Archive for 2014

The 2014 amendment on Value added tax law: is the taxman serious about businesses’ cash flow?

The 2014 Amendment on VAT Law, effective 01/01/2014, looks like the taxman cares about your cash flow: now monthly or quarterly, businesses can take out the VAT paid in purchases from the VAT in turnover and pay the tax man the difference only.
While this credit subtraction system is commonplace in tax laws around, in Vietnam the tax office collected VAT liability on sales up front monthly or quarterly. Businesses can claim repayment of VAT credits on purchases by the end of the year, and only if the VAT credit amount is large enough.
Given the time for the tax office to process claims, it can takes several years before you can receive payment of VAT credits the tax office owes you. To businesses, this is like a coronary artery disease: part of the cash flow is sucked into the government’s coffer, no interest!
During economic downturn, it seems cash flow as blood of businesses is as importance as the cash stream into the budget. The National Assembly passed an Amendment to VAT Law 2008 in June 2013, and the government published Decree 209/2013/NĐ-CP to implement the change from the 1st of January 2014.
It is interesting to note that the Tax Office issued Guidance to implement the Amendment on the 1st of January 2014 while awaiting the Government to draft the Decree to implement the Amendment. Does it mean the tax man is quite serious about business cash flow? I wait to see how smooth and quick the process is for my clients to claim their VAT credits in their first quarterly submissions in April 2014.

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