Value-added tax cut is beneficial for several businesses not all
Nguyen Thanh Tung, a business owner in Ho Chi Minh City’s Cu Chi outlying district, said that his iron and steel product business was not eligible for tax reduction. Meanwhile Diep Minh Chau, the owner of a business in District 3 is worried because he does various industries in his own business and some of them are not entitled to the low value-added tax; hence, the tax rate correction will be a challenge for the company’s accountant.
According to the Government's Decree 15, only new essential goods and services are eligible for the new value-added tax. Business establishments that calculate tax by the credit method may apply the VAT rate of 8 percent for goods and services. Business establishments that calculate tax as a percentage of turnover including business individuals, individual business households are entitled to a 20 percent reduction of the percentage rate for calculating VAT on goods and services.
In addition, Decree 15 also clearly stipulates that the lower VAT rate will not apply to telecommunications, financial activities, banking, securities, insurance, real estate business, metals, and products from prefabricated metals, mining products (excluding coal), coke, refined petroleum, chemicals and chemical products, goods and services subject to excise tax, information technology under the law on information technology.
Additionally, special consumption goods such as cigarettes, cigars and other tobacco, alcohol, beer, automobiles with less than 24 seats, two-wheeled motorbikes, three-wheeled motorbikes with a cylinder capacity of over 125cm, aircraft, yachts, gasoline, air conditioners with a capacity of 90,000 BTU or less, discotheques, massage, karaoke parlor, casino, video games will not be eligible to enjoy the new tax.
The tax reduction period will last from February 1 to the end of 2022. According to economic experts, the nature of VAT is that indirect taxes are paid by consumers through the purchase price of goods and services, so the imposition of tax will help lower the price of goods and be more beneficial to consumers.
For the tax policy to be effective, the Tax Department in Ho Chi Minh City on February 14 asked enterprises to issue VAT reduction invoices of 2 percent for industries that are reduced following regulations ensuring the National Assembly and the Government's support policies come into reality.
The General Department of Taxation also said that it will strictly handle enterprises that do not issue tax reduction invoices as prescribed. Currently, many businesses selling consumer goods and the supermarket system have adjusted the VAT rate to 8 percent for essential items according to regulations such as GO! hypermarket system, Big C, supermarkets Tops Market, Nguyen Kim electronics supermarket.
However, many businesses also complain that the modification of the tax rate on the invoice will cause difficulties for multi-industry business enterprises making it difficult to declare by product code. However, according to the tax industry, businesses bumped into difficulties because accountants have confused business registration code with commodity code.
Therefore, the tax industry has put on the website an excel table and instructions on how to look up the commodity code to know whether the goods and services are eligible for tax reduction.
Some businesses expressed concern about how the production process chain will be handled if the goods are imported before the effective date of the above decree with the tax rate of 10 percent, and now sold during the tax reduction of 8 percent.
Deputy Director of Ho Chi Minh City Tax Department Thai Minh Giao said that if goods were purchased before with the VAT rate of 10 percent, from now until the end of the year, they still have to sell at the tax rate of 8 percent. The difference in VAT will be deducted in subsequent taxes. All trading activities for goods and services during the tax reduction period are fully applied at all stages from production to business, to ensure benefits to consumers, Mr. Giao said.
The Association of Mechanical and Electrical Enterprises in Ho Chi Minh City yesterday sent a document to the city Tax Department. Accordingly, many member enterprises of the association affirmed that some points in the application of Decree 15 are unclear.
Mr. Do Phuoc Tong, Chairman of Ho Chi Minh City Mechanical and Electrical Enterprise Association, explained that based on the content of the decree if the item is taxed at 8 percent but the enterprise exports 10 percent, the seller must pay 10 percent, the buyer shall deduct 8 percent.
Moreover, if the goods are subject to 10 percent tax but the enterprise exports 8 percent, the seller will have 2 percent arrears together with late payment interest and a penalty for false declaration, the buyer can only deduct 8 percent.
Furthermore, any item that generates revenue before 1-2-2022 but only VAT invoices are issued in February 2022, they will still be issued according to the time of revenue generation, not subject to tariffs of zero percent, 5 percent, or ten percent. Last but not least, before February 1, 2022, the tax rate in the adjusted invoice is not taxable.
