Legal Updates

CONVERTING DIRECT VALUE TO DISCOUNTING METHODOLOGY

 

At Official Letter No. 4526/TCT-KK dated November 5, 2019, the General Department of Taxation has guided Gia Y Trading and Service Co., Ltd on the declaration procedures and convert value added tax (VAT) method from direct method to deduction.

 

Gia Y Trading and Service Co., Ltd was established in April 2019, then declared the form of tax declaration according to the method of direct revenue. The company uses sales invoices to follow this form. However, in the process of signing contracts with many partners, because some partners do not clearly understand and cannot distinguish between sales invoices, VAT invoices and require the Company to provide VAT invoices when making contract acceptance documents will only agree to sign the contract with the Company.

From the above difficulties, the Company asked the state management agency to guide the procedures for declaring and converting the VAT calculation method from the direct method to the deduction method.

Answering problems of Gia Y Trading and Service Co., Ltd., General Department of Taxation said, Clause 1, Article 12 of Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance (corrected as amended). changed and supplemented according to the provisions of Clause 3, Article 3 of Circular No. 119/2014/TT-BTC of the Ministry of Finance) specifically stipulating the method of tax deduction.

Accordingly, the tax credit method is applicable to business establishments that fully comply with the accounting, invoice and document regimes in accordance with the law on accounting, invoices and documents. In which, there are operating business establishments with annual revenue from selling goods and providing services of VND 1 billion or more and fully implementing accounting, invoice and voucher regimes in accordance with the provisions of law. the law on accounting, invoices and documents, except for business households and individuals that pay tax by the direct calculation method; Business establishments voluntarily register to apply the tax credit method, except for business households and individuals that pay tax by the direct calculation method…

Business establishments that voluntarily register to apply the tax credit method, including operating businesses and cooperatives with annual revenue from selling goods and providing services subject to VAT under one billion dong, have done so. full accounting regime, books, invoices and documents according to the provisions of law on accounting, invoices and vouchers…

In addition, at the end of the first calendar year since its establishment, if the enterprise or cooperative has a turnover of 1 billion VND or more and fully observes the accounting, invoice and voucher regime as prescribed by the law on accounting, invoices and documents, the tax credit method shall continue to be applied; if the enterprise or cooperative fails to achieve a turnover of 1 billion VND or more but still fully implements the accounting, invoice and voucher regime in accordance with the law on accounting, invoices and documents, may voluntarily register to continue applying the tax credit method under the guidance at Point a, Clause 3 of this Article. After the first calendar year since its establishment, enterprises and cooperatives shall stably apply the tax calculation method for 2 consecutive years.

In Official Dispatch No. 4253/TCT-CS dated September 20, 2017 of the General Department of Taxation on the introduction of new points in Circular No. 93/2017/TT-BTC dated September 19, 2017 on guiding tax calculation methods, Previously, when converting to apply value-added tax calculation methods (from direct method to deduction method and vice versa), business establishments had to submit Form 06/GTGT ​​to the tax office.

However, from the effective date of Circular No. 93/2017/TT-BTC, the determination of the VAT calculation method is based on the VAT declaration dossier sent by the business establishment to the tax authority. In which, if the business establishment registers to apply VAT by the deduction method, it shall send the VAT declaration form No. 01/GTGT, 02/GTGT ​​to the tax authority; If the business establishment registers to apply the direct method, it shall send the VAT declaration form No. 03/GTGT, 04/GTGT ​​to the tax office.

Pursuant to the above regulations, the General Department of Taxation guides, in case Gia Y Trading and Service Company Limited was established in April 2019, at the end of the first calendar year since its establishment, if the Company has turnover from 1 billion VND or more and fully comply with the accounting, invoice and voucher regime in accordance with the law on accounting, invoices and documents, or fail to reach the revenue level of 1 billion VND or more. but still fully comply with the accounting, invoice and voucher regime in accordance with the provisions of the law on accounting, invoices and certificates, if voluntarily applying the tax credit method, the company shall send a sample VAT declaration form. 01/GTGT, 02/GTGT ​​to the tax office to declare VAT and at the same time register the method of calculating VAT for the following year according to the deduction method.

 

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