On July 29, 2022, the Government issued Decree 49/2022/ND-CP (“Decree 49”) amending and supplementing some articles of Decree No. 209/2013/ND-CP (“Decree 209”) guiding the implementation of the Law on Value Added Tax (“VAT”).
The highlights of that Decree that businesses need to pay attention to are as follows:
1. Changes on the method of determining the land price permitted to be deducted for VAT calculation in the real estate sector
For real estate transfer, the value-added taxable price is the real estate transfer price minus (-) the land price permitted to be deducted for VAT calculation.
Change on the calculation of land price permitted to be deducted for VAT calculation for real estate transfer:
In case a business establishment is transferred the land use right from an organization or individual: the land price permitted to be deducted for VAT calculation is the land price at the time of the land use right transfer, excluding the infrastructure value. Business establishments are permitted to declare and deduct input VAT of the infrastructure (if any).
In case the land use right transfer price included the infrastructure value under Decree 209, the land price must be determined towards excluding the infrastructure value at the time of transfer. If this value is unidentifiable, the land price permitted to be deducted for VAT calculation is the land price set by the provincial People’s Committee at the time of the transfer contract conclusion.
This content is completely different from the previous provisions in Decree 209.
Receiving capital contribution by land use right also fall under the case of land price permitted to be deducted for VAT calculation:
Decree 49 supplemented the case of receiving capital contribution by land use rights as a case of determining the land price permitted to be deducted for VAT calculation. Accordingly, if a business establishment receives a capital contribution by land use rights, the land price permitted to be deducted for VAT calculation is the price stated in the capital contribution contract. In case the transfer price of land use right is lower than the land price received as capital contribution, only the land price shall be deducted according to the transfer price.
2. Expanding the scope of investment projects eligible for VAT refund
All business establishments having new investment projects are eligible for VAT refund:
In Decree 209 (amended by Decree No. 146/2017/ND-CP), only new business establishments derived from investment projects have an investment period of at least 1 year are eligible for VAT refund. Decree 49 expanded such scope by allowing “Business establishments (including new business establishments derived from investment projects) making new investment projects (including investment projects divided into different investment stages or different investment categories) which have been in the investment period, located in the same province/ city or in different provinces/ cities where the head office is located, having the amount of input VATon the goods and services arising in the accumulated investment period which have not been fully deducted yet from at least 300 million VND, shall be refunded the VAT”.
The above provision does not apply to cases where (i) the VAT amount, which has not been deducted of the investment project, is not allowed to be refunded, instead, is allowed to be deducted in the next period (according to the content below), and (ii) investment projects in construction of houses for sale and investment projects not forming fixed assets.
Business establishments operating in conditional business lines may be entitled to VAT refund even with the VAT amount from investment projects that do not require a conditional business license:
Accordingly, there are 3 types of investment project of business establishments, operating in conditional business lines, being eligible for VAT refund, which are:
(i) Investment projects in the investment period, which were granted business licenses for conditional business lines;
(ii) Investment projects in the investment period that require a license for conditional business operation but have not had to request the competent authority to be issued;
(iii) Investment projects that do not required conditional business licenses.
Supplementing regulations on cases that the VAT amount, which has not been deducted of investment projects, shall be deducted in the next period, not allowed to refund
(i) Investment projects of business establishments operating in a conditional business lines have not met all legal conditions (have not been granted a conditional business license by a competent state agency or have not satisfied all legal conditions for such business).
(ii) ) Investment projects of business establishments operating in a conditional business lines that fails to maintain legal conditions during their operation (during the operation, the business establishments have been withdrawn one of the business licenses for conditional business investment lines; or they have not satisfied all legal conditions for such business).
(iii) Investment projects on exploitation of natural resources and minerals which have been licensed from July 1, 2016 or investment projects on production of goods and services with the total value of natural resources and minerals plus energy costs accounting for at least 51% of the product cost according to investment projects, except for oil and gas prospection, exploration and development projects, which are entitled to VAT refund as per regulations.
Decree 49 shall take effect from September 12, 2022. Particularly, regulations on VAT refund for investment projects of business establishments operating in conditional business lines in Article 1.3 of this Decree shall take effect from the effective date of Decree 100/2016/ND-CP (July 1, 2016).
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