Claiming tax refunds a hassle for Vietnamese businesses

Businesses in Vietnam are disadvantaged when it comes to both paying taxes and getting refunds.

While businesses are fined for settling their taxes even one day late, tax authorities seem to enjoy impunity by delaying tax refunds to the same firms for long periods of time.

In Vietnam, businesses that have greater input value added tax (VAT) than output tax for 12 consecutive months can file a request to claim a tax refund.

Input tax is the VAT a firm is charged when buying goods or services from another supplier. Output tax is the VAT at the same rate that same company charges its customers when selling its own goods or services.

Businesses calculate their VAT balance every 12 months to see if they are eligible for a refund.

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Business owners complete VAT refunding procedures at a tax agency in Ho Chi Minh City.

However, while tax authorities immediately receive tax payments from businesses, they tend not to reciprocate in paying VAT refunds to eligible companies.

Do Phuoc Tong, chairman of the Ho Chi Minh City Mechanics Association, said late refunds of VAT cause cash-flow problems for businesses.

Dinh Cong Khuong, chairman of Khuong Mai Co., a steelmaker, said the company had been trying to claim a VND7 billion (US$312,500) VAT refund since 2011, but has yet to receive a single penny.

“We have paid a total of VND250 billion (US$11.16 million) in VAT over the last five years, but the tax authorities have never let us claim our refund,” Khuong said.

The company even had to borrow money to maintain production, but may soon have to close, the chairman added.

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Business owners declare tax at a tax agency in Ho Chi Minh City. 

A meeting between businesses in Ho Chi Minh City with Dinh La Thang, secretary of the municipal Party Committee, on March 8 was overshadowed by complaints about VAT refunds.

Thang eventually requested that the city’s tax department look into the grievances and determine who should be held accountable for the late refunding.

“If the taxman is responsible for the issue, tax officers must receive strict sanctions,” the Party chief pressed.

Deputy Minister of Finance Do Hoang Anh Tuan said the General Department of Taxation is to blame.

Tuan refuted reports that the state budget has no money to refund VAT, saying the General Department of Taxation “has been given strict directions to use the money.”

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Deputy Minister of Finance Do Hoang Tuan Anh

“In the first quarter, the general department has set aside VND92 billion (US$4.11 million) for VAT refunding to businesses in Ho Chi Minh City, while the fund in the north-central province of Ha Tinh is VND1.09 trillion ($48.9 million),” Tuan told Tuoi Tre (Youth) newspaper on March 13.

The tax department in Ho Chi Minh City is forecast to refund VND900 billion (US$40.18 million) for VAT, but the allotment is only VND92 billion, according to the deputy minister.

“The General Department of Taxation must transfer the money allocated for other provinces to make up for the shortage in Ho Chi Minh City,” Tuan said.

Tuan added local level tax agencies should be the first to be held accountable for late VAT refunds, but the General Department of Taxation holds the biggest responsibility for failing to properly manage the tax fund.

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