Regime on Value Added Tax (VAT) Invoice in Vietnam

A Value-Added Tax (VAT) invoice is a type of document used in the sale and purchase of goods and services. It is issued by the seller and records the detailed value of goods or services, as well as the VAT that the buyer must pay. Businesses use this invoice to declare output VAT (for the seller) and to deduct input VAT (for the buyer) as part of the tax declaration and financial accounting process following the law. Therefore, not understanding the regime on Value Added Tax (VAT) Invoice in Vietnam may result in administrative fines or even legal penalties for businesses. In this article, Luat Viet An will provide advice on the most important issues that businesses should pay attention to to comply with current VAT invoice regulations.

Types of VAT Invoices

VAT Invoices must be in electronic form

According to Decree 123/2020/ND-CP, which governs invoices and documents effective from July 1, 2022, all businesses must use electronic VAT invoices for VAT deduction.

Thus, when selling goods or providing services, the seller must issue an invoice to the buyer (including cases where goods or services are used for promotion, advertising, samples, gifts, exchanges, employee compensation, or internal consumption; goods provided under lending, borrowing, or return conditions) and must fully record all required details.

Cases in which invoices are not required 

According to Clause 2.4, Article 6 of Circular 78/2014/TT-BTC (amended by Circular 96/2015/TT-BTC), certain business purchases of goods or services do not require an invoice, provided the seller prepares a “List of Purchased Goods and Services” in the format of form 01/TNDN attached to Circular 78/2014/TT-BTC. This list, along with payment documents, is required to qualify for tax deductions. These cases include:

• Purchase of agricultural, forestry, or aquatic products from producers directly engaged in farming or fishing;
• Purchase of hand-made products made from materials like jute, rattan, bamboo, and other agricultural byproducts;
• Purchase of materials such as stones, sand, and gravel from individuals or households engaged in extraction;
• Purchase of scrap materials from individuals collecting waste;
• Purchase of goods or services from non-business individuals or households (where annual revenue does not exceed VND 100 million).

VAT Output Invoices

• According to the regime on Value Added Tax (VAT) Invoice in Vietnam, when selling goods or services, businesses must issue an invoice to the customer.
• Businesses subject to VAT under the credit-invoice method must use VAT invoices for the sale of taxable goods or services, including sales of goods subject to special consumption tax.
• VAT invoices must be issued in accordance with the law and financial regulations to be accepted by the tax authorities.

Required Documents for VAT Invoices 

• A sales or purchase contract (Purchase and Sale Agreement). If the contract does not specify the list of goods sold, an appendix to the contract detailing the goods bought or sold is required.
• Goods release or receipt notes for goods sold or purchased.
• Receipt or payment slips recording the transaction amounts for sold or purchased goods.
• A contract liquidation or settlement document for the purchase and sale agreement.

Special considerations 

When issuing invoices, businesses must apply the correct tax rate according to the Ministry of Finance’s regulations for the specific goods or services. Special attention should be given to the wording used on invoices, as errors could result in incorrect tax rates. For example, a transport business may be eligible for a VAT reduction on transportation services (from 10% to 5%). However, if the invoice mistakenly lists “vehicle rental” instead of “transport services,” the business may be subject to a higher tax rate of 10%.

VAT Input Invoices

To ensure that an invoice qualifies for VAT deduction and meets the requirements of current tax laws, businesses need to pay particular attention to  VAT input invoices.

For Invoices Over 20 Million VND

According to Article 6.1 of Circular 78/2014/TT-BTC, any purchase of goods or services with a value of VND 20 million or more (including VAT) must be paid via non-cash methods (e.g., bank transfer) to qualify for VAT deductions.

A mandatory condition for input invoices with a value of VND 20 million or more is that payment must be made through a bank transfer to qualify for VAT deduction. Therefore, businesses should pay attention to the following important points in the case of transactions involving invoices over VND 20 million:

First, invoices paid in installments

If an invoice is paid in installments, all payments must be made via bank transfer, including the initial deposit. If a deposit is paid in cash and deducted from the invoice amount, the supplier must refund the deposit and make the payment via bank transfer for VAT deduction eligibility.

Second, multiple invoices on the same day

If multiple invoices are issued for purchases from the same supplier on the same day, each invoice must be under VND 20 million. If the total value of the purchases exceeds VND 20 million, the VAT deduction is not allowed.

Third, bank transfer requirements

Payments must be made from:

The buyer’s bank account ⇒ the seller’s bank account

If the payment is made from an account not registered under the buyer’s name, or if the payment is made to an account not belonging to the seller, VAT deduction is not permitted.

Fourth, payment deadline

If a contract specifies a payment deadline but payment is not made by that date, the VAT deduction will not be allowed.

Note for VAT deductions for fixed assets 

For fixed assets such as vehicles, the VAT deduction is subject to certain conditions. For example, vehicles with fewer than 9 seats (excluding those used for business purposes like transport, tourism, or hospitality) valued over VND 1.6 billion are not eligible for VAT deduction on the portion above that threshold. However, if the business is in the transport sector, the VAT can still be deducted.

Invoices declared in one year but accounted for in the next year 

If an invoice is declared in the current year but accounted for in the next year, the VAT value from that invoice will not be deductible.

Handling lost input invoices 

If a business loses an input VAT invoice, it should request an electronic copy from the supplier or verify the invoice information using the provided database.

Invoice information lookup

Businesses can check the validity of issued invoices at the official website: https://hoadondientu.gdt.gov.vn/

Under all circumstances, businesses are prohibited from purchasing or selling invoices. Violations may result in administrative penalties or criminal liability, depending on the severity of the violation.

By understanding the regime on Value Added Tax (VAT) invoice in Vietnam, businesses can significantly improve their accounting and financial operations. Viet An Law is always available to provide consultations and answer any questions from businesses.

Updated: 10/2024