Currently, VAT deduction is applicable to business establishments fully implementing accounting regimes, receipts and vouchers in accordance with the laws on accounting, invoices vouchers, and registering to pay taxes with tax deductible method. Other taxpayers have to follow direct tax settlement, including individuals; business households that do not perform or insufficiently perform accounting regimes, invoices and vouchers; foreign individuals and organisations doing business out of the governing realm of the Law on Investment; and other objects that do not perform or insufficiently perform accounting regimes, invoices and vouchers; and traders of gold, silver and precious stones.
However, from January 1, 2014, in addition to satisfying all conditions concerning accounting regimes, receipts and vouchers, businesses must have VAT-incurring revenue of over VND1 billion onwards a year. Such annual revenue is calculated from VAT invoices dated from the first day of December to the last day of November of the following year. Tax computing method is kept stable over two years.
For example, active Company A, set up in 2011, needs to following steps to calculate the VAT-incurring revenue in 2014.
Summing up the value of VAT invoices in 12 months (i.e. from December 2012 through November 2013.)
Where the total revenue is over VND1 billion, Company A will enjoy VAT deductible method in two years (2014 and 2015).
Where the total revenue is less than VND1 billion, Company A shall follow the direct tax payment method in two years (2014 and 2015), except for the case of Company A voluntarily registering to use the tax deductible method.
Where the company halts operations in the year, the revenue will be calculated from the year preceding the company's halt in operations. Where it stops operations in some months of the year, the revenue of the year will be calculated in months and quarters with operation.
In case a company was established in 2013 and their real operational time in the year is less than 12 months, the estimated revenue for that year will be based on the average monthly revenue of operational months multiplied by 12. If the estimated revenue is VND1 billion or more, it can follow VAT deductible method. Otherwise, it will follow the direct tax payment method, except for the case of voluntarily registering to use the tax deductible method.
The new regulations aim to encourage business establishments to voluntarily implement strict accounting regulations. Besides, this new ruling will help local tax authorities better manage taxpayers.
Hien Anh
Vietnamese
