What Does Zero Rated For VAT Mean? AS Auditing

If I think about the word "tax", I will immediately think of the amount to be paid. However, the value-added tax has a tax rate of zero percent (0%) applied to exported goods and services.

So, what does zero rate (0%) for VAT mean?

• Firstly, ceding the right to tax value added to the place of final consumption. This is consistent with the nature and international practice of value added tax.
• Secondly, to encourage exports and create conditions for domestic enterprises to compete on price with other countries.
• Thirdly, enterprises trading in goods and services subject to zero rate (0%) may deduct or refund input value-added tax. This is the content increasing internal financial resources for domestic companies.

The current errors of Vietnam enterprises are mistaking to apply zero rate (0%). In order to get a zero rate, enterprises have to operate in exporting goods and services and ensure that all documents are complete in accordance with the provisions of the tax law.

In order to avoid "misunderstanding", we note three cases of exported goods and services or cases of deemed exportation without applying zero rate (0%), as follows:

Case 1:

Oil and gas purchased from domestic market by a taxpayer and sold to automobiles in the free trade zone; The automobiles sold to the entitles in free trade zones. The reason is that the free trade zone located in the territory of Vietnam cannot distinguish gas, automobiles running in the zone or outside the zone.

Case 2:

Services provided for the entities in free trade zones include: leases on houses, meeting halls, offices, hotels, warehouses, yards; employee transport; food and drink services provided in the free trade zones by external providers (except for catering, food and drink services provided by those in the same free trade zone).

Except for catering, food and drink services provided by those in the same free trade zone, the zero rate (0%) is still applied. The reason is the meal happening in the zone.

Case 3:

Outbound postal and telecommunications services, exported natural resources that are not processed into other products; the goods and services provided for the individuals that do not register to do business in free trade zones.

To solve the problem of "forgetfulness", we need to note the documents required for exported goods and services or deemed exportation, to apply the zero rate (0%), as follows:

The documents below are compulsory for exported goods:

1. Sale contract, or export entrustment contract;
2. Bank receipts for payment for exported goods and other documents prescribed by law;
3. The customs declaration and the accompanying set of customs documents;
4. Invoice.

The documents below are compulsory for exported services:

1. Foreign trade contract;
2. Bank receipts for payment for exported services and other documents prescribed by law;
3. Proof of provide export services;
4. Invoice.

In cases deemed export are export processing or forwarded export processing, the set of documents required:

1. Forwarding note, customs declaration, contract;
2. Bank receipts for payment for exported services and other documents prescribed by law;
3. Proof of deemed export or a set of customs declarations, if the enterprise is the place of final export of the forwarded processing stage;
4. Invoice.

SUMMARY TABLE OF DOCUMENTS FOR EACH TYPE OF EXPORT

The storage of accounting evidence has to be detailed and complete. Although lacking of one document of the requirements of the tax, this is not complete.

– If the customs declaration is missing, it will be charged at the same tax rate as domestic sales, and input value-added tax is deductible.

– If there is no proof of payment via bank, but there is still a customs declaration, the tax rate of 0% will be applied, but input Value Added Tax is not deductible.