VALUE-ADDED TAX: WHAT SHOULD KNOW ABOUT THE LATEST LEGAL REGULATIONS FOR 2022

Value-added tax is a common one that enterprises and business households need to know in order to declare and pay taxes in accordance with current laws. What is the current law on value-added tax? Find out further details with OTIS LAWYERS in the article below!

Legal Grounds

Law on Value-Added Tax 2008

Circular 219/2013/TT-BTC

What is Value-Added Tax?

What is Value-Added Tax? How is the meaning?

Value-Added Tax is also known as VAT. According to the provisions of Article 2 of Law on value-added tax, "VAT is a tax imposed on the added value of goods and services arising in the process from production, circulation to consumption."

Characteristics of Value-Added Tax

As an indirect tax

VAT is an indirect tax levied on the added value of goods and services, arising from the process of production, circulation to consumption. Consumers will be taxable. Production and business establishments, enterprises providing goods services will be taxpayers to the state budget on behalf of consumers by adding tax to the selling prices that consumers have to pay when buying goods. service.

As a tax with a large taxable object

Taxable objects of VAT are goods and services used for production, business and consumption in Vietnam, which are subject to value added tax, except for the objects stipulated in Article 5 of Law on VAT.

Calculating on the added value of goods and services only

This is one of the basic characteristics to distinguish VAT from other indirect taxes. VAT at all stages. From the production process to the circulation of goods and even the consumption process. Taxation is only on the added value but not on the entire value of goods and services.

Role of value-added tax

• VAT has the effect of regulating income of organizations and individuals consuming taxable goods and services 
• VAT is an important revenue of the State Budget. VAT generates a large and relatively stable source of revenue for the state budget.
• Encourage the export of goods and services.
• Promote the implementation of the accounting and use of invoices.

Objects of value-added tax imposition 

Tax payment objects

Value-added tax payers are organizations and individuals that produce and trade in value-added taxable goods and services, and organizations and individuals that import value-added taxable goods.

Taxable objects

Taxable objects of VAT are goods and services used for production, business and consumption in Vietnam that are subject to value added tax, except for the objects specified in Article 5 of Law on VAT.

Non-taxable Objects 

• Cultivation and husbandry products, and reared and fished aquatic products which have not yet been processed into other products or have been just preliminarily processed and sold by producing and fishing organizations and individuals, and products at the stage of importation.…
• Products which are animal breeds and plant varieties, including breeding eggs, breeding animals, seedlings, seeds, sperms, embryos and genetic materials.
• Irrigation and drainage; soil ploughing and harrowing; dredging of intra-field canals and ditches for agricultural production; services of harvesting farm produce.
• Salt products made of seawater, natural rock salt, refined salt and iodized salt.
• State-owned residential houses sold by the State to current tenants.
• Transfer of land use rights;
• Life insurance, student insurance, insurance on domestic animals, insurance on plants and reinsurance.
• Credit provision services; securities trading; capital transfer; derivative financial services, including interest-rate swap contracts, forward contracts, futures contracts, call or put options, foreign currency sales, and other derivative financial services as prescribed by law
• Healthcare and animal health services, including medical examination and treatment and preventive services for humans and domestic animals.
• Public post and telecommunications and universal Internet services under the Governments programs.
• Public services on sanitation and water drainage in streets and residential areas; maintenance of zoos, flower gardens, parks, street greeneries and public lighting; funeral services;
• Renovation, repair and construction of cultural, artistic, public service and infrastructure works and residential houses for social policy beneficiaries, which are funded with people contributions or humanitarian aid.
• Teaching and vocational training as provided for by law.
• State budget-funded radio and television broadcasting.

How to calculate value-added tax

VAT can be calculated by 2 methods

Deduction method

Payable VAT = output VAT – deducted input VAT 

Direct calculation method

VAT amount = revenue x percentage %

VAT rate

VAT rate is the tax payment per unit of taxable goods or services. VAT rates include 3 levels: 0%, 5% and 10%. The tax rate will be different depending on the type of goods

Tax consulting service of OTIS LAWYERS

Above is the consultation of OTIS LAWYERS on VAT in accordance with the law. We hope that the above article will be a useful reference for you when learning about taxes. 

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