Refund of VAT on investment projects

Refund of VAT on investment projects

In the process of consulting customers who are new investors to Vietnam, I have received many questions related to the issue of value added tax (VAT) refund, such as the following:

1. Can we refund VAT?
2. If possible, what are the conditions for refunding VAT ?
3. When will we be refunded VAT?
4. How long does VAT refund take?

Those are many common questions that I often get from our customers.

Today, I would like to share with you the relevant rules and the small notes,that help you to note and avoid these errors, otherwise you will have a little trouble after the intended VAT refund in Vietnam.

Currently, according to the current regulations in Vietnam (Circular 130/2016 / TT-BTC issued on 12 August 2016), a company will have 2 cases of relatively common VAT refund:

1. The first, tax refund for new investment projects
2. The second, tax refund in case of export turnover

However, in the scope of this article, I would like to share about case 1, "VAT refund for new investment projects". Accordingly, Circular 130/2016 / TT-BTC regulates as follows:

“Business premises newly established from investment projects that have been registered for business, registered for payment of value-added tax by the deduction method, or Projects of exploration and development of oil and gas fields are in the investment phase and have not yet come into operation, If the investment period is from 1 year or more, it will be refunded value added tax on goods and services used for investment in each year. In case, the accumulated value-added tax on purchased goods and services used for investment is VND 300 million or more, it will be refunded. "

At the same time, in the content of this circular, the Ministry of Finance also stipulates cases not eligible for VAT refund, specifically as follows:

- Investment projects of business premises do not contribute sufficient authorized capital tax as registered according to the provisions of law.

- Investment projects do not response the requirements of conditional business lines;

- …

Based on the regulations and the spirit of Circular 130/2016/TT-BTC, most companies do not fully understand the regulations and concepts in the circular, leading to some companies to make mistakes, incomplete implementation that lead the tax authorities not accepting tax refund for the reason: "The company does not apply the provisions of Circular 130/2016/TT-BTC".

The common errors that I encountered are:

1. Asking refund VAT when the project has been put into operation
2. Asking refund VAT when the authorized capital has not been fully contributed
3. The form of capital contribution does not conform to the regulations on foreign exchange control
4. VAT declaration form is not compliant with regulations

To help you understand the spirit of the circular and the content of regulations, I would like to explain the meaning of the "keyword" as follows:

"In the investment stage, not yet in operation" is understood as: the first, your project has no sales activities, which means no output invoices; secondly, the time for constructing workshops, installing machinery and equipment (understood as the investment stage) stated in the investment certificate is still within the committed period. If you meet both of these criteria, it means that your project is In the investment stage, not yet in operation.

"01 year or more" or "from 300 million": Your company is eligible for tax refund when the project implementation time is full 1 year or more, otherwise your VAT portion have enough from 300 million or more, whichever is first response

"Not making full contribution to the charter capital as registered according to the provisions of law": This is one of the many things that many companies make mistakes, the reason is that before September 2019, when the date of Circular 06/2019 / TT-NHNN have effected, the capital contribution for the investment preparation stage (understood before the capital account in Vietnam), the company having to open a payment account at any bank in Vietnam, the investor must transfer money from abroad to a payment account in Vietnam, then from the payment account to transfer the payment for fees incurred for the investment preparation stage, if complying with such a schedule, the money transferred from abroad for the new investment period shall be considered as the charter capital as prescribed. Many cases have not done like this, the foreign investors transferred money directly to industrial park investors to pay a deposit for land rental, and this deposit was later considered by the company as a capital contribution. This is a form of capital contribution in contravention of the Circular 19/2014 / TT-NHNN and therefore is not considered by tax authorities as eligible for VAT refund. However, until September 2019 when Circular 06/2019 / TT-NHNN was issued and replaced Circular 19/2014 / TT-NHNN, this content was amended, Accordingly, before being granted the investment registration certificate by a competent agency, foreign investors are allowed to transfer money from abroad or from foreign currency payment account, Vietnam dong of the foreign investor opened at an authorized bank in Vietnam to pay legal expenses during the stage of carrying out investment preparation activities in Vietnam.

Summary, in order to receive a refund for your new investment project, you must response all of the following:

1. Your company is a newly established company
2. Project investment duration is 1 year or more or with input VAT from VND 300 million
3. Contributing sufficient charter capital as prescribed
4. No output invoices have been issued yet
5. The time of asking for tax refund is still within the time frame of commitment on the progress of factory construction investment, installation of machinery and equipment stated in the investment certificate.

If responding all 5 of the above conditions, your application for tax refund will be valid.

So, I have shared with you the regulations related to "VAT refund for new investment projects", through this article, we are looking forward to receiving sharing and contributions from experts, readers so we can better improve our knowledge and experience.

Thank you!