For example, the act of selling jewelry by an individual to another person without the intention of reselling it for profit. The goods and services listed in Article 4 of the VAT Law that are not in this form of supply are all goods and services subject to VAT but are exempt from tax. In other words, they are all activities generated from VAT that are always within the scope of regulation of the VAT Law but are exempted from VAT by a special law for different reasons. The consequence of this tax exemption is that when entities perform deductible operations, they do not have to calculate and collect tax and are not allowed to deduct input VAT due to the policy of implementing tax incentives. The VAT Law has determined a very broad scope of VAT exemption, which can be divided into the following groups:
- Some activities and products of some industries and fields are still facing difficulties and need to be encouraged to create conditions for development, such as the production of raw, unprocessed agricultural, forestry and aquatic products, salt products, and irrigation water for agricultural production.
- Some essential goods and services serving the social life of the community such as medical examination and treatment services, teaching, vocational training, public sanitation and drainage services.
- Some goods and services related to technology and investment capital, such as machinery and equipment, specialized means of transport that cannot be produced domestically, imported as fixed assets, credit services, investment funds, technology transfer, etc.
- Some goods and services are used for non-business purposes or for social policy purposes such as weapons and specialized equipment for national security and defense, maintenance and repair of cultural and artistic works, etc.
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- Some goods and services need incentives at levels such as unprocessed export resources, goods and services provided for international transportation...
- Some goods and services are not subject to tax due to the technical nature of the tax system, such as products subject to special consumption tax, transit goods, temporary import for re-export, temporary export for re-import, etc.
However, in the process of application, many cases have had results contrary to the intentions of policy makers as well as the intentions of lawmakers. This incentive has caused many instabilities for entities performing these operations due to the special deduction mechanism in cases where entities use raw materials that are exempt from VAT. Such as the printing industry of newspapers, magazines, scientific books and tax-exempt publications. In the area, when selling goods, there will be no VAT, businesses will not have to pay VAT to the state treasury, but when purchasing raw materials such as paper, electricity or machinery and equipment, they will have to pay 10% input VAT. Because there is no output VAT to deduct, all VAT paid when purchasing raw materials, machinery and equipment will be included in the cost of the product, increasing the selling price, making it difficult to sell.
Or in Clause 3, Article 4 stipulates that "services subject to special consumption tax are not subject to VAT at the stage where special consumption tax has been imposed", it is thought that this provision reduces the tax burden for enterprises producing goods subject to special consumption tax that have fallen into a "difficult, three-pronged" situation, especially for enterprises assembling cars and air conditioners whose main input is imported components, which are subject to both import tax and VAT, and when sold to the market, these products are subject to special consumption tax but are exempt from VAT, meaning that the input VAT paid cannot be deducted. Clearly, there is a lack of fairness and equality in determining the scope and level of VAT obligations.
* VAT payers
The taxable entity specifies which economic activities the tax regulates, and the tax payer specifies which economic activities the tax regulates.
Article 3 of the Law on VAT stipulates that “organizations and individuals producing and trading taxable goods and services (collectively referred to as business establishments) and other organizations and individuals importing taxable goods (collectively referred to as importers) are subjects of VAT payment.
According to this regulation, the taxpayers are very broad, including all organizations and individuals engaged in the production and trading of goods and services subject to VAT in Vietnam, regardless of ownership form, industry, form of business organization, and organizations and individuals importing goods and services subject to VAT, regardless of whether they are foreign or domestic business organizations. This regulation is completely consistent with theory, but the practice of this issue also needs to be discussed because the number of individual business households in our country accounts for a large proportion, but most of their business activities are ineffective, while the VAT law does not define a VAT threshold like other countries, so the cost of tax administration is very large compared to the amount of VAT collected from these subjects. On the other hand, it is also necessary to consider the concepts of "importer" and "business establishment" because the concept of business establishment includes importers. If business establishments carry out the import of goods, they are called importers.