This issue's introduction
Tax payable - deduction of output tax
Chapter III Value Added Tax
Tax payable - tax base
Among them, the sales price is the amount collected by the seller for the sale of the product; the import duty-paid price is the price for calculating import taxes and fees, excluding VAT and luxury goods sales tax.
(1) The basis for calculating the tax on goods is the sales price, including all fees required or required by the seller, insurance, freight, maintenance and technical assistance (i.e. training), etc. should be included in the tax basis.
All deductions in the tax invoice are not included in the tax basis.
In the absence of a price, VAT is calculated based on "other value", including the following situations:
Tax payable - output tax deduction
The basis for calculating import VAT is the import value, including the cost of goods, insurance, freight and tariffs.
The output VAT amount is calculated by multiplying the tax base by the VAT rate.
If the output tax amount is greater than the input tax amount during the tax period, the difference between the two is the taxpayer's tax payable.
However, if the input tax is greater than the output tax, the difference is an overpayment. The overpaid tax should be compensated in the next tax period. In principle, this overpaid tax can only be refunded at the end of the accounting year.
The definition of "end of the accounting year" includes the period when the enterprise ceases to operate.
(1) Deduction requirements
① If the VAT taxpayer meets the formal and material requirements, the input tax can be deducted.
A. Meet the formal requirements, which means that the tax invoice reflecting the input tax information is clear, complete and true.
B. Meet the material requirements, which means that the tax invoice contains true and correct information about the taxable behavior.
"True and correct information" means transactions that actually occurred and are not fictitious.
② Input tax can be deducted only if it is directly related to the VAT taxpayer's business, including production, distribution, marketing and management.
(2) Excess input tax
Input tax can be deducted from output tax. If the input tax is greater than the output tax, an overpayment will occur. Generally speaking, this overpayment must be compensated in the next tax period and a refund can only be applied for at the end of the tax year. However, this rule does not apply to the following taxpayers, who can choose to apply for a refund on a monthly basis:
① VAT taxpayers who export taxable intangible assets;
② VAT taxpayers who provide taxable goods or services to VAT collectors;
③ VAT taxpayers who provide taxable goods or services exempt from VAT;
④ VAT taxpayers who export taxable intangible assets;
⑤ VAT taxpayers who export taxable services.
It should be noted that if these taxpayers fail to start production within a specific period after the input VAT is deducted, they must re-pay the refunded VAT. This period is 3 years for producers and 1 year for non-producers.
According to the Ministry of Finance Regulation No. 18 of 2021, the 3-year period for producers can be extended for taxpayers in certain sectors: the maximum period for manufacturing companies is 5 years; the maximum period for commercial sectors included in national strategic projects is 6 years.
If the producer purchases or imports capital goods after this period, the input tax paid when the goods were purchased can still be deducted. The overpayment can be refunded or carried forward. If the producer fails to start the first production within 2 years after the refund, it must pay the VAT again.
(3) Partial deduction
Taxpayers may purchase goods or services for which the VAT cannot be fully deducted. In this case, the deductible input tax must be apportioned using the following equation:
P = PM × Z (“P” refers to the deductible input tax, “PM” refers to the input tax paid, and “Z” refers to the proportion of taxable goods/services supplied to the total goods/services supplied)
At the end of the accounting period, taxpayers must recalculate the deductible input tax.
If the taxable goods/services are used for less than one year, the equation used is P’ = PM × Z’.
If the taxable goods/services are used for more than one year, the equation used becomes: P’ = (PM) / (T × Z’) (“P’” refers to the deductible input tax in the accounting year, “PM” refers to the input tax paid, “Z’” refers to the proportion of taxable goods/services supplied to the total goods/services supplied in the accounting year, and “T” refers to the number of years of use).
The useful life of land and buildings is 10 years, and the useful life of other goods and services is 4 years.
The input tax generated by the recalculation can be cumulatively deducted with other input tax within 3 months after the end of the accounting period, but if the goods and services exceed the useful life, there is no need to recalculate.
(4) Adjustment of initial input tax deduction
When the buyer returns the purchased goods to the supplier due to defects or no longer needed, the buyer can adjust the input tax deduction according to the circumstances, so the buyer must correct its VAT return form. At this time, the buyer should issue a return slip for goods or a cancellation slip for services.
If the loss is caused by force majeure, it cannot be corrected.
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