Sending comments to the 7th Session of the XIV National Assembly, voters of Ho Chi Minh City proposed to abolish the requirement of having a "Certificate of eligibility for business in conditional investment and business lines" for the tax to be refunded under Circular No. 130/2016/TT-BTC dated August 12, 2016 of the Ministry of Finance.

According to voters' feedback, 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 stipulates conditions for value added tax (VAT) refund, in which there are 2 contents as follows:

- The company must have a project in the investment stage;

- The company must be granted a Certificate of eligibility for business in conditional business lines.

With this regulation, many businesses are stuck with "Certificate of eligibility for business in conditional business lines".

According to current regulations, some business lines must go into operation before the competent authorities inspect and issue a "Conditional Business Certificate".

However, when the "Certificate of conditional business" is granted, the project is under the category that has been put into operation. According to the provisions of VAT refund, the project that has been put into operation will not be eligible for VAT refund. This is contrary to the regulations on VAT refund for projects in the investment stage with an input VAT amount of VND 300 million and over, which will be eligible for tax refund.

Therefore, voters in Ho Chi Minh City propose to abolish the regulation that enterprises must have a "Certificate of eligibility to conduct business in conditional business lines" to receive tax refund or, if applicable, during the stage of business investment, enterprises are entitled to VAT refund (if the input tax is VND 300 million or over and the enterprises commit to supplementing the "Certificate of eligibility for business in conditional business lines" within a certain period).

If this regulation is abolished, it will avoid the case that enterprises are entitled to tax refund but not be refunded due to inconsistent legal regulations, leading to damage to enterprises and discouraging investment from enterprises.

Regarding this issue, the Ministry of Finance responded to voters of Ho Chi Minh City as follows:

In Clause 3, Article 1 of Law No. 106/2016/QH13 dated April 6, 2016 on amendments and supplements to some articles of the Law on VAT, it stipulates:

“1… In case a business establishment that has registered to pay VAT using the deduction method has a new investment project which is still in its investment stage, VAT on goods, services purchased serving for investment has not yet been deducted, and the remaining tax is at least three hundred million VND, VAT shall be refunded.

A business establishment is not entitled to a VAT refund but is entitled to carry forward the uncredited tax amount of an investment project under the law on investment to the next period in the following cases:

a) The investment project does not have adequate charter capital as registered; engages in conditional business lines while the corresponding conditions have not been fully satisfied as prescribed by the Law on Investment or the fulfillment of such conditions is not maintained throughout its operation;

Clause 6, Article 1 of the Government's Decree No. 100/2016/ND-CP dated July 1, 2016 stipulates:

“6. Article 10 is amended and supplemented as follows:

“Article 10. VAT refund

2. Business establishments are entitled to refund of VAT on an investment project as follows:

a) A business establishment derived from an investment project which has been registered and pays VAT under deduction method, a petroleum prospection, exploration, and development project which has been invested for at least 01 year and has not been put into operation shall have VAT on goods, services purchased during investment stage refunded in each year, except for the case specified in Point c of this Clause. If the accumulated VAT amount on goods and services during the investment stage is VND 300 million or over, it shall be refunded.

c) Business establishments are not entitled to a VAT refund but are allowed to carry forward the uncredited tax amount of an investment project under the law on investment to the next period in the following cases:

- The investment project of a business establishment in a conditional business line has not satisfied all conditions as prescribed in the Law on Investment and specified in Point a, Clause 1, Article 13 of the Law on Value-added tax and the Law amendments to the Law on Value-added tax, the Law on special excise duty and the Law on Tax administration, which means the business establishment has not obtained a license for conditional business or has not obtained a certificate of eligibility for conditional business, or competent authority has not issued permission for conditional business, or any of the conditions for conditional business have not been satisfied if written permission is not required by law.

Clause 3, Article 1 of Circular No. 130/2016/TT-BTC dated 12/8/2016 of the Ministry of Finance provides for VAT refund:

"2. Newly business establishments derived from investment projects which have been registered and pay VAT under deduction method, a petroleum prospection, exploration, and development project which has been invested for at least 01 year and has not been put into operation shall have VAT on goods, services purchased during investment stage refunded in each year, except for the case specified in Point c, Clause 3 of this Article. In case the accumulated VAT amount on goods and services purchased for investment activities is VND 300 million or higher, the VAT shall be refundable.

3. VAT refund for investment projects

c) Business establishments shall not be eligible for a VAT refund but can carry forward the remaining deductible VAT on its investment project under the law on investment to the next period in the following cases:

- An investment project of a business establishment in a conditional business line has not satisfied all business conditions as per the Law on Investment, which means the business establishment has not obtained a license to perform conditional business, or has not obtained a certificate of eligibility for conditional business, or has not got permission from the competent authority for conditional business, or has not satisfied the conditions for conditional business if written permission is not required by law.

Based on the above provisions, 2 regulations on VAT refund for investment projects in Circular No. 130/2016/TT-BTC dated August 12, 2016 of the Ministry of Finance are derived from the provisions of the Law on VAT. No. 106/2016/QH13 and Decree No. 100/2016/ND-CP.