Value Added Tax (VAT) is a common indirect tax in Vietnam, levied on the added value of goods and services during the production, circulation and final consumption process. However, handling VAT is not always simple. There are many special cases where VAT requires businesses to handle it in accordance with legal and accounting regulations to avoid risks.
The article below will help you systematize the most common special cases, corresponding legal basis and detailed instructions for properly declaring VAT.
VAT and the reasons for the existence of special cases
Concept of VAT according to the VAT Law 2008 (amended)
According to Article 2, Law on Value Added Tax No. 13/2008/QH12 (amended by Law No. 31/2013/QH13), VAT is a tax calculated on the added value of goods and services arising in the process of production, circulation and consumption. The final consumer is the real taxpayer. (See details here)
Why is it necessary to stipulate “special cases” in VAT?
Special provisions are intended to clearly distinguish:
- Non-taxable entities
- Tax exempt subjects
- Goods and services subject to tax rate 0%
- Cases where input tax is not deductible
If not clearly regulated, businesses can easily declare incorrectly, causing tax imbalance or being penalized.
Risks of falsely declaring these cases
- Collect and fine for incorrect product codes and invoice codes.
- Not getting a tax refund when you should have.
- Incorrect allocation of non-deductible input costs leads to incorrect accounting.
Common special cases of VAT (According to Decree 123/2020/ND-CP and Circular 219/2013/TT-BTC)
During the course of its operations, businesses will inevitably encounter situations that are outside of normal VAT practices. Below is a summary of 7 particularly common cases that businesses need to pay special attention to in order to handle them in accordance with regulations:
| STT | Special cases | Legal basis | How to handle VAT |
|---|---|---|---|
| 1 | Tax-free goods and services | Article 4, Circular 219/2013/TT-BTC | No VAT declaration, no deduction |
| 2 | VAT exemption under special policy | Article 5, Circular 219/2013/TT-BTC | Clearly state the reason for exemption or non-collection of VAT. |
| 3 | Export of software and electronic services | Clause 2, Article 9, Circular 219 | Apply tax rate 0%, complete documents |
| 4 | Services provided to foreign organizations | CV 4943/TCT-CS, Decree 209/2013/ND-CP | Tax rate 0% if conditions are met |
| 5 | ODA project tax refund, non-refundable aid | Article 18, Circular 219 | Profile according to the instructions of the Ministry of Finance |
| 6 | Transfer of investment project | CV 3700/TCT-CS | Tax free if qualified |
| 7 | Taxable and non-taxable goods on the same invoice | Decree 123/2020/ND-CP | Split line, no deduction for non-taxable portion |
Clearly distinguishing these cases will help businesses avoid false declarations, loss of deduction rights or even tax arrears.
Instructions for declaring and accounting for special cases of VAT
In practice, declaring the correct tax rate and the correct target is a prerequisite to avoid tax risks. The table below will help businesses identify and accurately account for each case:
| Classify | Tax rate | Input deduction | Declaration |
|---|---|---|---|
| Tax free | 0% | Are not | Not declared |
| Tax Free | No record | Are not | Specify the reason for exemption. |
| Tax rate 0% | 0% | Yes if eligible | Normal declaration |
| No input deductions | – | Are not | Track your expenses separately |
These regulations require the accounting department to pay special attention when processing invoices, declarations and recording input and output costs.
Declaration form
- Form 01/GTGT
- Appendix 01-1/GTGT for output subject to 0%
- Specify “not subject to tax” or “exempt” in the tax rate line
Notes when making invoices
- Right time to arise
- Correct content of goods/services
- Separate lines for non-taxable and taxable goods
Some common mistakes when handling special cases
Below are the most common mistakes that businesses can easily make, leading to legal consequences or being charged by tax authorities:
| Mistake | Consequence |
|---|---|
| Incorrect invoice code | Causes data distortion, easy to eliminate costs |
| No input separation no deduction | Loss of deduction rights, disqualification upon settlement |
| Incorrect account posting | Incorrect cost accounting affects financial statements |
What is the solution? Enterprises should build clear internal control procedures and regularly update legal documents for timely adjustments.
Latest legal updates regarding VAT and special cases (2025 – assume latest update)
Some notable new points in 2025 (assumed) are as follows:
- Clarification on VAT refund for non-refundable aid
- Supplementing regulations on declaring mixed invoices in cross-border electronic services
You can follow official updates at legal portals such as Law Library or Electronic Information Portal of the General Department of Taxation.
Real-life situation: Error in VAT processing for exported software – Lessons from technology enterprises
A technology company in Ho Chi Minh City exported software abroad but did not have sufficient bank payment documents and bilingual contracts. As a result, the revenue was not subject to the 0% tax rate but was subject to the 10% output tax rate, and at the same time lost the right to refund input VAT.
This case is a wake-up call for tech companies: when providing cross-border services, standardize input documents, contracts and export documentation before issuing invoices.
What should businesses do when encountering special VAT cases?
- Carefully review documents: contracts, invoices, bank payments.
- Seek written guidance from your local tax authority if in doubt.
- Cooperate with a reputable consulting firm to comprehensively control VAT-related contacts.
Conclusion: Proactively understanding special cases of VAT is to protect businesses
Special cases in VAT are a “gray area” with high potential risks. If handled incorrectly, businesses may be subject to additional tax collection, loss of deduction rights or no tax refund. Understanding the regulations, declaring correctly and staying up to date with legal regulations are the most effective ways to protect yourself.
MAN – Master Accountant Network supports businesses in handling all special cases regarding VAT: from consulting, preparing documents, to representing them in working with tax authorities.
