What are VAT Refunds?
Quick Summary of VAT in Vietnam
In Vietnam, VAT is regulated by Vietnam’s Law on Value-Added Tax. The tax will be finalized, declared and submitted to the local tax authorities by your company’s accountants or accounting outsourcing service. There are two methods for calculating a company’s VAT payable to the government: the direct method (for very specific industries like gold and gemstone processing) and the indirect (credit) method. Most companies would apply the indirect method, which is further explained in Circular 219/2013/TT-BTC.
This means that the total amount of VAT to be paid to the government would be:
Output VAT is levied on the consumer of the company’s goods and services, which is normally added to the price of those goods and services on their receipts. Input VAT is imposed on the company itself when it purchases materials, equipment, or services from suppliers. Subtracting input VAT from your payable amount means that these materials are not subject to VAT as your company is not the final consumer.
Definition of VAT Refunds
VAT refunds are defined as the amount of VAT returned to the taxpayer from the state budget in certain cases. For example, the company might have overpaid their VAT, or the government can offer returns as a tax reduction.
Who are eligible? What are the requirements for VAT refunds?
VAT refunds are given when your company’s total input VAT in a year (12 months or 4 quarters) has not been entirely deducted from its output VAT. In other words, your company did not account for all of its input VAT deductions and has overpaid the total annual VAT amount.
As refunds are based on input and output VAT, only businesses that use the credit method for filing VAT will be included in this program. There also has to be no prior tax debt whatsoever.
Additionally, VAT refunds are also used by the Vietnamese government as a tax incentive in some cases. Here are some examples of eligible cases (not limited to the examples below) according to Circular 130/2016/TT-BTC:
- Registered oil and gas exploitation businesses with an investment duration of more than 12 months; while having a total accumulated VAT amount of goods and services purchased and used for investment of VND 300 million (USD 12,600) or above
- Ownership transfer, enterprise transformation, M&A, consolidation, division, separation, dissolution, bankruptcy, or termination of operation within businesses if there is overpaid VAT or input VAT has been fully deducted
- Businesses that file over VND 300 million (USD 12,600) in uncredited input VAT in exported goods and services.
In order to apply for a VAT refund, after meeting the requirements above, you’ll have to make sure that your company has all the necessary documentation. That includes:
- Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC, also known as Business Registration Certificate or BRC)
- A company stamp, as regulated by the Law on Enterprises
- Accounting documents, including financial statements
- A company bank account for your investment capital (which has to match your IRC)
- A correctly filed refund application
How do I apply for a VAT refund?
Tax refund applications are carried out on the government’s online tax management platform. One big problem, however, is that it’s only available in Vietnamese.
On top of that, there are more specific procedures for some companies such as ones with importing activities and new investment projects.
How do I make it easier?
The solution to many businesses’ problems, especially when starting out or entering a new market, is to outsource complicated business processes that you don’t have enough resources for. These include HR (payroll and recruitment), legal (legal representative and secretarial), and accounting and tax compliance.
VAT return application is a new addition to our full suite of business process outsourcing (BPO) services in Vietnam, which take care of all your corporate outsourcing needs.
How do we get your company’s VAT refunds?
First, we’ll conduct a full assessment of your tax refund eligibility to decide whether we can go through with the service. That means we’ll:
- Collect all the relevant information and documents of your company
- Conduct a thorough compliance check
- Consult the conditions of the VAT refund.
We’ll also liaise with your company’s local authorities to confirm the requirements for your specific business type and field.
If all conditions are met on both your company’s side and the officials’ side, we’ll move on with preparing your application and submitting it.
- We’ll do all the research and legal inspection on procedures specific to your company.
- We’ll prepare your company’s dossiers and submit them for you.
- We’ll talk with the authorities and settle any complications regarding your application.
- We’ll transfer your results back to you as soon as they’re available.
What you’ll receive after the application
As soon as the procedures have gone through, we’ll make sure you have everything ready as if you went through them yourself. That includes:
- Confirmation documents directly from the Tax Department for the refund
- The refunded amount of your VAT.
Want to find out more about our service? Contact one of our business consultants with the form below.
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