TAX ARTICLES

Changes in value-added tax (VAT) applied in 2022

Changes in value-added tax (VAT) applied in 2022
Changes in value-added tax (VAT) applied in 2022

On 11 January 2022, the National Assembly issued Resolution No. 43/2022/QH15 on fiscal and monetary policies to support the program of socio-economic recovery and development, which include the section on supporting policies for the Program on socio-economic recovery and development refers to the reduction of 2% of the VAT rate in 2022, applicable to groups of goods and services currently applying the VAT rate of 10% (remaining 8%).

Later, on 28 January 2022, the Government issued Decree No. 15/2022/ND-CP stipulating tax exemption and reduction policies according to the National Assembly’s Resolution No. 43/2022/QH15 on fiscal and monetary policies to support the program of socio-economic recovery and development. The above Decree has specified the list of goods and services eligible for VAT reduction

1. Change in VAT rates

VAT rates for goods and services are changed. Specifically, Decree No. 15/2022/ND-CP stipulating the reduction of VAT for some groups of goods and services currently applying the 10% tax rate will be reduced to 8% from 01 February 2022 to the end of 31 December 2022.

The reduction of VAT for each type of goods and services is uniformly applied for import, manufacture, process, commercial trading. For coal exploited for sale (including the case of coal mined and then screened, classified according to a closed process, then sold) subject to VAT reduction.

2. List of products and services subject to VAT rate reduction

Groups of goods and services that meet the conditions are (i) the current VAT rate is at 10%, and (ii) do not belong to the following groups, are all entitled to a VAT rate reduction to 8%:

  • Groups of goods, services: telecommunications, financial activities, banking, securities, insurance, real estate trading, metals and prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products are detailed in Appendix I – Decree No. 15/2022/ND-CP.
  • Goods and services subject to excise tax are detailed in Appendix II – Decree No. 15/2022/ND-CP, specifically:

Goods: Cigarettes, cigars and other preparations from tobacco plants for smoking, inhalation, chewing, smelling, sucking; Alcohol; Beer; Automobiles with less than 24 seats, including cars that carry both passengers and goods with two or more rows of seats, and a fixed partition design between the passenger compartment and the cargo compartment; Two-wheeled motorcycles and three-wheeled motorcycles with a cylinder capacity of over 125cm3; Aircraft, yachts; Gasoline of all kinds; Air conditioners with a capacity less than of 90,000 BTU; Cards; Joss papers.

Services: Discotheque business; Massage, karaoke business; Casino business; prize-winning electronic games, including games with the jackpot, slot, and similar machines; Betting business; Golf business includes selling membership cards, golf tickets; Lottery business.

  • Information technology businesses in accordance with the law on information technology is detailed in Appendix III – Decree No. 15/2022/ND-CP

3. Invoice processing when applying VAT reduction

  • In case goods and services are listed in groups that are not eligible for VAT reduction but are currently not subject to VAT or subject to 5% VAT according to the provisions of the current VAT Law, the current regulations will still apply with no VAT reduction.
  • When issuing invoices of the goods and services subject to VAT reduction, fill “8%” at the VAT rate line. Based on the VAT invoice, the seller declares output VAT, and the buyer deducts input VAT according to the reduced tax stated on the invoice.
  • The company must issue separate invoice(s) for goods and services eligible for VAT reduction. If there is no separate invoice for goods and services eligible for VAT reduction, the tax reduction will not be applied.
  • In case the company has issued the invoice(s) and declared according to the old tax rate or the old percentage to calculate VAT, the seller and the buyer must make a record or have a written agreement clearly stating the error. At the same time, the Company must issue the invoice(s) to correct the error and provide the buyer with the corrected invoice. Based on the adjusted invoice, the Company declares the adjustment of the output tax, and the buyer declares the adjustment of input tax (if any).
  • In case the Company has issued the invoices printed on order in the form of tickets with a pre-printed face value that has not been used up (if any), the company must cancel the invoices, then re-issue the new one or need to process the price tag with 2% VAT rate reduction next to pre-printed price criteria for continued use.
  • When the company submits the VAT declaration, it must attach a declaration of goods and services eligible for VAT reduction according to Form No. 01, Appendix IV of Decree No. 15/2022/ND-CP.

4. What should companies pay attention to when applying new VAT regulations

  • Update legal regulations and invoice handling methods when there are any changes in tax rates for the accounting department, this thing will help the internal process of the enterprise be unified, avoiding risks on the amount of tax payable.
  • For companies that frequently generate import-export activities, it is necessary to pay attention to the declaration on the VNACCS/VCIS system, accordingly, they must choose the correct VB195 code to declare the VAT rate of 8%. The declaration of VB195 code only applies to customs declarations registered from 00:00 AM on 01 February 2022.
  • For contracts between company and customers, in some cases, changing the VAT rate will lead to the change(s) in the amount to be paid, these changes must be made in accordance with the tax law. Hence, making an appendix to amend the contract between the parties or not will depend on the needs of the parties, not a mandatory requirement.

The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.