Conditions for applying 0% tax on exported goods and services
Mr. Bui Quang Huy's company (Hanoi) has an e-commerce website providing dental product design services. The customer submits a request via the website, then the company sends the design and the customer pays via Paypal.
Mr. Huy asked, can your company impose a value-added tax (VAT) rate of 0% for foreign customers? If yes, what procedures and documents are needed (because customers who buy online will not be able to sign contracts directly)?
The Ministry of Finance responded to this issue as follows:
Pursuant to Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance guiding the implementation of the Law on VAT and Decree No. 209/2013/ND-CP dated December 18, 2013 of the Government regulating detailing and guiding the implementation of a number of articles of the Law on VAT:
In Clause 1, Article 9 stipulates the tax rate of 0%:
"1. Tax rate of 0%: Applied to exported goods and services; construction and installation activities abroad and in non-tariff zones; international transportation; goods and services are not subject to VAT upon export, except for cases where the 0% tax rate guided in Clause 3 of this Article is not applied.
Exported goods and services are goods and services sold or supplied to organizations and individuals abroad and consumed outside of Vietnam; selling and supplying to organizations and individuals in non-tariff zones; goods and services provided to foreign customers in accordance with law.
a) Exported goods include:
- Goods exported to foreign countries, including export entrustment;
… - Goods sold but the delivery and receipt points are outside Vietnam;
… b) Export services include services provided directly to organizations and individuals abroad and consumed outside of Vietnam;…
Overseas individuals are foreigners who do not reside in Vietnam, Vietnamese who reside abroad and are outside Vietnam during the time the service provision takes place.
In the case of service provision where the provision of services takes place both in Vietnam and outside of Vietnam, but the service contract is signed between two taxpayers in Vietnam or has a permanent establishment in Vietnam the tax rate of 0% only applies to the value of services performed outside of Vietnam...
- Business establishments providing services that are taxpayers in Vietnam must have documents proving that the services are performed outside of Vietnam.
… dd) Other goods and services:
... - Goods and services that are not subject to VAT upon export, except for cases where the 0% tax rate guided in Clause 3 of this Article is not applied;".
In Clause 2, Article 9 stipulates the conditions for applying the 0% tax rate to exported goods and services:
"a) For exported goods:
- Having a contract to sell or process export goods; entrusted export contract;
- Having documents of payment for exported goods via banks and other documents as prescribed by law;
- Having a customs declaration as prescribed in Clause 2, Article 16 of this Circular.
Particularly for the case of goods sold and the point of delivery and receipt of goods is outside Vietnam, the business establishment (the seller) must have documents proving the delivery and receipt of goods outside Vietnam such as: Purchase contract invoice signed with the seller of goods in a foreign country; the goods sale contract signed with the purchaser; documents proving that goods are delivered or received outside of Vietnam such as: commercial invoices according to international practices, bills of lading, packing slips, certificates of origin...; vouchers for payment via bank include: Documents through the bank of the business establishment that make payment to the overseas seller of goods; documents of payment via bank of the goods purchaser to the business establishment.
… b) For export services:
- Having a service supply contract with an organization or individual abroad or in a non-tariff zone;
- Having documents of payment for export services via banks and other documents as prescribed by law;…”.
Pursuant to Circular No. 130/2016/TT-BTC dated August 12, 2016 of the Ministry of Finance guiding Decree No. 100/2016/ND-CP dated July 1, 2016 of the Government detailing the implementation of the Law Amending and supplementing a number of articles of the Law on VAT, the Law on Special Consumption Tax and the Law on Tax Administration and amending a number of articles in the Tax Circulars:
In Clause 2, Article 1 amending and supplementing Clause 3, Article 9 of Circular No. 219/2013/TT-BTC stipulating cases where the 10% tax rate is not applicable as follows:
"2. Amend and supplement Clause 3, Article 9 as follows:
"3. Cases where the 0% tax rate is not applicable include:
… - The following services provided in Vietnam to overseas organizations and individuals are not eligible for the 0% tax rate, including:
… + Online payment service;
+ Services provided in association with the sale, distribution and consumption of products and goods in Vietnam.
Mr. Huy's company provides product design services to customers, including foreign customers. The tax rate of 0% applies to exported goods and services, which are goods and services sold or supplied to organizations and individuals abroad and consumed outside of Vietnam; goods and services provided to foreign customers as prescribed in Clause 1, Article 9 of Circular No. 219/2013/TT-BTC.
Companies exporting goods and services abroad to apply the 0% tax rate must satisfy the conditions specified in Clause 2, Article 9 of Circular No. 219/2013/TT-BTC.
For services provided in Vietnam to overseas organizations and individuals paying online, the tax rate of 0% is not applicable as prescribed in Clause 2, Article 1 of Circular 130/2016/TT-BTC as amended, supplementing Clause 3, Article 9 of Circular No. 219/2013/TT-BTC.
Please base on the actual situation, compare legal documents to comply with regulations. In the process of implementation, if you still have problems, please provide documents related to the problem and contact the tax authority directly managing it for specific instructions.
By: Translator: LeAnh-Bizic
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