Analysis of Decree No. 49/2022/ND-CP on Value-Added Tax

On July 29, the Government hereby promulgates the Decree No. 49/2022/ND-CP on amending and supplementing a number of the Government's Decree No. 209/2013/ND-CP detailing and guiding a number of articles of the Law on Value-Added Tax, which was amended and supplemented under Decree No. 12/2015/ND-CP, Decree No. 100/2016/ND-CP and Decree No. 146/2017/ND-CP.

Here is the analysis of important changes in VAT in the Decree No. 49/2022/ND-CP that every enterprise takes care of:

1. The land price permitted to be deducted for expenses for compensation and ground clearance

Clause 1, Article 1 of the Decree No. 49/2022/ND-CP supplements the regulations on expenses for compensation and ground clearance which are deducted with VAT:

The compensation and ground clearance payment according to the plan approved by the competent State agency, and shall be deducted from the land use levy and land rental payable as prescribed by the law on the collection of land use levy, land rental and water surface rental.

In previous regulations: No detailed regulations, only mention the fee of compensation and ground clearance as prescribed by law.

2. Defining the deducted land price of the business establishments with infrastructure investment

Clause 1, Article 1 of Decree No. 49/2022/ND-CP prescribes that in case business establishments acquire land use rights from organizations or individuals, the land price permitted to be deducted for value-added tax calculation is the land price at the time of acquisition, exclusive of the value of infrastructure. Business establishments are permitted to declare and credit input value-added tax on infrastructure (if any).

At the same time, the Decree also prescribes that:

• If it is impossible to determine the land price at the time of acquisition, the land price to be deducted for value-added tax calculation is the land price prescribed by the provincial-level People’s Committee at the time of signing the acquisition contract.
• In case business establishments acquiring land use rights from organizations or individuals have already determined the land price including the value of infrastructure as prescribed at Point a Clause 3 Article 4 of Decree No. 209/2013/ND-CP (amended and supplemented under Clause 3 Article 3 of Decree No. 12/2015/ND-CP dated February 12, 2015), the land price permitted to be deducted for value-added tax calculation at the time of acquisition shall not include the infrastructure value.
• In the case it is impossible to detach the land price at the time of acquisition, the land price to be deducted for value-added tax calculation is the land price prescribed by the provincial-level People’s Committee at the time of signing the acquisition contract.

In previous regulations: The Decree No. 209/2013/ND-CP which is amended and supplemented by the Decree No. 12/2015/ND-CP prescribes that the land price to be deducted for value-added tax calculation is the land price at the time of acquisition, inclusive of the value of infrastructure (if any); business establishments are not permitted to declare and credit input value-added tax on infrastructure already included in the non-taxable to-be-deducted value of land use rights. 

If the to-be-deducted land price is exclusive of the value of infrastructure, business establishments may declare and credit input value-added tax on infrastructure not yet included in the non-taxable to-be-deducted value of land use rights.

These regulations make organizations and individuals misunderstand that land price to be deducted for value-added tax calculation for the land price at the time of acquisition, inclusive of the value of infrastructure (business establishments are calculated in the deducted land price inclusive of the value of infrastructure or not calculated in the deducted land price of infrastructure establishment).

3. Taxable price applicable to the electricity generation by Vietnam Electricity

- For the dependent cost-accounting hydropower plants of EVN, GENCO (Power Generation Corporation)

Taxable price for electricity of dependent cost-accounting hydropower plants of EVN, GENCO equals 35% of the average electricity retail prices exclusive of value-added tax in accordance with the electricity law and law on prices.

In previous regulations: Taxable price for electricity of dependent cost-accounting hydropower plants of EVN, GENCO who do not directly sell electricity to customers is the taxable price of the parent company announced by EVN before March 31 every year in order to apply but cannot lower than the average electricity product cost of the following year (excluding interest expenses and exchange rate) of dependent cost-accounting hydropower plants of EVN, GENCO.
 

- For the dependent cost-accounting thermal plants of EVN, GENCO

The taxable price for determining the value-added tax amount to be paid in the locality where the dependent cost-accounting thermal plants of EVN, GENCO are located is the electricity selling price for the customer as written on the invoice according to the power purchase agreement applicable to each thermal power plant.

If absence of the power purchase agreement for each thermal power plant, the taxable price shall be the average electricity retail price exclusive of value-added tax in accordance with the electricity law and law on prices.

In previous regulations: Dependent cost-accounting thermal plants of EVN, GENCO who do not directly sell electricity to customers, the taxable price is the taxable price of the parent company announced by EVN before March 31 every year in order to apply but cannot be lower than the average electricity product cost of the following year.

- For the other dependent cost-accounting power generation companies of EVN, GENCO (excluding thermal power and hydropower)

The taxable price for determining the value-added tax amount to be paid in the locality where the other dependent cost-accounting power generation companies (wind electricity, solar power...)of EVN, GENC are located is the electricity selling price exclusive of value-added tax as prescribed for each type of power generation by the competent State agency. In case of the absence of the electricity selling price prescribed for each type of power generation by the competent State agency as mentioned at this point, the taxable price shall be the average electricity retail price exclusive of value-added tax in accordance with the electricity law and law on prices.

In previous regulations: No regulations on taxable prices for these electricity sources, but the electricity purchase price (wind electricity, solar power) of the Ministry of Industry and Trade.

4. Value-added tax refund for investment projects

For investment project of business establishment which has already made business registration, registers to pay value-added tax by the tax credit method

Clause 3, Article 1, Decree No. 49/2022/ND-CP amends, supplements to merge the points a and b, Clause 2, Article 10, Decree No. 209/2013/ND-P which is amended and supplemented in the Decree No. 100/2016/ND-CP.

At the same time, new investment projects (including investment projects divided into many investment phases or investment items) under the Law on Investment in the same province or city, or in a province or city other than the one where it is headquartered.

In particulars:

 A business establishment that has already made business registration and registers to pay value-added tax by the tax credit method (including new business establishments established under investment projects), has new investment projects (including investment projects divided into many investment phases or investment items) at the investment stage, or oil and gas prospecting, exploration and development projects still at the investment stage, with the input value-added tax amount of goods and services arising in the accumulated investment stage not yet fully credited that is valued at VND 300 million or more, shall be entitled to value-added tax refund. The business establishment shall declare value-added tax separately for each investment project and must offset the input value-added tax amount of the investment project with the payable value-added tax amount of production and business activities being carried out (if any).  After offsetting, if the accumulated input value-added tax amount of the investment project, that has not yet been fully credited, is valued at VND 300 million or more, it shall be entitled to value-added tax refund. In case where the investment project of the business establishment has been inspected, examined and audited by the competent State agencies, the tax office may use the inspection, examination and audit results to decide on value-added tax refund.

In previous regulations: The Decree No. 209/2013/ND-CP which is amended and supplemented the Decree No. 100/2016/ND-CP requires the investment projects to have investment time of 01 year and more to get VAT refund of goods and services of investment for each year.
 

For investment projects of establishments engaged in conditional production

Clause 3, Article 1 of the Decree 49/2022, VAT refund for investment projects of establishments engaged in conditional production and business lines that fall into the following conditions that business establishments shall be entitled to value-added tax refund for investment projects:
-  Investment projects at investment stage, as prescribed by the investment law and specialized law, which have been licensed to conduct business in conditional production and business lines by the competent State agency according to one of the following forms:  Licenses or certificates or written certification or approval.
-  Investment projects at the investment stage, as prescribed by the investment law and specialized law, which are not subject to the licensing to conduct business in conditional production and business lines according to one of the following forms: Licenses or certificates or written certification or approval.
- Investment projects as prescribed by the investment law and specialized law, which do not require licenses for conducting business in conditional production and business lines according to one of the following forms: Licenses or certificates or written certification or approval.

In previous regulations: For investment projects, establishments engaged in conditional production and business lines must satisfy business conditions and maintain business conditions in the operation process to get VAT refund.

This Circular takes effect on September 12, 2022.