Value Added Tax

Circular 219/2013/TT-BTC (“Circular 219”) was issued on 31 December 2013 by the Ministry of Finance (“MoF”) and announced in the official gazette on 01 March 2014, providing guidance for the implementation of Decree 209/2013/ND-CP on Value Added Tax (“VAT”). Circular 219 took effect from 01 January 2014 and replaced Circular 06/2012/TT-BTC and Circular 65/2013/TT-BTC of MoF.

1. Application of 0% VAT rate As per Circular 06/2012/TT-BTC, a critical condition for enterprises to apply the VAT rate of 0% for services provided to foreign customers is that they must not have a permanent establishment in Vietnam and should confirm the same in writing. However, such requirement has been removed in Circular 219. Instead, services provided and consumed overseas are eligible for 0% VAT rate application. We note that Circular 219 has not clearly defined what constitutes “services consumed outside of Vietnam”, thus, enterprises should seek professional advice for assistance in clarifying further.

2. Input VAT creditability for fixed assets Circular 219 abolishes the provisions permitting full credit of input VAT from fixed assets simultaneously used for producing, trading goods/services that are subject to and exempt from VAT. Instead, taxpayers are only allowed to deduct the input VAT amount corresponding to the output goods and services which are subject to VAT.


Enterprises are required to record separately the creditable and non-creditable input VAT amounts. If such amounts cannot be separated, the creditable input VAT can be calculated based on the ratio (%) of the VAT-taxable revenue against the total revenue generated from the sale of products and rendering of services.

3. VAT deduction method Prior to 2014, the VAT deduction method was generally applied to enterprises which maintained full accounting records, invoices, and documents in accordance with current regulations, except for those specifically adopting the direct method. In accordance with Circular 219, from 01 January 2014, the tax deduction method is applicable to: (i) enterprises with annual VAT-taxable sales revenue exceeding VND1 billion, or below VND1 billion but where taxpayers voluntarily register to apply the tax deduction method, and (ii) newly established enterprises procuring fixed assets, machineries and equipment valuing from VND1 billion or more. Circular 219 details several methods to determine the level of annual VAT-taxable revenue in cases where an enterprise has been in operation for fewer than 12 months.

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