Scenario:
Company A is a third party, brokering for a foreign company so that the foreign company can sell goods to a company in Vietnam. The foreign company pays in USD to company A after each time the other two parties make a sale.
So how much value added tax (VAT) rate (0% or 10%) is applicable for Company A?
In this regard, the current regulations apply as follows:
– Pursuant to Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance guiding the implementation of the Law on VAT and Decree No. 209/2013/ND-CP dated December 18, 2013 of the Government detailing and guiding the implementation of a number of articles of the Law on VAT.
+ In Clause 20, Article 4, subjects not subject to VAT:
“20. …
Non-tariff zones include: export processing zones, export processing enterprises, tax-suspension warehouses, tax-suspension zones, bonded warehouses, special economic and commercial zones, commercial-industrial zones and other economic areas established and entitled to tax incentives such as non-tariff zones under the Prime Minister’s Decision. The relationship of buying, selling and exchanging goods between these zones and the outside world is an import and export relationship.
…”
+ Article 9 stipulates the tax rate of 0%:
“1. Tax rate of 0%: applied to exported goods and services; construction and installation activities abroad and in non-tariff zones; international transport; goods and services are not subject to VAT upon export, except for cases where the 0% tax rate guided in Clause 3 of this Article is not applied.
Exported goods and services are goods and services sold or supplied to organizations and individuals abroad and consumed outside of Vietnam; selling and supplying to organizations and individuals in non-tariff zones; goods and services provided to foreign customers in accordance with law.
…
b) Export services include services provided directly to organizations and individuals abroad and consumed outside of Vietnam; direct supply to organizations and individuals in non-tariff zones and consumption in non-tariff zones.
Overseas individuals are foreigners who do not reside in Vietnam, Vietnamese who reside abroad and are outside Vietnam during the time of service provision. Organizations and individuals in non-tariff zones are organizations and individuals with business registration and other cases prescribed by the Prime Minister.
…
Business establishments providing services that are taxpayers in Vietnam must have documents proving that the services are performed outside of Vietnam.
…
2. Conditions for applying the 0% tax rate:
…
b) For export services:
– Having a service supply contract with an organization or individual abroad or in a non-tariff zone;
– Having documents of payment for export services via banks and other documents as prescribed by law;
…”
+ Article 11 stipulates the tax rate of 10%:
“The tax rate of 10% applies to goods and services not specified in Articles 4, 9 and 10 of this Circular.
…”
– Pursuant to Clause 2, Article 1 of Circular 130/2016/TT-BTC dated August 12, 2016 of the Ministry of Finance amending and supplementing Clause 3, Article 9 of Circular 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance stipulating cases in which the 0% tax rate is not applicable:
“2. Amending and supplementing Clause 3, Article 9 as follows:
“3. Cases that do not apply the 0% tax rate include:
…
– Services provided by business establishments to organizations and individuals in non-tariff zones, including: rental of houses, halls, offices, hotels, warehouses; transportation services for workers; catering services (except for industrial catering services, catering services in non-tariff zones);
– The following services provided in Vietnam to overseas organizations and individuals are not eligible for the 0% tax rate, including:
+ Competition in sports, performing arts, culture, entertainment, conferences, hotels, training, advertising, tourism;
+ Online payment service;
+ Providing services associated with the sale, distribution and consumption of products and goods in Vietnam.”
Pursuant to the above provisions:
– Brokerage services to find, introduce and take care of customers who are overseas companies, export processing enterprises for suppliers who are also overseas companies, export processing enterprises are defined as services provided directly to overseas organizations and consumption outside Vietnam, provided directly to organizations in non-tariff zones and consumption in non-tariff zones (export services) and are subject to VAT rate of 0% if they satisfy the conditions specified at Point b, Clause 2, Article 9 are satisfied and not fall into the cases specified in Clause 3, Article 9 of Circular 219/2013/TT-BTC (amended and supplemented in Clause 2, Article 1 of Circular 130/2016/TT-BTC) above. Non-tariff zones are determined according to the guidance in Clause 20, Article 4 of Circular 219/2013/TT-BTC.
– Brokerage services to find, introduce and take care of customers in Vietnam for suppliers who are overseas companies or export processing enterprises are defined as services performed and consumed in Vietnam, the company when providing these services issues a VAT invoice with the VAT rate of 10%.