Overview of VAT Refund

VAT refund is an important part of Vietnam’s tax system, which aims to provide tax refunds to eligible enterprises and organizations and reduce their tax burden. VAT refund mainly applies to the following situations:

Exporting enterprises: Exporting enterprises can apply for a refund of VAT related to exported goods or services to encourage exports and enhance international competitiveness.

Investment projects: Large investment projects, particularly those in sectors or regions that qualify as government-encouraged, may be eligible for VAT refunds to support the start-up and development of the project.

Diplomatic missions and international organizations: Diplomatic missions, consular offices and certain international organizations can apply for VAT refunds on their activities in Vietnam based on specific arrangements under diplomatic or international agreements.

Specific industries (such as agriculture): Certain specific industries, especially those that have a significant impact on the national economy, such as agriculture, can enjoy VAT refunds to support their development and reduce costs.

Legal Basis:

Article 60 of the Law on Tax Administration: This is the main legal basis for VAT refunds and stipulates the applicable conditions and procedures for refunds.

Notice No. 219/2013/TT-BTC of the Ministry of Finance: This notice specifies in detail the procedures for calculating, declaring and refunding VAT and is a specific guiding document for the implementation of VAT policy.

Circular No. 130/2016/TT-BTC of the Ministry of Finance (latest revision): This circular updates and amends the original VAT policy and further clarifies the scope of application and procedural requirements for tax refunds.

Through these laws and regulations, the Vietnamese government ensures that eligible enterprises and organizations can apply for and obtain VAT refunds in a timely manner, thereby optimizing the tax burden and promoting the development of economic activities.

Detailed tax refund process

Preparation

The preparation stage is a crucial step in the process of applying for a VAT refund. Businesses need to collect and organize all the necessary documents to ensure that the refund application goes smoothly. The following is a detailed list of documents and requirements required in the preparation stage:

1.Collect the required documents

a) VAT invoice

Requirements: Enterprises need to provide originals or certified copies. VAT invoices are important documents proving that VAT has been paid and must be kept properly.

Note: The invoice date should be within 12 months before the tax refund application date, otherwise it may affect the legality and validity of the tax refund application.

b) Export contracts

Requirements: The export contract must be submitted in Vietnamese. If the original contract is in a foreign language, a certified Vietnamese translation is required.

Content: The contract must include detailed information such as product description, quantity, unit price and total price, so that the tax department can verify the authenticity and legality of the exported goods.

c) Customs declaration form

Requirements: The company needs to submit a customs declaration form with customs stamp to prove that the goods have been actually exported.

Note: Make sure the information on the customs declaration is consistent with the actual export situation, including the type, quantity and value of goods, to avoid problems during the review process.

d) Financial statements

Requirements: An audit report for the most recent fiscal year must be submitted. Applicable to companies that have completed annual financial audits.

Content: Financial statements include the income statement, balance sheet and cash flow statement. These documents are used to verify the financial position of the business and the payment of VAT.

e) Bank statement

Requirements: Businesses need to provide bank statements showing relevant transactions to prove the authenticity of VAT payments and refunds.

Note: For export tax rebates, you must provide proof of foreign exchange income to prove that the export income has been remitted back to Vietnam and settled through legal channels.

f) Other supporting documents

Transport documents (such as bill of lading, air waybill): used to prove that the goods have been transported out of the country and must be consistent with the information on the customs declaration form.

Insurance policy (if applicable): If the exported goods are insured, the relevant insurance policy must be provided to prove the content of the policy and the goods information.

Quality inspection certificate (required for certain goods): Certain specific goods (such as food, chemicals, etc.) may require a quality inspection certificate to prove that the goods meet the standards of the exporting country and Vietnam.

By collecting and preparing all the above documents, enterprises can ensure the completeness and accuracy of their VAT refund application materials, thereby increasing the possibility of a successful refund application. This preparation stage is crucial and directly affects the smooth progress of the entire refund process.

Document verification

• Use the document checklist to ensure you have all the necessary documents
• Ensure that all documents have consistent information such as date and amount
• Check all documents to see if they comply with the latest requirements of the Vietnam Taxation Department

2. Submitting an application

Fill in the tax refund application form

After preparing all the required documents, the company needs to check them carefully to ensure their accuracy and consistency. Here are some points to pay attention to when checking the documents:

Use a document checklist to ensure you have all the necessary documents: Prepare a document checklist and check if you have all the required documents. This includes VAT invoices, export contracts, customs declarations, financial statements, bank statements, and other supporting documents. Using a checklist will help prevent you from missing any critical documents.

Ensure that all documents have consistent information such as dates, amounts, etc.: Carefully check all documents to ensure that key information such as dates, amounts, and descriptions of goods are consistent across all documents. For example, the amount on the invoice should be consistent with the amount in the contract and bank statement, and the description of goods on the customs declaration should be consistent with the description in the export contract and shipping documents. These consistencies are the focus of the tax department’s audit.

Check whether all documents comply with the latest requirements of the Vietnam Taxation Department: When checking the documents, you also need to ensure that the format, content and additional information of all documents comply with the latest requirements of the Vietnam Taxation Department. In particular, the Vietnam Taxation Department may regularly update regulations or notices. Enterprises need to ensure that their documents comply with these latest compliance requirements to avoid rejection or delay of tax refund applications.

By carefully checking the documents, companies can greatly improve the success rate of their VAT refund applications and ensure the smooth progress of the entire process. Checking the accuracy and consistency of the documents is a key step in ensuring the compliance of the refund application.

Submit Application

a) Form type:

Form 01/GTGT ​​(latest version): Make sure you use the latest version of the tax refund application form issued by the Vietnam Tax Department to avoid having your application rejected due to using an old version.

b) Fill in the following information:

Basic information of the enterprise: including the name, tax number, address and other detailed information of the enterprise. This information must be completely consistent with the registration information of the tax bureau.

Tax refund period: Specify the applicable period for tax refund, which can be a month or a quarter, depending on the company’s declaration cycle.

Details of refund amount calculation: List in detail the amount of refund requested and the basis for calculation, including details of relevant invoices, transactions and fees. All data should be consistent with the information in the supporting documents.

Reason for tax refund: briefly explain the reason for applying for tax refund, such as export tax refund, investment project tax refund, etc., and cite relevant laws and regulations.

Signature of the legal representative and company seal: The tax refund application form must be signed by the legal representative of the enterprise and stamped with the company seal to ensure the legality and formality of the application.

c) Notes:

Make sure all information is accurate: Carefully check all the information you fill in, especially the amount and refund period, to ensure it is consistent with the supporting documents.

Fill in Vietnamese: As required, the tax refund application form needs to be filled in Vietnamese to ensure compliance with language standards.

The amount must be accurate to the nearest Vietnamese Dong: When filling in the refund amount, it must be accurate to the nearest Vietnamese Dong to avoid inaccurate amounts due to rounding errors.

3.Review stage

Preliminary Review

After submitting a tax refund application, the tax authorities will conduct a preliminary review of the application. The purpose of this stage is to ensure the completeness of all documents and the accuracy of the information, and to make a preliminary calculation of the tax refund amount.

a) Audit content:

Document completeness check: The tax authorities will first check whether the submitted documents are complete and include all necessary supporting documents, such as VAT invoices, export contracts, customs declarations, financial statements, etc.

Basic information verification: The tax staff will verify the basic information on the application form, including company name, tax number, tax refund period, etc., to ensure that this information is consistent with the tax bureau records.

Preliminary calculation of refund amount: The tax authorities will make a preliminary calculation of the refund amount applied for based on the submitted documents and declaration forms, and verify whether it is consistent with the data provided by the enterprise.

b) Time estimate:

5-10 business days: The initial review is usually completed within 5-10 business days after the application is submitted. This time period may vary depending on the complexity of the documents submitted by the business and the workload of the tax bureau.

c) Possible results:

Pass preliminary review: If all documents are complete and the information is accurate, the tax authorities will notify the enterprise that the application has passed the preliminary review and enter the further detailed review stage.

Request for additional documents: If the tax authorities find that some documents are incomplete or the information is inconsistent during the review, the enterprise will be required to submit the additional documents or information within the specified time to avoid delays in the application process.

Rejection of application (with reason): If the application contains major errors or does not meet the tax refund conditions, the tax authorities may reject the application and attach a reason for the rejection. The enterprise can make corrections based on the reasons and reapply, or choose to appeal.

Through preliminary review, the tax authorities can effectively screen out tax refund applications that meet basic conditions and lay the foundation for subsequent detailed review and final decision.

Supplementary documents (if necessary)

a) Common supplementary document requirements:

• Detailed description of a specific transaction
• Additional Financial Records
• Original copy of specific invoice

b) Submission method:

• Upload via electronic system
• Submit it in person at the tax office if necessary

c) Time Limit:

• Usually 5-10 working days are given for replenishment
• Exceeding this time limit may result in your application being rejected

4.Tax refund processing

Approval

During the initial review, if the tax authorities find that the application documents are incomplete or inconsistent, the enterprise may be required to submit supplementary documents. The following is a detailed description of the supplementary document stage:

a) Common supplementary document requirements:

Detailed explanation of certain transactions: Tax authorities may require companies to provide detailed explanations of certain transactions to better understand the nature and context of the transactions. For example, complex transactions involving multiple countries, special business arrangements or large transactions may require additional explanations.

Additional financial records: Businesses may be asked to provide additional financial records, such as bank statements, accounting records for a specific period, payment vouchers, etc., to support the amounts and information listed in the application.

Original copies of certain invoices: In certain circumstances, the tax authorities may require businesses to submit original copies of certain VAT invoices to verify their authenticity and legitimacy, especially those involving large-value tax refunds.

b) Submission method:

Upload through the electronic system: Enterprises can upload supplementary documents through the electronic declaration system of the Vietnam General Department of Taxation. This method is fast and convenient and suitable for supplementary submission in most cases.

Submit in person at the tax office if necessary: ​​In some special cases, or when the electronic system does not support the upload of specific documents, the company may need to submit supplementary documents in person at the tax office. This usually involves more complex or sensitive documents.

c) Time Limit:

Usually 5-10 working days are given for supplementary documents: Tax authorities usually give enterprises 5-10 working days to submit supplementary documents. During this time period, enterprises need to collect and submit the required documents as soon as possible to avoid delays.

Exceeding the deadline may result in rejection of the application: If the enterprise fails to submit the supplementary documents within the prescribed time, the tax authorities may reject the tax refund application. Therefore, strictly adhering to the time limit is crucial to successfully obtaining a tax refund.

During the supplementary document stage, enterprises need to attach great importance to the requirements of the tax authorities and take prompt action to ensure the accuracy and timeliness of all supplementary materials to ensure the smooth progress of the tax refund application.

Tax refund processing

After the tax refund application has been initially reviewed and any necessary supplementary documents have been submitted, the tax authorities will conduct a final review of the application. If the review is passed, the company will receive a formal tax refund confirmation notice. The following are the detailed steps and matters after the review is passed:

a) Notification method:

Electronic system notification: The tax authorities usually send a notification of tax refund approval to enterprises through the electronic declaration system of the Vietnam General Department of Taxation. Enterprises should log in to the system regularly to check the declaration status and ensure that they receive the notification in time.

Official written notice: In addition to electronic notices, the tax authorities may also send a formal written notice to the enterprise. This notice is usually sent by mail or directly to the enterprise by the tax officials and has legal effect.

b) Content:

Confirmed refund amount: The notice will clearly show the refund amount confirmed by the tax authorities. This amount should be consistent with the amount reported by the enterprise, or reflect the adjustments made by the tax authorities during the review process.

Refund method (usually bank transfer): The notice will also state the refund method, which is usually by bank transfer to the account designated by the company. The company should ensure that the bank account information in the notice is accurate to avoid the refund not arriving correctly.

c) Time estimate:

10-15 working days: After the tax refund is approved, the tax authorities usually need 10-15 working days to process the tax refund and complete the bank transfer. This time may be extended due to factors such as bank processing time and holidays.

Passing the tax refund review and receiving the tax refund marks the successful completion of the entire VAT refund process. The company should properly record the receipt of the tax refund and ensure that all relevant documents are kept intact for future audits or tax inspections.

5.Receive tax refund

Confirmation of receipt

After the tax authorities complete the tax refund processing and issue the refund, the company needs to confirm whether the refund has been successfully received. The following are the steps and precautions for confirming the refund:

a) Confirmation method:

Check bank statements: Businesses should first confirm that the tax refund has been received through bank statements. This can be done through online banking systems, electronic statements provided by the bank, or by contacting the bank directly to obtain the latest account details.

Tax refund status update in the tax system: Enterprises should also log in to the electronic declaration system of the Vietnam General Department of Taxation to check the status update of the tax refund application. If the system shows that the tax refund has been processed and the bank account also confirms the receipt of the money, it means that the tax refund is successful.

b) Notes:

Check whether the refund amount is correct: After confirming the receipt, the enterprise should carefully check whether the actual refund amount received is consistent with the amount notified by the tax authorities. If there is any difference in the amount, the reason needs to be found out immediately.

If there is any discrepancy, contact the tax bureau immediately: If it is found that the amount received does not match the notified amount, the company should immediately contact the tax bureau, provide relevant certificates and bank statements, and request to find out the reasons and resolve the problem.

By confirming the accurate receipt of tax refunds, businesses can ensure the successful completion of the entire VAT refund process and resolve any issues that may arise in a timely manner. Proper management and recording of tax refund information is very important for the financial health and tax compliance of a business.

Record keeping

a) Files to be saved:

Copies of all application documents

Approval notice from the tax bureau

Bank transfer records

b) Retention period: at least 10 years (according to Vietnam Accounting Law)

c) Storage method:

Paper document archiving

Electronic file backup (recommended)

Common problems and solutions

During the VAT refund process, businesses may encounter some common problems. Here are the possible causes of these problems and their corresponding solutions:

1.Refund application rejected

Possible causes:

Incomplete or non-compliant documents: The submitted documents may lack necessary supporting materials, or some documents may not meet the requirements of the Vietnam Tax Department.

Calculation Error: There may be errors in the calculation of the amount in the tax refund application, resulting in the tax refund application being ineligible.

Not meeting the tax refund conditions: The business or specific transactions do not meet the statutory conditions for tax refund, resulting in the application being rejected.

Solution:

Carefully review the reasons for rejection: The tax office will usually provide a reason for rejecting a refund. Businesses should carefully read and understand the specific reasons for the rejection.

Supplement or correct necessary documents: If the documents are incomplete or do not meet the requirements, the enterprise should supplement or correct the documents and resubmit the application.

Seek help from a professional tax advisor when necessary: ​​If the reasons for rejection are complex, the company may consider consulting a professional tax advisor to ensure that the next application is successfully approved.

2.The refund amount is not in line with expectations

Possible causes:

Different calculation methods: The tax bureau may use a different calculation method from the enterprise, resulting in the refund amount being inconsistent with the enterprise’s expectations.

Some invoices or transactions are not eligible for tax refund: Some invoices or transactions may be determined by the tax bureau to be ineligible for tax refund and thus excluded from the tax refund calculation.

Solution:

Request the tax bureau to provide detailed calculation instructions: Enterprises can request the tax bureau to provide detailed calculation instructions for the tax refund amount to understand the specific reasons for the difference.

Provide additional evidence to support your calculations: If your business believes that the tax bureau’s calculations are incorrect, you can provide additional documents or evidence to support your calculations.

If there is a dispute, you can apply for reconsideration: If there is a serious disagreement with the tax bureau’s calculations, the company can apply for reconsideration in accordance with legal procedures to seek a re-examination.

3.Tax refund processing takes too long

Possible causes:

Heavy workload at the tax bureau: During busy filing seasons or special periods, the tax bureau may delay processing tax refund applications due to heavy workload.

Application documents require additional review: Certain complex applications may require additional review or confirmation by the tax bureau, resulting in longer processing time.

Solution:

Regularly follow up the application progress: Enterprises should regularly follow up the progress of tax refund applications to ensure that they are aware of the current status of the application in a timely manner.

Proactively communicate with tax officials: If a refund is taking too long to process, businesses can proactively communicate with the responsible tax official to understand the reasons for the delay and provide any information that may help speed up processing.

Ensure timely responses to any requests for additional information: If the tax office requests additional information or documents, businesses should respond as quickly as possible and within the required timeframe to avoid further delays.

Through these coping strategies, enterprises can effectively solve common problems encountered in the VAT refund process, ensure that the refund application proceeds smoothly and obtain the expected refund amount.

Best Practice Recommendations

In the process of processing VAT refund applications, following some best practices can significantly increase the success rate of refund applications and ensure compliance and efficiency of tax management. Here are a few key suggestions:

Maintain good record management

Establish a systematic document management system: Create a systematic document management system to facilitate the filing and retrieval of all tax refund-related documents. Use classification and tagging functions to organize key documents such as invoices, contracts, financial statements, etc., and ensure that each document has a clear storage location.

Update and review your financial records regularly: Update and review your financial records regularly to ensure that all information is accurate. Keeping your financial records up to date will help you provide the required documents quickly when applying for a tax refund and reduce the possibility of errors.

Understand the latest regulations

Check the website of the Vietnam General Taxation Department regularly for updates: Tax regulations may be updated as policies change. Check the website of the Vietnam General Taxation Department regularly to obtain the latest tax information and notices to ensure that the company always complies with current regulations.

Participate in relevant training and seminars: Actively participate in tax training and seminars organized by the government or professional organizations, maintain the latest understanding of tax laws and policies, and apply them in daily operations.

Plan ahead

Make a tax refund plan at the beginning of the financial year: Make a tax refund plan in advance, clarify the tax refund goals and operation steps for each quarter or year. Advance planning can help companies deal with tax refund declarations more calmly at the end of the year.

Ensure that all relevant personnel understand the tax refund process: Train and educate all relevant personnel within the company to ensure that they understand and are familiar with the tax refund process to avoid operational errors caused by poor communication.

Use professional software

Consider using professional tax management software: Investing in professional tax management software can help companies manage tax processes more efficiently, automatically generate returns, and reduce errors caused by manual operations.

Ensure the software is compatible with Vietnam’s tax system: Choose software that is compatible with Vietnam’s tax system to ensure all electronic filings and submissions can proceed smoothly, reducing the risk of technical glitches.

Establishing an internal audit mechanism

Conduct an internal audit before submitting your application: Before you formally submit your tax refund application, conduct an internal audit to ensure that all documents and calculations are accurate. An internal audit can help identify and correct potential problems.

Conduct mock tax audits regularly: Conduct mock tax audits regularly to check the company’s tax compliance and document preparation. This helps identify and resolve issues that may arise in the formal audit in advance.

Cultivate a professional team

Invest in training for finance and tax teams: Continue to invest in professional training for finance and tax teams to ensure they have the latest knowledge and skills to cope with the complex tax environment.

Consider hiring an experienced tax expert: For complex tax issues, consider hiring an experienced tax expert or consultant to provide professional advice and assist in handling complex tax refund applications.

With these best practice recommendations, businesses can better manage the VAT refund process, improve compliance, reduce errors and delays in refund applications, and ensure efficient and accurate tax administration.

Legal and Policy Updates

When making VAT refunds, companies need to keep an eye on the latest legal and policy changes to ensure that their operations comply with current regulatory requirements. The following are some important legal and policy updates on VAT refunds in recent times:

New Tax Administration Law effective July 1, 2021: The new Tax Administration Law will take effect July 1, 2021, which includes adjustments to the VAT refund process. These adjustments may include changes to reporting requirements, strengthening of audit procedures, and redefinition of refund eligibility. Businesses need to understand these changes in detail and adjust their refund application process accordingly to ensure compliance.

The Ministry of Finance is considering simplifying the VAT refund process for certain industries: According to the latest policy discussions, the Ministry of Finance of Vietnam is considering simplifying the VAT refund process for certain industries. This move is intended to reduce the administrative burden on businesses, especially for export-oriented businesses, agriculture, and high-tech industries that may benefit from the simplified procedures. Businesses should pay close attention to further announcements from the Ministry of Finance and be prepared to adjust their internal processes accordingly.

New electronic tax refund system expected to be launched in 2024: The General Department of Taxation of Vietnam is expected to launch a new electronic tax refund system in 2024, which aims to further optimize the tax refund process, improve application efficiency, and significantly shorten the tax refund processing time. The new system may include a higher level of automation, more convenient online submission functions, and more transparent status tracking tools. Enterprises should understand the operational requirements of the system in advance and prepare for technical and personnel training to make full use of this new platform.

VAT refund is a complex but important process that has a significant impact on the cash flow and financial management of enterprises. By understanding and strictly following the above process in detail, enterprises can maximize their tax refund opportunities while ensuring compliance. It is recommended that enterprises continue to pay attention to the updates of relevant regulations and seek the assistance of professional tax advisors when necessary to optimize tax refund strategies and reduce risks.