VAT refund during construction stage only applicable to new investment projects

1. We are a manufacturing company located in Hai Duong province. At times, we organize short-term occupational training courses for other companies within the group under a training service agreement. Could the income we earn from such training services be VAT exempt or not?

According to the current VAT regulations, in case taxpayers carry out vocational training activities without registration in such fields and do not set up a vocational education institution in accordance with the Law on Vocational Education, the occupational training service is not qualified to enjoy VAT exemption.

2. We are a foreign invested company with a printer production project in Hai Phong. In 2022, we expanded the above investment project by increasing investment capital and production capacity (i.e. expansion investment project or EIP). Such EIP is still under construction and is expected to come into commercial production from August 2023. Could we claim a VAT refund for the input VAT incurred during the construction stage of the EIP?

Following the provision of Decree 49/2022/ND-CP amending Decree 209/2013/ND-CP and Decree 100/2016/ND-CP, a VAT refund during the construction stage is only applicable to new investment projects. Therefore, your company’s EIP is not eligible for a VAT refund during the construction stage. Such input VAT can be credited against output VAT payable of the current project or of the EIP at a later stage.

3. We are an export and processing enterprise (EPE) specializing in production of automotive components. In January 2023, we outsourced a part of our production to a domestic non-EPE under a processing agreement. Subsequently, we would lend some of our equipment to the non-EPE following the terms and conditions of the processing agreement. Are there any customs/tax obligations triggered for us and the non-EPE entity?

In accordance with recent guidance from the General Department of Customs, the customs and tax obligations of the EPE who lends and non-EPE who borrows the equipment shall be as follows:

- If the lending is to serve the export processing purpose of the EPE: the EPE will declare temporary export, while the non-EPE will counter-declare for temporary import procedures and be liable to import duty but not import VAT.

However, in case the equipment lending is to support the processing agreement between the two entities, the non-EPE can enjoy import duty exemption. Upon the expiry of the equipment lending, if the non-EPE does not return the equipment, the non-EPE will have to declare for the change of equipment usage purpose and pay VAT plus import duty.

- If the equipment lending is to serve business purposes other than export processing, the EPE must declare for the change of equipment usage purpose and pay taxes in compensation for those exempted before.