Official Letter 258/CTĐLA-TTHT on the Method of Calculating Value-Added Tax.

On January 20, 2025, the Dak Lak Tax Department received Official Letter No. 01/2025 dated January 16, 2025, from Minh Châu FRUIT Export Trading Co., Ltd., regarding the application of the VAT calculation method. The Tax Department provides the following response:

According to Clause 1 and Points a, b, Clause 2, Article 12 of Circular No. 219/2013/TT-BTC dated December 31, 2013, by the Ministry of Finance, it stipulates:

Article 12. VAT Deduction Method

1. The VAT deduction method applies to business establishments that comply with accounting, invoicing, and documentation regulations as prescribed by law, including:

a) Business establishments that are operating with annual revenue from the sale of goods or the provision of services of one billion VND or more and fully comply with accounting, invoicing, and documentation regulations, excluding households and individuals engaged in business paying tax under the direct calculation method as guided in Article 13 of this Circular;

b) Business establishments voluntarily registering to apply the VAT deduction method, excluding households and individuals engaged in business paying tax under the direct calculation method as guided in Article 13 of this Circular;

c) Foreign organizations and individuals supplying goods and services for oil and gas exploration, development, and exploitation must pay tax using the deduction method, with the tax being withheld and paid by the Vietnamese side.

2. The annual revenue from one billion VND or more used to determine whether a business establishment is required to pay VAT using the deduction method, as guided in Point a, Clause 1 of this Article, is the revenue from taxable goods and services, which is determined as follows:

a) The annual revenue is self-determined by the business establishment based on the total "Total revenue from the sale of taxable goods and services" in the monthly VAT return from November of the previous year to the end of the tax period of the current year (before the year in which the VAT calculation method is determined) or on the quarterly VAT return from the 4th quarter of the previous year to the end of the 3rd quarter of the current year before the year of determination of the VAT calculation method. The period for applying a stable VAT calculation method is 2 consecutive years.

b) In the case where a new company is established in 2013 and operates for less than 12 months in 2013, the estimated revenue for the year is calculated as follows: the total "Total revenue from the sale of taxable goods and services" from the monthly VAT return during the operational months is divided by the number of months of operation, then multiplied by 12 months. If the estimated revenue is one billion VND or more, the company applies the VAT deduction method. If the estimated revenue is less than one billion VND, the company applies the direct calculation method for two years, unless the company voluntarily registers to apply the VAT deduction method.

Based on the above regulations, Minh Châu FRUIT Export Trading Co., Ltd., established on August 9, 2023 (with less than 12 months of operation in 2023), if it determines an estimated revenue of one billion VND or more as guided in Point b, Clause 2 above, should apply the VAT deduction method. If the revenue is less than one billion VND, the direct calculation method should be applied for the years 2024 and 2025.

The Tax Department informs Minh Châu FRUIT Export Trading Co., Ltd. accordingly for implementation.