What is VAT refund? Legal steps to refund VAT
Currently, VAT refund is one of the issues that many organizations and businesses are concerned about. Because implementing VAT refund procedures is relatively complicated, it requires compliance with the law. In the article below, 1C Vietnam will summarize for your business the concept, tax refund procedures, regulations and important documents when performing VAT refund . Let's find out!
1. What is VAT refund?
VAT refund is the tax returned to the subject who has completed paying tax to the State Budget. That is, the State budget will refund to buyers of goods and services the amount of input tax that the business unit deducted during the tax period or is not subject to tax.
Through that, VAT refund has many important meanings, helping to create conditions for individuals and businesses to recover the initial capital advance.
2. VAT refund procedures
Basically, the VAT refund procedure is carried out based on the following 3 steps:
2.1 Step 1: Make application
To prepare for VAT refund procedures, businesses need to prepare the following types of documents:
- Document requesting tax refund, including request for refund of State budget revenue.
- Documents related to VAT refund request.
2.2 Step 2: Submit tax refund documents
Taxpaying units and businesses need to send documents to the competent tax administration agency in the following forms:
- Send to tax authority.
- Sending through post office.
- Submit documents through the electronic transaction portal.
2.3 Step 3: Tax authorities receive documents and process
When receiving tax refund requests, the tax administration agency is responsible for handling tax refund procedures for businesses and individuals paying taxes according to regulations. Within 3 days from the date of receiving the dossier, the tax administration agency will classify the dossier and notify the taxpayer in 2 cases:
- Accepted documents => Notify the deadline for processing tax refund documents for businesses and individuals.
- Application not accepted => Written notice of incomplete application.
2.4 Step 4: Receive tax refund
Finally, individuals and businesses will receive VAT refunds according to the tax administration's announcement within the following time limit:
- No later than 6 working days for documents subject to advance tax refund.
- No later than 40 working days for documents subject to pre-tax refund inspection.
3. VAT refund regulations
Individuals and businesses need to pay attention to tax refund regulations to ensure their benefits. In particular, VAT refund is regulated according to the following 3 main contents:
3.1 VAT refundable items
Based on current legal regulations, subjects eligible for VAT refund will include:
No | Subjects eligible for VAT refund | Detailed description |
first | Enterprises pay VAT based on the tax deduction method. | In case there is input VAT that has not been fully deducted in the month or quarter, it will be deducted in the next period. |
2 | Newly established business establishments that have registered their business, registered to pay VAT using the deduction method, or projects that are in the investment stage and have not yet come into operation. | If the investment period is 1 year or more or the accumulated VAT amount of goods/services purchased for investment activities is 300 million VND or more, VAT will be refunded each year. |
3 | Business investment projects have just been implemented. | Must make a separate declaration and transfer of input value added tax to offset the VAT declaration of the business process. The amount of VAT transferred from the investment project is equal to the amount of VAT payable for production and business activities. |
4 | Business establishments have exported goods/services during the month or quarter. | If input value added tax is deducted from 300 million VND or more, VAT will be refunded monthly or quarterly. In case the deduction is not enough 300 million VND, it will be deducted in the next month or quarter. |
5 | Business establishments carry out ownership conversions, mergers, dissolution, bankruptcy, termination of operations... | Get a VAT refund if the business establishment overpays VAT or the input VAT amount has not been fully deducted. Business establishments that have not yet come into operation when dissolved will not be eligible for VAT refund. |
6 | Programs/projects using non-refundable official development assistance (ODA) capital. | For goods/services purchased in Vietnam for use in the program, organizations funded by foreign sponsors will be refunded the VAT amount paid. Organizations in Vietnam that use humanitarian aid from foreign organizations to purchase goods/services for Vietnamese humanitarian aid projects will receive a refund of VAT paid. |
7 | Subjects entitled to diplomatic immunity and privileges when purchasing goods/services in Vietnam for use. | In these cases, the amount of VAT paid will be refunded on the VAT invoice or on payment documents containing VAT. |
8 | Foreigners or Vietnamese residing abroad with passports and entry documents issued by foreign agencies. | Based on the guidance of the Ministry of Finance, this person will receive a VAT refund for goods purchased in Vietnam and brought with them when leaving the country. |
9 | Business establishments have decisions on tax refund processing and VAT refund cases according to international treaties. |
3.2 Conditions for VAT refund
To receive VAT refund , business organizations need to simultaneously meet the following prerequisites:
- Enterprises have a negative VAT amount continuously (3 months or more) and the deductible tax amount is 200,000 VND or more.
- Full payment of export orders via bank.
- Do not buy short when there are no transactions of buying, selling or exchanging goods.
- Invoices with a total payment of over 20 million are paid in full via bank.
- Proof of payment via bank for export orders, clearly stating each financial invoice.
Note: In case a business establishment has declared and requested a VAT refund, it will not be allowed to transfer the input tax amount requested for refund to the next month's withheld tax amount.
3.3 VAT refund time
The time to receive the value-added tax refund after the tax authority receives the tax refund dossier is specified as follows:
- VAT refund dossier before - check after: 15 working days from the date of receipt of dossier with good compliance business.
- VAT refund documents are checked first - refunded later: 60 working days from the date of receipt of documents for businesses that refund tax for the first time or from 2 times onwards.
4. What does a VAT refund file include?
When preparing tax refund documents, individuals and organizations need to rely on promulgated regulations of the law. Thereby, a complete VAT refund dossier will include the following information:
4.1 VAT refund according to international treaties
According to the law, business units requesting a value-added tax refund need to fully prepare the following tax refund request documents:
- Tax refund request letter certified by the agency proposing to sign the international treaty.
- Related documents:
- Copy of international treaty.
- Copy of contract with Vietnamese party certified by foreign organization or authorized representative.
- Contract summary signed by the foreign organization or authorized representative with content including: Contract name, terms, scope of work, tax obligations.
- Power of attorney if a foreign individual or organization authorizes an individual or organization in Vietnam to carry out tax refund procedures according to international treaties. If you want to refund tax to another person's account, you need to carry out consular legalization procedures (if authorized abroad) or notarization (if authorized in Vietnam).
- Tax payment voucher table according to form No. 02-1/HT issued with Circular 80/2021/TT-BTC.
4.2 Refund of input VAT that has not been fully deducted when the enterprise makes conversions
A complete application for input VAT refund (not fully deducted) includes:
- If you are subject to inspection by the tax authority at the taxpayer's headquarters, you do not have to submit a request for refund of state budget revenues.
- The tax administration agency will base on the inspection results to determine whether the input VAT amount that has not been fully deducted is eligible for tax refund or not, then issue a tax refund.
- If not subject to inspection at the taxpayer's headquarters, the taxpayer must prepare and send a request for refund of state budget revenues.
4.3 VAT refund in other cases
In addition to VAT refund according to International Treaties and when making conversions such as mergers, bankruptcy, splits, etc., businesses also need to pay attention to the remaining cases below to prepare documents to request refund. VAT in accordance with the provisions of law.
- Request for refund of state budget revenue.
- Documents for each tax refund case are as follows:
Case | Documents required in the VAT refund request dossier |
Tax refund for investment projects | Copy of Investment Registration Certificate, Investment Certificate or Investment License for projects requiring an Investment Registration Certificate. |
If the project has construction works: - Copy of land use right certificate, land allocation decision and land lease contract. - Construction permit. | |
Copy of Charter Capital Contribution Document | |
- Copy of business license and certificate of business eligibility. - Regulatory documents of state agencies allowing conditional business investment. | |
Copies of invoices and documents for purchased goods and services (except in cases where the taxpayer has sent electronic invoices to the tax administration agency). | |
- Documents deciding to establish the Project Management Board. - The investment project owner takes over project management. - How the branch/investment project management board is organized and operated (if VAT refund is implemented). | |
VAT refund for exported goods/services | - List of invoices and documents of purchased goods/services. - (Except for cases where taxpayers have sent electronic invoices to tax authorities). - List of cleared customs declarations for exported goods that have been cleared. |
ODA capital is directly managed by the program/project owner | - Copy of international treaties, non-refundable ODA capital agreements or documents discussing commitments and receipt of non-refundable ODA capital. - Copy of Decision approving project documents or program investment decision. - Project documents/Research reports approved. |
- Request for confirmation of valid expenses for business capital and request for payment of investment capital. | |
List of invoices and documents for purchased goods/services. | |
Copy of the ODA managing agency's written confirmation to the project owner that ODA is subject to VAT refund and is not funded by the state to pay VAT. | |
The owner of an ODA program or project that assigns part or all of the project to another unit for implementation but is not mentioned in the above documents must also have a copy of the document on the assignment of management and implementation rights of the program. / ODA projects are not refundable to units and organizations requesting tax refund. | |
If the main contractor prepares a VAT refund dossier, there must be a copy of the contract signed between the project owner and the main contractor, showing the price paid according to the bidding results excluding VAT. | |
ODA capital is directly managed and implemented by donors | - Copy of International Treaty, ODA Agreement or Exchange Document on commitment and receipt of ODA capital. - Copy of Decision approving project/non-project documents or Investment Decision. - Project documents or Research Report approved. |
List of invoices and documents for purchased goods/services. | |
If the Sponsor appoints the Sponsor's Representative Office/organization to manage and implement the program but is not stated in the above documents, the following must be added: - Copy of document assigning the right to manage and implement the donor's ODA program or project to the Representative Office or organization designated by the donor. - Copy of the document of the competent authority on the establishment of the Representative Office designated by the sponsor. | |
If the main contractor prepares a VAT refund application, there must be a copy of the contract between the sponsor and the contractor or a contract summary certified by the sponsor, including information such as: Contract number, date Signing, term, scope of work, contract value, payment method, payment price does not include VAT. | |
Goods/services purchased domestically using non-refundable aid are not part of official development assistance | Copy of Decision approving programs, projects, and non-project aid amounts and Copies of program, project, and non-project documents. |
Application for confirmation of valid expenses for business capital and payment of investment capital. | |
List of invoices and documents of purchased goods/services. | |
Goods/services purchased domestically with foreign aid funds to provide relief and overcome the consequences of natural disasters in Vietnam | Copy of the Decision on receiving emergency aid for relief or the Decision on receiving and emergency aid documents to overcome the consequences of natural disasters. |
List of invoices and documents of purchased goods/services. | |
Value added tax refund and diplomatic immunity | - VAT list of purchased goods/services attached to Circular 80/2021/TT-BTC with confirmation from the Department of State Protocol (under the Ministry of Foreign Affairs) in case input costs are subject to price tax refund increased value of diplomatic immunity. - List of diplomatic officials eligible for VAT refund. |
The VAT refund agent for exiting customers is a commercial bank | List of VAT refund documents for foreigners leaving the country. |
VAT refund is based on the decision of the competent authority | Decision paper from the competent authority according to the law. |
Thus, 1C Vietnam has worked with your business to deeply understand the concepts, procedures and documents that need to be prepared when making a VAT refund request. Don't forget to follow 1C Vietnam for more useful knowledge and business management!