On 15 December 2017, the Government issued Decree No. 146/2017/ND-CP (Decree No. 146), effective on 1 February 2018, to amend rules the on VAT credit with respect to the export of raw minerals/natural resources and related products, as well as the VAT refund and expense deductibility.

1. Restriction on input VAT credit for companies engaged in export of raw minerals/natural resources and related products relieved

Under current Decree No. 100/2016/ND-CP (Decree No. 100), export of (i) raw minerals and natural resources, or (ii) processed products of which value of minerals or natural resources plus energy expenses accounting for 51% or more of manufacturing cost, or (iii) goods produced from minerals or natural resources of which value of minerals or natural resources plus energy expenses accounting for 51% or more of manufacturing cost is categorized as a VAT-exempt supply for which input VAT is not creditable.

Decree No. 146 treats the following exports as 0% VAT supply:

  • Exporter directly extracts minerals/natural resources and processes, or engages other entities as processers to transform minerals/natural resources into other products (Processed Products). Such Processed Products are further processed into exported goods;
  • Exporter purchases minerals/natural resources and processes, or engages other entities as processers to transform minerals/natural resources into other products (Processed Products). Such Processed Products are further processed into exported goods; and
  • Exporter purchases main materials not being minerals/natural resources (Processed Products) and further processes or engages other entities to process such Processed Products into exported goods.

Businesses engaging in the above 0% VAT exports can claim input VAT credit.

2. VAT refund on export of imported goods

Under Decree No. 100, input VAT incurred for importation of goods was only creditable, but not refundable when such goods are re-exported. Decree No. 146 abolishes this restriction and allows such input VAT to be refundable where the re-export of the imported goods will be carried out at customs' locations.

3. Increased deductible cap on life insurance premiums and contributions to voluntary pension funds

Decree No. 146 increases the cap of deductible life insurance premiums and contributions to voluntary pension funds paid by employers from VND 1 million to VND 3 million per month per employee.

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