Introduction to VAT in Vietnam
Value-Added Tax (VAT) is a consumption tax applicable to goods and services in Vietnam. All individuals and organizations engaged in business activities involving VAT-eligible goods and services must pay VAT, regardless of their location in Vietnam.
Calculation Methods for VAT
VAT can be calculated using two methods: the credit method and the direct method. The credit method, which applies to most businesses, involves determining payable VAT by subtracting creditable input VAT from output VAT. The direct method, used by specific entities, calculates VAT based on the added value of sold goods or services.
Invoicing Requirements and Documentation
Proper VAT invoices must be obtained from suppliers to claim input VAT. These invoices should meet Vietnamese regulations and include accurate VAT amounts. Most businesses are required to use e-invoices, and registration and approval from tax authorities are necessary.
Tax Filing and Payment Procedures
Small business owners in Vietnam must file VAT returns monthly or quarterly and settle tax payments within specified deadlines. For businesses using the direct method, VAT finalization must be completed within three months after the accounting year. Payments are made in Vietnamese dong directly to the State Treasury.
VAT Refund Opportunities for Small Business Owners
Certain situations may qualify small business owners for VAT refunds. This includes cases where input VAT has not been fully credited, exporters with significant input VAT credits, and specific circumstances outlined in Vietnamese tax regulations. To initiate the refund process, an application dossier must be submitted to the tax authority for approval.
By understanding the calculation methods, invoicing requirements, tax filing and payment procedures, as well as VAT refund opportunities, small business owners in Vietnam can ensure compliance and streamline their financial operations.