Should there be a unified method for VAT calculation?
Sending comments to the 7th session of the XIV National Assembly, voters of Tra Vinh province proposed the authorities to unify on a tax calculation method, which is the method of value added tax (VAT) deduction.
According to voters, the current implementation of two methods (tax deduction and direct calculation) causes many complications in tax compliance, tax administration, and invoices used for each method.
Regarding this issue, the Ministry of Finance replied to voters of Tra Vinh as follows:
Article 10, Article 11 of the Law on VAT No. 13/2008/QH12, which was amended and supplemented in the Law on VAT No. 31/2013/QH13 dated June 19, 2013, specify the methods of tax deduction and direct calculation on value added as follows:
“Article 10. Tax deduction method
… 2. The deduction method applies to the business establishments that comply with the regime for accounting and invoicing according to the laws on accounting and invoicing, including:
a) Business establishments that earn annual revenue of at least one billion VND from goods sales, service providing except for business households and individuals;
b) Business establishments that voluntarily register to apply the tax deduction method, except for business households and individuals…”.
Article 11. Method of direct calculation on value added
1. The amount of VAT payable according to direct calculation on value added equals the value added multiplied by the rate of VAT applicable to the trade and crafting of gold, silver, and gems.
… 2. The amount of VAT according to direct calculation on value added, which equals to the percentage multiplied by revenue applied as follows:
a) Subjects of application:
- Enterprises and cooperatives of which the annual revenue is less than one billion VND, except for enterprises and cooperatives that voluntarily employ the deduction method according to Clause 2, Article 10 of this Law;
- Business households and individuals;
- The foreign organizations and individuals, which/who do not have permanent establishments in Vietnam but earn revenues in Vietnam, that do not fully comply with the regime for accounting, invoicing, and voucher, except for foreign organizations and individuals that provide goods and services to conduct activities in petroleum prospection, exploration, development and extraction and have their tax deducted and paid on behalf by the Vietnamese party;
- Other economic organizations, except for the organizations that voluntarily employ the deduction method specified in Clause 2, Article 10 of this Law;…”.
According to the above provisions, the Law on VAT has specified two methods of VAT calculation, namely, the method of tax deduction and the method of direct calculation on value added, and stipulates the subjects of application of each method of VAT calculation to suit the socio-economic situation of Vietnam.
The regulation of two methods of VAT calculation as mentioned above is also applied by many countries around the world to contribute to a healthy and transparent business environment and to encourage businesses in increasing the use of invoices and vouchers in production and business.
In particular, the method of direct calculation on value added applies to business establishments that have not yet fully implemented the prescribed regime on accounting, invoicing, and voucher and small and micro-sized taxpayers with annual revenue of less than one billion VND has contributed to simplifying tax administration, reducing management costs for tax authorities and compliance costs for taxpayers.
By: Online Newspaper of the Government/ Translator: Viet Nguyen-Bizic
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