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Vietnam's VAT Law for Machinery and Equipment - Vietnam Briefing News

HANOI- Vietnam’s VAT law touches on a number of goods and services. Please see our latest magazine on the country’s VAT law, entitled A Guide to Understanding Vietnam’s VAT, in order to receive a general overview of what VAT is and how to properly ensure that you follow all regulations involved.

In this article, we examine the VAT implications for a number of goods and services listed under the Machinery and Equipment category in Vietnam’s VAT law.

Transactions related to certain products and services are viewed as non-taxable transactions, these include: 

  • Machinery, equipment, parts and supplies which cannot be manufactured at home and need to be imported for direct use in scientific research and technological development; or for prospecting, exploring and developing oil and gas fields; or for aircraft, drilling platforms and ships, scientific research and technological development; or for prospecting, exploring and developing oil and gas fields; or for aircraft, drilling platforms and ships;
  • Special-purpose weapons and military equipment for security and defense purposes.

The importation of these products is not liable to VAT for the total value of goods in the import stage:

  • Machinery, equipment, parts and supplies which cannot be manufactured at home and need to be imported for direct use in scientific research and technological development; or for prospecting, exploring and developing oil and gas fields; or aircraft, drilling platforms and ships for the formation of enterprises’ fixed assets or which are hired from foreign parties for production and business activities or for lease and sublease; and other goods.

In order to identify goods not liable to VAT at the stage of importation under this Point, importers shall produce to customs offices documents as guided in the Ministry of Finance’s regulations on customs procedures; customs inspection and supervision; import and export duties and tax administration of imports and exports.

The Ministry of Planning and Investment shall promulgate the list of machinery, equipment and supplies which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported to directly serve scientific research and technological development; the list of machinery, equipment, spare parts, special-use means of transport and supplies which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported for prospecting, exploring and developing oil and gas fields; and the list of aircraft, derricks and ships which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported to form fixed assets of enterprises or hired from abroad for production, business or lease.

The chargeable amount of taxable price includes the following terms:

In case of leasing foreign-made machinery, equipment or means of transport which cannot be manufactured at home for sub-lease, the taxed price is exclusive of the rent payable to the foreign party.

The Machinery and Equipment category has exposure to more than one tax category depending on what the good or service is.  See below for further clarification. 

0% Tax Rate

Applies to exported goods and services; work construction and installation for export processing enterprises; international transportation; goods and services not liable to VAT upon exportation

Cases ineligible for the 0% tax rate are subject to the corresponding tax rates applicable to goods and services sold or provided domestically.

10% standard tax rate

This tax rate applies to all goods and services not otherwise specified. The VAT rates previously specified apply uniformly to each type of good or service at the stages of importation, manufacture, processing and trading.

Exemptions

A variety of goods and service transactions may qualify to be exempted from VAT. It is best to contact a tax professional to ensure that all regulations are followed.

Deduction and Recovery of Input Tax- Saving Your Money 

Business establishments which pay VAT according to the tax credit method are entitled to input VAT credit as follows:

Input VAT on goods and services used in prospecting, exploring and developing oil and gas fields to the first day of exploitation or production may be wholly credited.

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Related Reading

In this issue of Vietnam Briefing, entitled A Guide to Understanding Vietnam’s VAT, we attempt to clarify the entire VAT process by taking you through an introduction as to what VAT is, who and what is liable, and how to pay it properly. We first take you through the basics of VAT in Vietnam before taking you deeper into the topic. Additionally, we provide updates on the new changes to the VAT process and explain how they will impact your business. The magazine is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore until the end of April.

Vietnam’s VAT Law for Media

Vietnam’s VAT Law for Gifts

Vietnam’s VAT Law for the Financial Category

Vietnam’s VAT Law for Farming and Animals

Vietnam’s VAT Law for Housing

Vietnam’s VAT Law for Healthcare

Vietnam’s VAT Law for Imports/Exports