VAT according to the value-added tax credit method may apply the value-added tax rate of 8%;

(2) Business establishments (including business households and individuals) that calculate VAT according to the percentage of turnover shall be entitled to a reduction of 20% of the percentage used to calculate VAT when issuing invoices for goods and services eligible for value-added tax reduction.

3. Order and procedures for making VAT invoices for the goods and services eligible for VAT reduction

In accordance with the Clause 3, Article 1 of this Decree, business establishments shall make the different procedures for VAT reduction depending on different methods of VAT calculations, in particulars:
 

VAT deduction	The percentage of turnover
Must write “8%” at the VAT tax rate when making VAT invoices Based on the VAT invoices: - Establishments trading goods or providing services shall declare the output VAT amount; - Business establishments buying goods or using services shall declare input VAT credit according to the reduced tax amount stated on the value-added tax invoices.	Must fully write the goods or service prices before reduction at the “amount” column - Write according to the prices after reducing 20% of the percentage of turnover at the “Total amount” -Note: “Reduce ... (amount of money) equivalent to 20% of the percentage used to calculate VAT.

Note:

- Business establishments must make separate invoices for goods and services eligible for value-added tax reduction. Business establishments shall not be entitled to VAT reduction if they fail to make separate invoices

- Business establishment has made invoices and declared according to the tax rate or percentage used to calculate value-added tax that has not been reduced:  The seller and purchaser must make a record or agreement in writing clearly stating such mistake, the seller shall make an invoice adjusting such mistake and hand over the adjusting invoice to the purchaser.

- The establishments trading goods or providing services eligible for value-added tax reduction have issued invoices printed on order in the form of a pre-printed ticket with its unused face value and wish to continue using it: They shall stamp it according to the price after reducing 2% of the VAT rate or the price after reducing 20% of the percentage in addition to the pre-printed price criterion for continued use.

Businesses shall declare goods and services eligible for VAT reduction according to Form No. 01 provided in Appendix IV to this Decree and the value-added tax declaration.

In accordance with the Article 44 of the Law No. 38/2019/QH14 on Tax administration:
+ The deadline for submission of monthly or quarterly tax declaration dossiers is the 20th day of the month following the month in which the tax liability arises;
+ The deadline for submission of or quarterly tax declaration dossiers is the last day of the first month of the quarter following the quarter in which the tax liability arises.

4. Implementation time of VAT reduction

From February 01, 2022 - December 31, 2022 (Clause 1, Article 3)

II. DEDUCTIBLE EXPENSES FOR DETERMINING INCOME SUBJECT TO ENTERPRISE INCOME TAX

The Resolution No. 43/2022/QH15 allows for reduced expenses when defining the taxable incomes for expenses for supporting and financing the COVID-19 prevention and control in Vietnam for the enterprise income tax period in 2022.

This content is guided at the Article 2 of the Decree No. 15/2022/ND-CP as follows:

1. The expenses for supporting and financing the Covid-19 prevention and control shall be through the units receiving supports and sponsorships include:

- Vietnam Fatherland Front Committees at all levels; 

- Health establishments; armed forces; units and organizations chosen to be concentrated quarantine establishments by the competent State agency; educational institutions; press agencies;

- Ministries, ministerial-level agencies, government-attached agencies; Party organizations, Youth Unions, Trade Unions and Vietnam Women's Union at central and localities;

- Local administrations with the fundraising function at all levels;

- Fund for COVID-19 Prevention and Control; COVID-19 Vaccine Fund;

- National Humanitarian Portal; charity funds and organizations with the fundraising function established and operating under the law.

2. In case a parent company receives supports and sponsorships from its member units to focus on conducting supporting and sponsoring activities, the parent company and member units may include the expenses equivalent to the supports and sponsorships of the parent company and each member unit in the deductible expenses for determining taxable income.  

The parent company must have a record or document certifying the supports or sponsorships. Member units must have legal invoices and documents in accordance with law provisions and have a written certification from the parent company on the supports or sponsorships of each member unit.

3. Dossiers to identify the expenses for supports or sponsorships comprise: Written records of supporting or financing certification made according to Form No. 02 provided in Appendix IV to this Decree, or paper or electronic documents and materials of funding certification signed and sealed by representatives of sponsoring enterprises or organizations and representatives of units receiving supports and sponsorships; enclosed with legal invoices and documents of the sponsorship and supports (in-kind or cash).

4. The Implementation time for determining income subject to enterprise income tax

The tax period of enterprise income tax 2022 (Clause 1, Article 3).

III. CONCLUSION:

These are important contents prescribed in the Decree No. 15/2022/ND-CP. Within that, enterprises should pay much attention to the contents of VAT reduction.

To this moment, the General Department of Vietnam Customs has issued a number of documents guiding the implementation of the Decree 15 that enterprises can make reference:

1/ The Official Dispatch No. 370/TCHQ-TXNK of the General Department of Vietnam Customs on the implementation of the Decree No. 15/2022/ND-CP

2/ The Official Dispatch NO. 521/TCHQ-TXNK of the General Department of Vietnam Customs on the implementation of the Decree No. 15/2022/ND-CP

3/ Official Dispatch No. 642/TCHQ-TXNK of the General Department of Vietnam Customs on the declaration of the VAT rate, defining name and applying the HS codes of imported goods which are not eligible for VAT reduction under the Decree No. 15/2022/ND-CP.