The Amendment law introduces several positive changes that reflect the effort of the country in modernizing its indirect tax system and it will take effect on 1 January 2014. The Amendment law legislates for several regulations, guidance notes and interpretations previously released by the tax authorities in the form of guiding decrees, circulars and rulings governing the application of VAT exemption to supplies such as financial services including loans provided by non-credit institutions, security and currency trading, factoring services, and so on.
The 6-month time limit to claim creditable input VAT has been removed. Taxpayers may now claim their input VAT credits at any time as long as the claims are made prior to a tax audit. In addition, claims for VAT refunds are allowed where taxpayers have accumulated input VAT credits for at least 1 year.
The Amendment law also allows businesses with annual revenue below 1 billion Vietnamese dong (VND) to report VAT under the “direct method”, unless they elect to continue reporting VAT under the conventional “deduction method”.
The Amendment law explicitly defines export services as “services consumed outside of Vietnam”. This potentially means that even if the service buyers pass the VAT registration and permanent establishment (PE) tests their acquisitions may still be taxable, rather than qualifying as a zero-rate exports, if the tax authorities regard the goods or services acquired as being consumed in Vietnam.
Another VAT related development occurred on 28 June 2013 when Vietnam’s Ministry of Finance issued official letter 8355/BTC-TCT to tax authorities. This letter provides temporary guidance for VAT reporting by VAT registered businesses with an annual turnover up to VND20 billion. Effective 1 July 2013, these businesses may elect to report VAT on a quarterly basis (commencing in the 3rd quarter of 2013). Businesses that wish to continue reporting VAT on a monthly basis were required to notify their local tax office in writing by 20 August 2013, (i.e. the filing due date for the monthly VAT return of July 2013).
Vietnam tax regulators believe that these changes will bring Vietnam’s VAT system into alignment with the expected changes in other domestic tax laws and international indirect tax practices. The changes are intended to simplify compliance procedures and help taxpayers reducing their compliance costs.