The 60-day deferral of Value Added Tax (VAT) payments on importation and VAT refunds are the tax incentives Viet Nam applies to investment projects facing objective financial problems.
The following enterprises are entitled to select between VAT deferral on imports and VAT refund for machines and equipment imported to create fixed assets for investment projects:
Enterprises newly established from investment projects currently in the process of investment that have yet to be brought into operation;
Active enterprises taking part in investment projects, such as the construction of new production lines, operational expansion, technological innovation, and environmental improvement in addition to production capacity enhancement, by means of direct imports or authorising the import of machines and equipment to create fixed assets.
When such enterprises encounter objective financial difficulties, such as failure to distribute a sufficient amount of money to pay for VAT on imports, reliance on loans from commercial banks on the import of machines and equipment for production and trading purposes, or in case of critical losses incurred by the delayed customs clearance of commodities, they are entitled to choose between the abovementioned incentives if they satisfy the following three requirements:
1. Having registered for VAT submission under the deduction method and having been granted the Business Registration Certificate or Investment Certificate, owning a legitimate corporate seal, implementing accounting regimes as prescribed by law, and having a bank account;
2. The total value of machines and equipment imported to create fixed assets is worth more than VND100 billion (US$4.464 million);
3. The investment projects produced and trade goods and services subject to VAT.
Deferral of VAT payment on importation
Enterprises are eligible for deferred VAT payment on imports once the first shipment of imported goods has reached the port, worth less than VND100 billion. The maximum extended period must be within 60 days commencing from the deadline for VAT submission prescribed by law. Imported goods shall be granted customs clearance after the completion of inspection carried out by customs authority.
The application for deferral of VAT payment on imports can be filed directly with the customs authority or sent via post or e-mail.
In case where the customs authority approves the application for such deferral, a written notification on the approval of VAT payment deferral will be issued within three working days commencing from the date of receipt of sufficient documents.
Enterprises should note that it is only required to include records of VAT payment on imports in the application dossier sent to customs authority for VAT refund after the dossier is declared correct, sufficient and in accordance with law by the customs authority. Within five working days, the customs authority is responsible for informing the enterprise that the application dossier they submitted is correct and sufficient for VAT refund. Only then will the enterprise need to supplement the records of VAT payment on imports as requested.
Within three working days after the additional records of VAT payment on imports have been submitted, the tax authority will examine and compare such records with the figures declared in the application dossier to draw a decision on VAT refund. There are two situations that may occur during such process of examining and comparing:
The amount of submitted VAT written on the records of VAT payment is lower than the amount of VAT initially requested to be refunded. In this case, the VAT amount to be refunded is equal to the amount written on the records of VAT payment;
The amount of submitted VAT written on the records of VAT payment is higher than the amount of VAT initially requested to be refunded. In this case, the VAT amount to be refunded is the amount initially requested to be refunded.
The method of filing the application dossier for VAT refund is as similar as the aforementioned procedures on applying for deferral of VAT payment.
In addition, it is important for enterprises to note that the above mentioned tax incentives will not apply to machines and equipment used to create specialised fixed assets for credit institutions, businesses of reinsurance, life insurance, and securities, medical and training facilities.
PLF – LAW FIRM