“Newly established enterprises and branches should give heed to matters concerning value added tax (VAT) calculation method, when to apply deduction method, and registration for voluntary application of tax deduction method, etc.“
Methods of tax deduction are stipulated in detail in Circular No. 219/2013/TT-BTC (hereinafter referred to as “Circular 219”) guiding the implementation of the Law on VAT. However during the process of implementing Circular 219, plenty of newly established enterprises encountered many entanglements arising from the provisions of this Circular. The Ministry of Finance therefore has promulgated Official Dispatch No. 2616/TCT-CS providing enterprises with guidance on the implementation of the provisions on the application of tax deduction method.
Firstly, in regards of value of assets, machines, equipment purchased or invested by newly established enterprises: Newly established enterprises are permitted to register for voluntary application of tax deduction method when:
Secondly, in regards of application of tax deduction method for branches: According to the provisions of Circular 219 on tax deduction method, branches established by an enterprise submitting VAT under the deduction method will be eligible to apply the method of tax calculation as of the operating enterprise (in case the branches make VAT declaration at their direct tax administration). However, if the branches neither conduct direct sales nor generate revenue, they must declare tax altogether at the enterprise’s headquarters. In addition, this regulation also applies to branches established from the enterprise’s investment projects.
Thirdly, in regards of registration for voluntary application of tax deduction method: Enterprises should give careful attention to the following cases: