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GENERAL DEPARTMENT OF TAXATION
TAX DEPARTMENT OF CAN THO CITY
No.: 6143/CTCTH-TTHT
Re: Guidance on Value-Added Tax (VAT) Policy
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SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
Can Tho, December 26, 2024
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To:
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The Fruit Republic Can Tho Co., Ltd
Address: B15-1, Road 1A, Hung Phu 1 Industrial Park, Tan Phu Ward, Cai Rang District, Can Tho City
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The Tax Department of Can Tho City has received Official Letter No. TFR241218-001 dated December 18, 2024, from The Fruit Republic Can Tho Co., Ltd. (hereinafter referred to as "TFR Can Tho") regarding the offsetting of three-party debts in export activities. Regarding this matter, the Tax Department provides the following guidance:
- Pursuant to Circular No. 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance, guiding the implementation of the Law on Value-Added Tax and Decree No. 209/2013/ND-CP dated December 18, 2013, of the Government, detailing and guiding the implementation of certain provisions of the Law on Value-Added Tax (Circular No. 219/2013/TT-BTC):
+ Clause 2, Article 9 stipulates the conditions for applying the 0% VAT rate
“…
b) For exported services:
- There must be a contract for service provision with an organization or individual overseas or within a non-tariff zone;
- There must be payment documentation for the exported service via bank transfer and other required documents as prescribed by law;
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+ Article 16 (amended by Clause 7, Article 3 of Circular No. 119/2014/TT-BTC and Clause 11, Article 1 of Circular No. 26/2015/TT-BTC of the Ministry of Finance) stipulates:
“Article 16. Conditions for VAT deduction and refund for exported goods and services.
Exported goods and services (except for cases specified in Article 17 of this Circular) must meet the conditions and procedures stipulated in Clause 2, Article 9, and Clause 1, Article 15 of this Circular to be eligible for VAT deduction and refund. Specifically:
1. A contract for the sale or processing of goods...
2. A customs declaration...
3. Payment for exported goods and services must be made via bank transfer.
a) Payment via bank transfer means transferring money from the importer’s account to the exporter’s bank account using a payment method consistent with the contract and banking regulations. Payment documents include a credit note from the exporter’s bank confirming receipt of funds from the importer’s bank account. In case of deferred payment, a payment agreement must be included in the export contract. When the payment is due, the business entity must have bank transfer documents. In the case of export entrustment, there must be a bank transfer document from the foreign party to the entrusted party, and the entrusted party must transfer the export payment via bank to the entrusting party. If the foreign party directly pays the entrusting exporter, the entrusting party must have a bank transfer document, and this method of payment must be specified in the contract.
b) The following payment methods are also considered bank transfers:
b.1) If the payment for exported goods and services is offset against a foreign loan, the business entity must meet the necessary conditions and provide the required documents:
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b.2) If the business entity uses export proceeds to contribute capital to an overseas business partner, it must fulfill the relevant conditions and provide necessary documents:
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b.3) If the foreign party authorizes a third party (organization/individual abroad) to make the payment, this authorization must be specified in the export contract (or contract annex/amendment document).
b.4) If the foreign party requests a third-party entity in Vietnam to settle debts on their behalf, the payment must be made via bank transfer. The export contract (or contract annex/amendment) must specify this arrangement, and the exporter must provide a credit note from the bank confirming receipt of funds from the third-party entity. Additionally, the exporter must submit a debt reconciliation statement signed by both the foreign buyer and the third party.
b.5) If the foreign buyer authorizes a third party abroad to make payments and that third party requests a fourth entity in Vietnam to settle debts via bank transfer, the exporter must meet the required conditions and provide supporting documents:
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b.6) If the foreign party authorizes its Representative Office in Vietnam to make payments to the exporter's account, this authorization must be stated in the export contract (or contract annex/amendment).
b.7) If the foreign buyer (except individuals) pays from a foreign currency deposit account opened in a Vietnamese bank, the payment must be specified in the export contract (or contract annex/amendment). The payment document must be a credit note from the exporter's bank confirming receipt of funds from the foreign buyer’s deposit account.
If the foreign buyer is a private business, and the payment is made through the business owner’s foreign currency account in Vietnam (as stipulated in the export contract or its annex/amendment), this transaction qualifies as a bank transfer.
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Based on the above regulations and the details provided by TFR Can Tho in Official Letter No. TFR241218-001, the following conclusion is made:
If TFR Can Tho exports goods and the importer, The Fruit Republic B.V, uses a three-party debt offsetting arrangement involving TFR Can Tho - TFR Trading Limited - The Fruit Republic B.V, this form of payment does not qualify as a bank transfer under Article 16 of Circular No. 219/2013/TT-BTC of the Ministry of Finance. Therefore, the company does not meet the conditions for VAT refund for the aforementioned export transaction.
The Tax Department of Can Tho City recommends that The Fruit Republic Can Tho Co., Ltd. review the regulations above and comply with the provisions of the applicable legal documents./.