When travelling overseas, besides inevitable documents such as passport, visa, criminal record, foreigners are advised to know some regulations related to their benefits. A tax refund is a term that foreigners should keep in mind. So what is a tax refund? What should you know about tax refund in Vietnam?
This article will provide you with useful information about tax refunds in Vietnam regarding locations of paying tax, procedures of a tax refund, and necessary documents.
What is a tax refund for foreigners?
Tax refund for tourists permits travellers (foreign passport holders) to claim back Value Added Tax (VAT) on items purchased in any stores registered as a “Tax Refund for tourists” participants.
Who will follow the VAT refund?
According to Article 1 of the Circular No 72/2014/ TT-BTC issued on 30 May 2014, two subjects of VAT refund are “foreigners and overseas Vietnamese, except for members of the flight crew in accordance with the Aviation Law, member of sailor crew in accordance with the Maritime Law (hereinafter referred to as foreigners) whose passports or entry/exit documents are issued by foreign authorities and valid for entering and exiting Vietnam, purchasing and bringing goods overseas through ports of entry/exit where VAT refund is available”.
Locations of tax refund declaration
Two locations that tourists should keep in mind are locations for physical inspection of goods, checking VAT refund declaration, and location for VAT refund payment.
When foreign travelers arrive at Noi Bai or Tan Son Nhat airport, the location for physical inspection of goods, checking VAT refund declaration is located at the baggage check-in counters and/ or boarding-pass checking areas in order for physical inspection of refunded goods sent by luggage; at the isolated areas in order for physical inspection of refunded portable goods.
Besides, to receive the tax refund, VAT refund counters at international seaports, which have separate counters (kiosks) and are qualified for cash management and accounting documents in accordance with laws.
Process of VAT refund
The process of VAT refund goes through three stages.
Stage 1: Foreigners purchasing goods at enterprises selected for selling VAT refund goods (as published on the website of General Department of Tax www.gdt.gov.vn) shall be noticed to check the information in invoice cum tax refund declaration (date of issuing invoice; full name, passport number of buyers…).
If the information is not correct and completed, foreigners shall request for correction; but if it is correct and complete, they shall sign in the invoice cum tax refund declaration.
Stage 2: Foreigners shall be requested to submit invoice cum tax refund declaration and present refunded goods to the customs authority. In Noi Bai and Tan Son Nhat International Airport, foreigners shall submit invoice cum tax refund declaration and present goods to the customs authority at invoice cum tax refund declaration checking counters outside of the restricted areas in order for customs officers to check before conducting procedures for sending baggage.
After customs authority checks invoice cum tax refund declaration and goods, foreigners shall continue to conduct procedures for sending goods and take their boarding-pass.
In case foreigners request for refund payment to their hand luggage, after coming into the restricted areas, they shall submit invoice cum tax refund declaration and present refunded goods as requested. Customs Authority shall check invoice cum tax refund declaration and goods (if necessary) and calculate the VAT amount refunded to foreigners.
In the other places of a tax refund, refunded hand goods or baggage shall be subjected to customs inspection outside the restricted areas (in international airports) and in the refund areas (in international seaports).
Stage 3: Foreigners shall present their boarding-pass card and invoice cum tax refund declaration checked by Customs Authority in terms of identifying kinds of goods and calculating VAT amount refunded to foreigners, and stamp at tax refund counters in restricted areas.
Necessary documents for tax refund
In order to fulfill the procedure of checking and submitting VAT refund, foreign tourists should pay attention to two kinds of documents consisting of documents for checking invoice cum tax refund declaration and goods and documents for VAT refund payments to the foreigner on exit.
In terms of necessary documents for checking invoice cum tax refund declaration and goods, foreigners shall present to the customs officials at the invoices cum tax refund declaration and goods checking counter the following documents: passports or exit and entry permits; invoice cum tax refund declaration and goods.
With regard to necessary documents for VAT refund payments to the foreigner on exit, foreigners should prepare boarding pass and invoices cum VAT refund declaration. After the customs inspection on invoices cum VAT refund declaration and goods has been completed, foreign passengers shall present to the commercial banks at the refunding counter with the documents mentioned previously.
Goods subjected to VAT refund
According to Article 11 of Circular No 72/2014/TT-BTC dated 30 May 2014, VAT refund is applied to objects that meet the following requirements:
“ – Goods are not included in the list of goods prohibited from exportation; the list of export goods under permits of the Ministry of Trade (now the Ministry of Industry and Trade) or export list subject to specialized management according to the Decree No 187/2013/NĐ-CP dated 20/11/2013 of the Government and the guidelines thereof.
– Goods are subjected to VAT as stipulated in Article 3 of the VAT Tax Law No 13/2008/QH12 dated 3/6/2008 and the guidelines thereof.
– Goods are not in the list of goods prohibited in airplanes as stipulated in Article 12 of the Vietnam Civil Aviation Law dated 29/6/2006 and the guidelines thereof.
– Goods are not subjected to VAT refund of foreigners according to Circular 08/2003/TT-BTC dated 15/1/2003 of the Ministry of Finance which guides VAT refund for diplomatic missions, consular posts, and representative offices of international organizations in Vietnam.
– Goods purchased in Vietnam with invoice cum tax refund declaration which is issued within a maximum 60 days before the date of departure of foreign passengers from Vietnam.
– The minimum value of goods in the invoice cum tax refund declaration purchased at the same seller on the same day (including accumulation of many same-day invoices from the same seller) is at least 02 million VND.”
Some difficulties about tax refund system for foreigners in Vietnam
Currently, the procedure of inspecting VAT refund still depends much on paperwork. The customs agencies, established by the General Development of Vietnam Customs, check invoices by paper presented by passengers without electronic invoices. Besides, the process also faces some limitations when tourists have to make the declaration with hand-writing paper.
According to the Hanoi Custome Department, the Noi Bai Customs Brach reported that some cases caused difficulties for the Customs office to calculate the VAT refund such as clothes with general brands, missing labels, badges, missing red marks on invoices or inaccurate contact number.
Meanwhile, the Da Nang Customs Department, through the implementation VAT refund of goods for overseas tourists and Vietnamese expat on exit, reported that the office had difficulties in determining the sales companies’ tax refunds when checking invoices and VAT declaration. Therefore, it takes much time for the office to collect the refunded VAT with invoices made by these sales companies.
Solutions to improve the quality of the VAT refund system
This part is adapted from the article published on Customs News. With a view to building a more efficient system, authorities and organizations should coordinate with each other. It is advised that VAT refunding businesses work with the General Department of Taxation so, the management is tight and more convenient.
Furthermore, enterprises involving in sales tax refund should have clearly defined rights and obligations as well as sanctions for cases where enterprises do not update the information to the Customs office to handle in advance.
The Hanoi Customs Office suggested that tighter regulations on VAT refund conditions should also be applied for new or second-hand goods. The actual inspection of goods which are of great value from high-end brands namely Rolex Watches, Cartier, Hermes, Chanel is difficult to determine whether they are real or fake goods.
The application of technology in the VAT refund system should be implemented. It will create higher productivity and ensure transparent information between the Customs, banks, and VAT refund businesses.
All in all, a VAT refund is significant for foreign tourists entering and exiting Vietnam to ensure their benefits when traveling overseas. Foreigners should prepare in advance necessary documents to declare their VAT refund and follow the instruction of the Customs Office. The VAT refund system in Vietnam still has difficulties in creating a smooth workflow between relevant enterprises.
Therefore, it is an important point for the authority to upgrade the procedure of VAT refund. Hope that the article is helpful to you and if you have any problems relating to law, please contact Viettonkin, we will support you by our hearts.