📢 On November 26, 11, the National Assembly officially passed Law on Value Added Tax (VAT) No. 48/2024/QH15. The new law will be official. effective from July 01, 07, bringing many important changes, directly affecting the declaration, deduction and tax refund activities of all businesses.
1. Input VAT deduction: Tighten regulations on payment conditions
🎯VAT Law 2024, effective from July 01, 07 has abolish the transaction value threshold of "20 million VND or more" new cashless payment
➡️ One of the landmark changes is the amendment and supplementation of the conditions for input VAT deduction. According to Clause 2, Article 14 of the 2024 VAT Law, to be eligible for tax deduction, enterprises must meet the following conditions:
“a) There is a value-added invoice for purchasing goods and services or a document proving the payment of value-added tax at the import stage or a document proving the payment of value-added tax on behalf of the foreign party as prescribed in paragraph 3 and Clause 4 Article 4 of this Law. The Minister of Finance prescribes documents for payment of value added tax on behalf of foreign parties;
b) Have non-cash payment documents for purchased goods and services, except for some special cases as prescribed by the Government;
c) For exported goods and services, in addition to the conditions specified in Points a and b of this Clause, there must also be: a contract signed with a foreign party on the sale, processing of goods, provision of services; invoices for the sale of goods and provision of services; non-cash payment documents; customs declaration for exported goods; packing list, bill of lading, goods insurance documents (if any). The Government shall prescribe the conditions for deduction in the case of exporting goods via e-commerce platforms abroad and some other special cases.”
➡️ The important change that businesses need to note is in Section b, Clause 2, Article 14, VAT Law 2024 the above abolish the transaction value threshold of "20 million VND or more" This means that, in principle, all transactions of buying and selling goods and services, regardless of value, must have non-cash payment documents to be eligible for input VAT deduction, except for some special cases as prescribed by the Government.
➡️ In the Draft Decree guiding the implementation of the 2024 VAT Law (not yet officially issued), the Ministry of Finance proposed to reduce the threshold for requiring non-cash payment documents from 20 million VND to 5 million VND (including VAT). However, because the guiding Decree is still in the Draft stage and has not been officially applied, businesses still need to prepare for the new regulations of the VAT Law mentioned above and implement non-cash payments in accordance with regulations.
🎯 Recommendations for Businesses
👉 Check transactions or cash payments that are no longer in compliance with new regulations and immediately implement non-cash payment methods.
👉 Review the payment process at the enterprise and update new content into the process to ensure compliance, giving maximum priority to non-cash payment methods (transfer, check, payment order, etc.) for all transactions.
👉 Widely disseminate the new regulations to all departments and positions in the business, ensuring understanding and proper implementation of the updated procedures.
2. Subjects not subject to VAT: Increase the level of non-taxable revenue for business households and individuals
➡️ This is one of the most prominent and influential changes, stipulated in Clause 25, Article 5, VAT Law 2024, As follows:
“25. Goods and services of households and individuals producing and trading with annual revenue of VND 200 million or less; assets sold by organizations and individuals not doing business and not paying value added tax; national reserve goods sold by national reserve agencies; fees and charges according to the provisions of law on fees and charges.”
➡️ Applicable time: This provision shall take effect later than the other provisions, starting from the date 01/01/2026This means that households and individuals doing business with a revenue of 200 million VND or less in a year will not have to pay VAT.
➡️ Add new objects not subject to VAT: The new law has added a number of goods and services to the list of non-taxable objects to conform to the State's practices and policies, including:
- Gifts for non-business purposes: Gifts are imported goods not for business or production purposes of organizations and individuals in Vietnam.
- Goods shipped for educational purposes: Goods transferred between educational institutions (including preschools) to serve teaching, learning and scientific research activities.
- Services related to emission reduction credits: Service of selling emission reduction credits (certificates) issued by competent authorities.
- Goods and services of households and individuals engaged in farming, livestock farming, and fishing of unprocessed seafood: Additional clarification for unprocessed or only lightly processed products.
🎯 Recommendations for Businesses
👉 Evaluate and review business operations to determine whether they are not subject to VAT.
👉 Timely update changes to apply to business processes to meet VAT compliance.
👉 Widely disseminate the new regulations to all departments and positions in the business, ensuring understanding and proper implementation of the updated procedures.
3. Prohibited acts in tax deduction and refund: Clear regulations and strong sanctions
➡️ VAT Law 2024 has systematized more clearly and specifically the prohibited acts in tax deduction and refund in Article 13, specifically as follows:
“1. Buy, give, sell, organize advertising, broker the purchase and sale of invoices.
2. Creating transactions to buy, sell goods, provide services that do not exist or transactions that do not comply with the provisions of law.
3. Issue invoices for the sale of goods and provision of services during the period of temporary suspension of business operations, except for the case of issuing invoices to customers to perform contracts signed before the date of notification of temporary suspension of business operations.
4. Using illegal invoices and documents, illegally using invoices and documents according to Government regulations.
5. Not transferring electronic invoice data to tax authorities as prescribed.
6. Falsifying, misusing, illegally accessing, or destroying the information system on invoices and documents.
7. Giving, receiving, brokering bribes or performing other acts related to invoices and documents to obtain tax deductions, tax refunds, tax appropriation, or value added tax evasion.
8. Collusion, cover-up; collusion between tax officials, tax authorities and business establishments, importers, between business establishments and importers in using illegal invoices and documents, illegally using invoices and documents to deduct taxes, get tax refunds, misappropriate tax money, evade value added tax.”
➡️ Clearly defining these prohibited acts is a solid legal basis for tax authorities to strengthen inspection, examination and strict handling of violations, contributing to cleaning up the business environment.
🎯 Recommendations for Businesses
👉 Strengthen the process of checking and evaluating partners (KYC - Know Your Customer) before transactions to avoid risks related to invoices of "ghost" businesses or businesses with high tax risks.
👉 Build a strict internal control process to ensure the legality and validity of all input invoices and documents.
👉 Handle according to regulations if invoices are found to belong to businesses with high tax risks.
4. The principle of "Substance determines form": The consistent spirit of the 2024 VAT Law
➡️ Although not stated as a separate provision, the spirit "substance determines form" is clearly expressed and is a consistent principle in the regulations of VAT Law 2024.
➡️ This principle shows that the Tax Authority will consider the true economic nature of a transaction to make tax decisions when conducting a tax audit, instead of just relying on the legal form or name of documents and contracts.
➡️ Tightening regulations on payment documents, non-cash payments and prohibited acts regarding invoices and documents is a tool for authorities to determine the "nature" of the transaction. A transaction, even with full invoices and contracts, but if the payment cash flow is real, there is no corresponding delivery of goods, or does not actually occur in reality, all lead to risks for businesses when explaining to the Tax Authority.
🎯 Recommendations for Businesses
👉 Ensure that all transactions have complete, valid and consistent records and documents.
👉 Documents accurately reflect actual transactions and meet the business purposes of the enterprise.
👉 When there are complex transactions, related transactions or forms of debt offset, businesses need to prepare detailed and rigorous explanatory documents to prove the true nature of the transaction when requested by the tax authority.
VAT Law 2024 The above changes will certainly create challenges but also opportunities for businesses to improve professionalism, transparency and efficiency in financial and accounting management. Early and proper preparation will be the key to helping your business confidently apply the new law from July 01, 07.
