Under current regulations, for those tax payers who apply VAT credit method, the VAT credit method is specified as follows:
Payable VAT amount = Output VAT amount – Creditable input VAT amount
To be in detail, the creditable input VAT amount is the total VAT amount on goods or services purchased and on imported goods as indicated in VAT invoices and other relevant documents proving VAT payment.
However, in some cases, the VAT input amount is not qualified for deduction. Below are the specific cases of Non-deductible VAT input that are clearly stated in the Circulars on tax regulations, i.e. Circular 219/2013/TT-BTC, Circular 151/2014/TT-BTC, Circular 26/2015/TT-BTC by the Ministry of Finance.
1. Under Circular 219/2013/TT-BTC, it is regulated that:
As at Clause 7, Article 14:
7. Input VAT on goods and services serving the manufacture or sale of taxable goods and services mentioned in Article 4 of this Circular must not be deducted, except for the following cases:
a) VAT on purchased goods and services serving the provision of goods and services for the foreign entities that use them as humanitarian aid or non-refundable aid according to Clause 19 Article 4 of this Circular shall be deducted in full.
b) Input VAT on goods and services serving petroleum exploration shall be deducted in full until the first day of extraction.
As at Clause 15, Article 14
15. Input VAT must not be deducted in the following cases:
- The VAT invoice is not legitimate, such as VAT is not written (except for special invoices on which selling prices are VAT-inclusive);
- The invoice does not contain or does not contain the correct name, address or TIN of the seller, thus rendering the seller unidentifiable;
- The name, address, or tax code of the buyer on the invoice is incorrect (except for the case in Clause 12 of this Article);
- The VAT invoice or the receipt for VAT payment is fake; the invoice is changed or fictitious (made without actual sale);
- The invoice does not reflect the actual value of goods and services
As at Clause 3, Article 15
b) VAT on any purchase that costs 20 million VND or more (VAT-inclusive) shall not be deducted if no bank transfer receipt is presented. The taxpayer shall classify these invoices as non-deductible in the list of invoices and receipts for purchases.
2. Article 9, Circular 151/2014/TT-BTC which came into effect since 15 November 2014 regulates that:
“3. The input VAT on fixed assets, machinery, and equipment, including the input VAT on the lease of these assets, machinery, and equipment, and other input VAT relating to assets, machinery, and equipment such as warranty or repair shall be not deducted and shall be included in costs of fixed assets or the deductible expense prescribed in Law on corporate income tax and other documents providing guidance on implementation in the following cases: specialized fixed assets used for the manufacture of weapons and military equipment for security and defense; fixed assets, machinery, equipment of credit institutions, reinsurers and life insurers, securities companies, medical facilities, training institutions; civil aircraft and yachts not used for commercial cargo transport, passenger transport, tourism, or hotel operation.
With regard to fixed assets being cars with fewer than 9 seats (except for cars used for cargo transport, passenger transport, tourism, or hotel operation; cars used for display and test drive by car dealers) whose value are over VND 1.6 billion (not including VAT), the input VAT amount in proportion to the amount in excess of VND 1.6 billion shall not be deducted.”
3. Related to the allocation of VAT input amount on goods/services subject/non-subject to VAT, the Clause 9, Article 1, Circular 26/2015/TT-BTC regulates that:
2. When goods and services (including fixed assets) are purchased to serve the manufacture or sale of both the goods/services that are subject to VAT and goods/services that are not subject to VAT, only VAT on the goods and services serving the manufacture or sale of the goods/services subject to VAT shall be deducted. The taxpayer must separate the deductible input VAT from non-deductible one. Otherwise, input VAT shall be deducted according to the ratio of revenue subject to VAT, revenue not subject to VAT to the total revenue from selling goods and services, including revenue not subject to VAT that cannot be separated.
The taxpayer that sells both goods/services that are subject to VAT and goods/services that are not subject to VAT may temporarily deduct all of the VAT on purchased goods, services, and fixed assets incurred in the month/quarter. At the end of the year, the taxpayer shall determine the actual deductible input VAT in the year and adjust the amount of input VAT deducted during the year.
Above is the general regulation for cases of non-deductible VAT input.
To get into details for specific cases, please feel free to contact us as at:
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+ 84 24 3974 4181/ 4182
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