Official Dispatch No. 3995/TCT-KK dated September 16, 2014 of the General Department of Taxation on VAT deductions

THE MINISTRY OF FINANCE
THE GENERAL DEPARTMENT OF TAXATION

Official Dispatch No.3995/TCT-KK dated September 16, 2014 of the General Department of Taxation on VAT deductions

In response to the Dispatch No. 011113/XCH-VAT of Xin Chang Hua Co. Ltd and the Dispatch No. 472/CT-TTHT of Department of Taxation of Tay Ninh province on capital settlements; the Dispatch No. 02/2014/CV-KT of Langham Garments Co. Ltd. on refund of VAT on machinery and equipment imported as capital contributions, General Department of Taxation hereby provides guidance as follows:

Pursuant to Circular No. 06/2012/TT-BTC dated January 11, 2012 of the Ministry of Finance on VAT:

-Article 14:

“Article 14. Rules for deducting input VAT

1. Input VAT on goods/services serving the manufacture or sale of other goods/services subject to VAT are shall be deducted in full, including nonrefundable input VAT on goods subject to VAT that are impaired.

3. Input VAT on fixed assets serving the manufacture or sale of both goods/services subject to VAT and goods/services not subject to VAT are shall be deducted in full...”

Article 15:

“Article 15. Requirements for deducting input VAT

1. There are legitimate VAT invoices for purchased goods/services, or receipts for payment of VAT at importation stage, or receipts for payment of VAT on behalf of foreign parties being foreign organizations that do not have legal status in Vietnam and the foreigners doing business or earning income in Vietnam as prescribed by the Ministry of Finance.

2. There are bank transfer receipts for purchased goods/services (including imported goods) that are of VND 20 million or above, except for the case in which the total value of multiple purchases is below VND 20 million (at VAT-inclusive prices).Point b.2 Clause 3 Article 16:

“b) The payments below are considered bank transfer

b.2) Where the exporter uses the payment for exported goods/services as capital contribution to an overseas importer, the exporter must satisfy the requirements below:

- A capital contribution contract is concluded.

- The export contract permits the use of payment for exported goods/services as capital contributions the overseas importer.

- In case the capital contribution is smaller than the revenue from exported goods, the difference must be paid via a bank as instructed in this Point.”

Pursuant to the regulations above, if Xin Chang Hua Co. Ltd., Langham Garments Co. Ltd., and Vietnam – Malaysia Rubber Co. Ltd., which are foreign-invested companies in Vietnam, the companies that import machinery and equipment as requested by overseas investors, make payments in the form of capital contributions to investment projects in Vietnam according to their Certificates of investment, and have receipts for payment of VAT on imported goods are able to prove the increase in investors’ capital contribution in proportion to the value of the import contracts (capital contribution records, asset valuation records issued by the capital transfer councils of the capital contributors, or valuation records issued by licensed valuation organizations, enclosed with documents about asset origins), VAT on machinery and equipment imported as capital contribution shall be deducted and refund. 

This Dispatch replaces Dispatch No. 179/TCT-KK dated January 15, 2013 of General Department of Taxation.

Xin Chang Hua Co. Ltd., Langham Garments Co. Ltd, and Department of Taxation of Tay Ninh province Article responsible for implementation of this Dispatch./.

For the Director

The Deputy Director

Bui Van Nam