VAT refund has been delayed for the past two years in many businesses especially rubber, wood and mechanical industries

Frustration about VAT refund delays

Although according to regulations, only 40 days from the date of submission of complete dossiers is VAT refund, many businesses in the southern largest city have had to wait for more than 2 years and still have not been refunded. This causes many businesses to struggle because capital flows are congested, production and business stagnation, even standing on the brink of bankruptcy.

For nearly a year now, Hoa Thuan Trading Company in District 1 specializing in rubber export saw no employees in the office but the director comes to the company to receive customers every day. Company director Dinh Thi Thanh Tam said that from 11-2021 until now, the company has not been refunded VAT so there is no working capital for production.

By the second quarter of 2022, the tax refund amount had increased to more than VND 50 billion, so Hoa Thuan Trading Company was forced to stop exporting because there was no capital to do business. In previous years, on average, the company yearly exported more than 60,000 tons of fresh rubber to the US, Korean, and Chinese markets, earning about US$70 million a year.

But now, the company's capital for operations has been exhausted, the company has no choice but to cut costs, pay just over 50 percent of salaries, and lay off employees.

Mr. Nguyen Quang Vinh, Director of Hoang Dung Trading Company in District 10, has been waiting for a VAT refund of nearly VND40 billion. He was frustrated adding that the company has sent many documents to the tax department of Ho Chi Minh City to propose a settlement but he has so far received no reply.

Suffering the same fate, Mr. Nguyen Tien Vu, General Director of Van Xuan Industry Company Limited in District 1, said that from November 2021, the company is still waiting for the tax agency in Ho Chi Minh City to refund VND58 billion of VAT. Because the tax refund has not been finalized, the company is forced to reduce its export sales by 80 percent this year.

As noted, the delay in VAT refund is happening in many various fields of production and business. Mr. Do Phuoc Tong, Chairman of the Ho Chi Minh City Mechanical and Electrical Enterprise Association, disclosed that many businesses in the association have been also waiting for a tax refund for years. He said the delay of VND10 billion -VND15 billion in refund has greatly affected manufacturing enterprises’ capital flow. Many businesses have to borrow money to maintain production, while interest lending rates are high.

Barriers need to be removed soon

VAT refund has been delayed for the past two years in many businesses in most fields, especially rubber, wood and mechanical industries. Subsequently, member enterprises have lately co-signed an application to the Vietnam Rubber Association to propose that rubber exporters which have not been refunded VAT by the Tax Department of Ho Chi Minh City.

According to businesses, the Tax Department of Ho Chi Minh City required the results of verification of the origin of rubber goods,i.e., to check and verify the intermediate stages from F1, F2, F3, F4 and Fn to the final stage. Only when the verification results are available in the final stage, the tax agency will consider the VAT refund for the exporting enterprise.

On the other hand, the Tax Department of Ho Chi Minh City asked exporters to produce the payment voucher for export goods with the information of the payer's payment account number to consider a VAT refund for the exporter. Finally, it is time to verify the information of businesses buying abroad.

However, rubber exporters believed that these requirements of the tax authorities are contrary to the provisions of the current law because the Ministry of Finance issued document No. 13076/BTC-TCT on October 15, 2013 which does not require verification of intermediary stages. Moreover, the General Department of Taxation issued its Document No. 1017/TCT-CS on March 25, 2019 which also does not mention the information as required above.

The tax authorities must conduct verification but it should not exceed 40 days as prescribed. The Tax Department of Ho Chi Minh City has sent a verification letter for nearly a year now, but there is still no response from the Bureau of International Cooperation under the General Department of Taxation, leading to the enterprise not being considered for a tax refund, said a representative of an enterprise.

Meanwhile, Mr. Ngo Sy Hoai, Vice Chairman of the Vietnam Timber and Forest Products Association, said that the association has sent its petition to the Ministry of Agriculture and Rural Development and the Ministry of Finance to remove difficulties in confirmation of the timber origin in VAT refund.

It is estimated that the VAT amount of enterprises using planted forest timber for exports that have not been refunded so far has reached over VND1,000 billion with hundreds of businesses not yet being refunded. Worse, some enterprises have not received tax refunds of up to VND200 billion.

The reason is that the regulations of the General Department of Taxation consider timber and wood products made from domestically planted forest wood as items with high tax risk; therefore, the tax agency requested localities to strengthen inspection and coordination with police and customs agencies to verify the origin of timber.

The Ministry of Agriculture and Rural Development and the General Department of Taxation has not consistently guided on verifying the origin of forest products, while the supply chain of planted timber comes from many groups, including tens of thousands of private traders and small businesses in different locations. Therefore, the verification will take a lot of time, sometimes it is impossible as mentioned in the Vietnam Timber and Forest Products Association’s petition.

Therefore, the petition calling for an urgent solution is to have a consensus between the two ministries, and at the same time direct the authorities to refund VAT to businesses as soon as possible, remove difficulties, and avoid the risk of a series of businesses going bankrupt.

The delay in VAT refund makes businesses think that this is not fair. If the business is late in paying tax, it will be charged interest on late payment, and even banned from leaving the country, but the tax agency keeps much enterprises’ money but no one is responsible for delays. In particular, in the context of the current difficult economic situation, the early tax refund will help businesses revive contributing to the recovery of the country’s economy.