The company's customers are individual buyers, and the products sold include bottled water, toilet paper, hand towels, handicrafts, etc. The current input tax amount is approximately VND 900 million.

So, for the goods that Mr. Tuấn’s company purchases with input VAT at rates of 8% and 10%, and sells with an output VAT of 0%, is the input tax deductible?

Regarding this matter, the Ministry of Finance has the following opinion:

Based on Circular No. 219/2013/TT-BTC dated December 31, 2013, issued by the Minister of Finance, guiding the implementation of the VAT Law, and Decree No. 209/2013/ND-CP dated December 18, 2013, issued by the Government:

Article 9 stipulates the 0% tax rate:

"Article 9. 0% Tax Rate

1. The 0% tax rate applies to exported goods and services; construction and installation activities overseas and in non-tariff zones; international transportation; goods and services not subject to VAT when exported, except for the cases not subject to the 0% tax rate as guided in Clause 3 of this Article.

Exported goods and services are those sold or provided to organizations and individuals abroad and consumed outside of Vietnam; sold or provided to organizations and individuals in non-tariff zones; and goods and services provided to foreign customers as per legal regulations.

a) Exported goods include:

- Goods exported abroad, including goods exported under consignment;

- Goods sold into non-tariff zones as stipulated by the Prime Minister; goods sold to duty-free shops;

- Goods sold where the delivery and receipt of goods occur outside of Vietnam;

- Spare parts and supplies used for the repair and maintenance of vehicles, machinery, and equipment for foreign entities and consumed outside of Vietnam;

- Cases considered as exports according to legal regulations:

+ Continuously processed goods as defined by commercial law concerning the international purchase and sale of goods and agency activities for the purchase, sale, and processing of goods with foreign entities.

+ Goods exported on the spot according to legal regulations.

+ Goods exported for sale at overseas fairs and exhibitions.

…2. Conditions for applying the 0% tax rate:

a) For exported goods:

- There must be a contract for the sale or processing of exported goods; a contract for consignment export;

- There must be documents proving the payment for exported goods through a bank, and other documents as required by law;

- There must be a customs declaration as specified in Clause 2, Article 16 of this Circular.

… 3. Cases where the 0% tax rate does not apply include:

- Reinsurance abroad; technology transfer, and transfer of intellectual property rights abroad; capital transfer, credit granting, and securities investment abroad; derivative financial services; outbound postal and telecommunications services (including postal and telecommunications services provided to organizations and individuals in non-tariff zones; provision of prepaid mobile phone cards with codes and denominations sent abroad or into non-tariff zones); exported products that are natural resources or minerals extracted without further processing into other products; goods and services supplied to individuals who are not registered for business in non-tariff zones, except for other cases as prescribed by the Prime Minister”.

Article 14 stipulates the principles for deducting input VAT;

Article 15 stipulates the conditions for deducting input VAT;

Article 16 stipulates the conditions for deducting and refunding input VAT for exported goods and services:

Based on Article 2 of Circular No. 25/2018/TT-BTC dated March 16, 2018, amending and supplementing Clause 4, Article 18 of Circular No. 219/2013/TT-BTC dated December 31, 2013, of the Minister of Finance (as amended and supplemented by Circular No. 130/2016/TT-BTC dated August 12, 2016), which regulates VAT refunds for exported goods and services:

"4. VAT refund for exported goods and services

a) Business establishments that have exported goods and services during the month (for those declaring monthly) or the quarter (for those declaring quarterly), including cases where goods are imported and then exported to non-tariff zones, or goods are imported and then exported abroad, with an uncredited input VAT amount of VND 300 million or more, are eligible for a VAT refund on a monthly or quarterly basis. If the uncredited input VAT amount in a month or quarter is less than VND 300 million, it will be carried forward to the next month or quarter for crediting."

Business establishments that have both exported goods and services and domestically consumed goods and services during a month or quarter must separately account for the input VAT used for the production and business of exported goods and services. If separate accounting is not possible, the input VAT for exported goods and services is determined based on the ratio of revenue from exported goods and services to the total revenue from goods and services for the VAT declaration periods, calculated from the period following the most recent VAT refund period to the current VAT refund request period.

The input VAT for exported goods and services (including the separately accounted input VAT and the input VAT allocated according to the above ratio) is eligible for a refund if, after offsetting the VAT payable on domestically consumed goods and services, the remaining amount is VND 300 million or more. The refundable VAT amount for exported goods and services must not exceed the revenue from exported goods and services multiplied by 10%.

Eligible entities for VAT refunds in certain export cases include:

• For consignment exports: the entity that consigns the goods for export;

• For continuous processing: the entity that signs the processing contract for export with the foreign party;

• For goods exported to carry out construction projects abroad: the enterprise exporting goods and materials for the construction project abroad;

• For on-the-spot exports: the business entity with on-the-spot exported goods.

b) Business establishments are not eligible for VAT refunds in the following cases: Goods imported and then exported where the export of goods does not take place in a customs area as per customs regulations; Goods exported that do not undergo export procedures within a customs area as per customs regulations.”

Based on the above regulations, if the company purchases goods domestically and sells them within the isolation area of the airport, where the customers are individuals, this does not qualify for the 0% tax rate under Circular No. 219/2013/TT-BTC and is not eligible for a VAT refund for exported goods and services under Article 2 of Circular No. 25/2018/TT-BTC. The company can deduct the VAT on purchased goods and services if the conditions in Articles 14, 15, and 16 of Circular No. 219/2013/TT-BTC are met.

Mr. Tuan is advised to base on the actual situation and refer to the relevant tax laws to ensure compliance with regulations.

If there are any further issues during implementation, please provide the related documentation and contact your direct tax authority for detailed guidance.