Why are enterprises not interested in selling VAT refundable goods?

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Tan Son Nhat Airport Customs officer is guiding VAT refund procedures for passengers. Photo: Thu Hoa.

Only 10 new enterprises per year

The VAT refund policy for foreigners was piloted in July 2012 and was officially implemented from 2014. In the process of VAT refund to foreigners, the stage of selling VAT refundable goods to foreigners is important and decisive to the effectiveness of the tax refund program. However, after nearly 6 years of implementation, the number of enterprises participating inthe business of VAT refundable goods in Ho Chi Minh City are very few and only numbered in dozens.

According to Mr. Nguyen Nam Binh, Deputy Director of Ho Chi Minh City Tax Department, under the provisions of Circular 72/2014 / TT-BTC of the Ministry of Finance, enterprises participating in the pilot sales of VAT refundable goods are enterprises which are selected and certified by the General Department of Taxation. These enterprises are responsible for registering their business address at the right address and take responsibility under the law for registering the pilot sales; displaying a noticeboard for pilot sales of VAT refundable goods in Vietnamese and English, and removing the noticeboard when stopping the sales. Before 2016, Ho Chi Minh City had 62 enterprises recognized for selling VAT refundable goods with a tax refund of over VND 79.7 billion.In 2016, 70 enterprises with a tax refund of VND 44.8 billion, and in the first 11 months of 2017, 80 enterprises with a tax refund of VND 35.5 billion. Thus, each year only about 10 new enterprises.

In order to create a favourable mechanism for selecting enterprises as well as procedures for tax refund dossiers, the General Department of Taxation has applied the process of selecting taxpayers selling VAT refundable goods and the payment process of deposited tax and bank charges in the direction of time reduction and facilitation. Accordingly, if the dossiers of registration for sales of VAT refundable goods have already meet the prescribed conditions, they will be recognized for registering the VAT refundable goods in written notice to the Tax agency within 4 days after being received. However, there are not many registered enterprises.

Because the number of enterprises participating in sales of VAT refundable is few, the number of foreigners buying goods is also few and the tax refund is also low. Lawyer Dr.Bui Quang Tin, a specialist in economics and legal affairs and CEO of BizLight Business School, said that currently businesses involved in selling tax refundable goods could not sell goods, meanwhile enterprises, which could sell goods, were not involved in selling tax refundable goods.

On the other hand, most of the shops in Ho Chi Minh City, which are well known with international buyers for such things as lacquer paintings, handicrafts and Vietnamese traditional long dresses, belong to an individual, individual households and a family. They are not eligible for being recognized as a shop with VAT refundable goods, because these shops do not comply with the policies on accounting, invoices and documents in accordance with the law, and do not declare and pay VAT by the deductive method. In addition, enterprises selling tax refundable goods still make some basic mistakes on criteria in invoices when issueing invoices cum tax refund declarations so that visitors have difficulty with tax refunds, whereby they will hesitate buying tax refundable goods again.

1 out of 1000 people entitled to tax refunds

Le Tuan Binh, Deputy Director of Customs Branch of Tan Son Nhat International Airport stated that currently the Customs Branch is refunding tax to passengers on exit based on goods and bills that the passengers revived from VAT refundable shops. The procedures are quite smooth, because only 15 to 20 out of 20,000 passengers on exit implement the procedures for tax refund.

As analysed by Mr. Binh, although the number of people entitled to tax refunds and refunded tax rose, it did so insignificantly. In 2013, 5,000 people were entitled to tax refund with total refund of over VND 19 billion. But 3 years later, in 2016, this number still remained at 5,000 people with total refund of over VND 29 billion. In the first eleven months of 2017, it rose to 6,700 passengers and total refund of VND 31 billion.

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Although the number of people entitled to tax refunds and tax refund is increasing yearly, but when calculating the rate of passengers on exit, this number is still low, only accounting for 1 out of 1000. This means that only one person out of 1,000 people on exit was refunded VAT. During the VAT refund for foreigners, the Customs Branch at Tan Son Nhat airport realized that enterprises issuing invoices often made mistakes of passport number, nationality and name of passengers. Nevertheless, for each specific case, Customs officers should guide, consider and provide maximum facilitation for passengers for tax refund .