The tax rate of 0% and objects not liable to VAT are both exempted from tax. However, there are some differences between these two types of taxes.
Differentiation of the tax rate of 0% and objects not liable to VAT
Tax rate of 0 %
In accordance with Article 4, Circular No. 219/2013/TT-BTC, non-taxable objects include:
Products of cultivation and husbandry, reared and fished aquatic and marine products which have not yet been processed into other products.....
Materials and goods in the industries such as: Encourage agricultural production development; support for materials that cannot be produced domestically; services that relate practically, directly to people's lives and are not business
In accordance with Article 9, Circular No. 219/2013/TT-BTC, The 0% tax rate applies to exported goods and services; construction and installation of works overseas and in non-tariff zones; international transportation; and goods and services not liable to VAT as follows:
- Offshore reinsurance; offshore transfer of technologies or intellectual property rights; offshore capital transfer, credit extension or securities investment; derivative financial services; outbound post and telecommunications services....
- Petrol and oil sold to domestically purchased automobiles of businesses in non-tariff zones;
- Automobiles sold to organizations and individuals in non-tariff zones.
Enterprises and business establishments trading goods and/or services are not required to declare VAT because they are non-taxable objects.
Enterprises and other business establishments are required to declare VAT because they are taxable objects.
Tax credit and refund
Business establishments that do not have tax credits and refund of input VAT amounts or include them in the historical costs of fixed assets, value of materials or business charges.
Have tax credit and refund of input VAT on goods and services used for the production of or trade in goods and services liable to taxable objectives.
Encourage enterprises to develop necessary sectors for people in the country.
Encourage export enterprises, and promote the consumption of goods and services abroad.
Policies for goods having a tax rate of 0% and not liable to VAT
- Goods and services subject to the tax rate of 0% or not liable to VAT are included in the State’s policies, so consumers must not pay any VAT amounts.
- Goods subject to the tax rate of 0% to encourage enterprises to export and promote abroad consumption (more competitive selling price, tax credit, and refund (Article 2, Circular No. 25/2018/TT-BTC);
- Non-taxable goods are the policy to encourage enterprises to invest in new industries with high social security (support and encourage domestic consumption).
Note: Goods and services are subject to the VAT rate of 0% for exported goods and services because VAT is calculated by the territory.
Here are the criteria for the differentiation of the tax rate of 0% and objects not liable to VAT. Objectives of application and VAT declaration responsibilities are the differences between these two cases.