On January 27th, 2021, Hanoi Tax Department issued Official Letter No. 3446/CTHN-TTHT providing guidance on allocating the input VAT when engaging in both VAT taxable and non-taxable activities, whereby:
In case that the Company engages in production and business activities for both VAT taxable goods and services and VAT non-taxable goods and services, the Company will only get input VAT deductible for goods and services which are used for VAT taxable production and business activities if it meets the conditions for getting deductible as regulated by the law. The Company must separate the deductible input VAT from the non-deductible one. if the Company fails to do so, input VAT shall be deducted according to the ratio (%) of revenue subject to VAT, revenue not subject to VAT declaration, and payment to the total revenue from selling goods and services, including revenue not subject to VAT that cannot be separated.
For the Company engages in production and business activities for both monthly/quarterly VAT taxable goods and services and monthly/quarterly VAT non-taxable goods and services, it shall temporarily allocate the taxable VAT of goods, services, fixed assets to monthly/quarterly deductible sections, at the end of the year, the business unit shall carry out on allocating the annual input deductible VAT to make the declaration for adjusting the input VAT which was temporarily allocated to monthly/quarterly deductible sections.
If the input VAT is not deductible, the Company shall account for it as the expense for calculating CIT or include it in fixed assets price.
