Optimize costs, comply with tax law are the two top priorities of any business. One of the important tool to help businesses achieve that is value added tax (VAT) is deductible – a concept not new, but always caused a lot of confusion if not understood.
The calculation is correct, full input VAT is deducted not only help businesses reduce the amount of tax payable, but also contribute to protecting the financial benefits, avoid legal risks. However, many businesses, especially small and medium enterprises, are still struggling with the question: "How do you know which tax is deducted, deductible, such as how?"
The article below will play the role as a handbook of practices, help businesses understand from concept to how to calculate VAT deductible in detail, together with the rules updates, for example, illustrated easy to understand.
1. Why business need a clear understanding of how tax VAT is deducted?
With respect to the business, apply the method of deduction of tax, the VAT is a tax neutral – meaning that businesses do not have to bear the actual cost if done the right process. Instead, the business acts as the collecting and paying VAT to The state. However, to achieve the neutrality of this, businesses have to ensure the right – and complete – the validity tax deductible input.
If you do not understand how to calculate VAT deductible business may encounter severe problems such as:
- Excluded deduct input tax due to lack of eligibility (invoices, payments etc.).
- Is arrears, penalties for violation of tax administration as defined in the Law on tax Administration 38/2019/QH14.
- Large financial losses by not taking advantage of the right to deduct legitimate.
- Difficulties in tax audit, internal audit.
Especially in the period conversion of integrated electronic invoice comprehensive, controlling the VAT becomes more and more important, requires the business to have standardized processes in accounting, applied management software, tax specialist to support the accuracy, transparency, reduce risk.
Read more:
- Methods declare the correct VAT law helps avoid major flaws
- Updated tax regulations, VAT latest for business
- How to calculate VAT on imported goods according to the standard recipe
2. VAT is deducted what is? The conditions for deduction of input VAT
Definition according to the law
According to Article 14 circular 219/2013/TT-BTC guiding the implementation of the Law on VAT, input VAT is deductible is the amount of VAT invoiced value increase when businesses buy goods and services used for production, trading of goods and services subject to VAT.
In other words, if business bought goods and services, meet qualified, then the input VAT will be deducted from the output VAT when declare, help to reduce the actual tax payable.
For example: If the business has 500 million coins output VAT, 300 million VAT input valid, businesses only have to pay 200 million VAT.
The economic nature of VAT deductible
VAT is design to final consumers is subject to tax really. Business just is intermediate in the declaration, the collection and payment of tax. Therefore, the deductible input VAT is the mechanism ensure that the business is not taxed twice, at the same time ensure continuity in the supply chain.
Distinguish withholding tax – tax refund – tax filing
| Concept | Main characteristics | When to apply |
| Tax deduction | Except for direct input tax from output tax | Each VAT filing monthly/quarterly |
| Tax refund | The state returned the VAT also be deducted | When the number of input VAT on larger output |
| Taxpayer | Submit the tax after deduction deduction of input | When the output tax > input |
The conditions to apply is how to calculate VAT deductible input
To be deductible input VAT, business required to fully meet the conditions specified in Article 15 circular 219/2013/TT-BTC, specific as follows:
Invoice value valid
- VAT invoices must be issued by the seller are organizations and individuals to pay VAT according to the method of deduction to offer.
- Electronic invoices need to have full information: tax code, value of goods/service tax, VAT, the total amount of the tax.
- Invoice must be set the right time, don't fix erasing.
Actual note: Many businesses being kind costs due to the use of bills of the unit fled the business address or inactive. Therefore, need to carefully check the seller on the portal of electronic bills of the General department of Taxation.
Proof of payment non-cash (in case of ≥ 20 million)
- With the bills ≥ 20 million (tax included), a business must make payment via bank transfer.
- Vouchers include: the debit Authorization or bank statement has to confirm the payment.
Business NON-deductible input VAT if:
- Payment by cash.
- Transfer not proven homemade payment (for example: not specified content transfer according to the bill).
Goods and service for business operations, there arose output tax
- VAT is deducted only if the goods and services purchased to serve for production activities, trading of goods and services subject to VAT output.
- If used for non-taxable or tax-free → to allocate or not to be deducted.
Practical example:
- Buy stationery catering department administrative → be deducted if the DN activity has output VAT.
- Buying property for lease does not arise VAT output → 't be deducted.
3. How to calculate VAT deductible: detailed recipe
Step 1. Formula for calculating the VAT payable
VAT payable = output VAT – input VAT deductible
Step 2. Determine the output VAT
- Based on bill of sale of business.
- Calculated according to the formula: output VAT = Price tax x Tax rate VAT (0%, 5%, 10%)
- The tax price is the price excluding VAT.
For example: Business A sells products with price is not tax 100,000,000, VAT 10%: output VAT = 100.000.000 x 10% = 10,000,000
Step 3. Determine the input VAT deductible
- Synthetic bills, buy goods and service valid in the states.
- Exclude the account are not eligible deduction (stated in part III).
For example: Businesses have the invoice buy:
- Bill A: VAT 3,000,000
- Bill B: VAT 2,000,000
- Bill C: not qualified (cash payment) → exclude
→ Total input VAT is deductible = 3.000.000 + 2.000.000 = 5,000,000
Step 4. Apply the formula how to calculate VAT deductible payable
10.000.000 (output tax) – 5.000.000 (tax deductible input) = 5,000,000
Step 5. The special case to note when performing the calculation of VAT deductible
- Goods and services used for many purposes: If just used for the operation taxable, non-taxable → must allocate the input tax according to the rate of turnover.
- Items donated, promotion: Still have to declare VAT output (at market prices), but non-deductible input if no response conditions.
- Imported goods: No immediate deduction that declare and pay VAT at customs → then be put into deducted a. next, if eligible.
Understanding, using the exact conditions and formula for calculating VAT deductible will help the business avoid big risks, cost savings, tax ensures compliance with the law. The next section will go deeper into how to define input tax – output, the case is not deductible, the process accounting for VAT, the mistakes businesses need to avoid.
4. Guide how to determine the output VAT - input
To properly perform the calculation of VAT is deductible, a business must determine the correct tax, input and output in each of the states report. Here's how to do specific:
Step 1. How to determine the output VAT
- Output vat arises when businesses sell goods and provide services taxable.
- Apply the formula: output VAT = Price before tax x Tax rate VAT
- Tax rate downloads: 0%, 5%, 10% depending on industry.
- Business invoice must indicate the selling price, tax rate, respectively.
For example:
- Sales price without tax: 200 million
- Tax rate: 10% → output Tax = 200.000.000 x 10% = 20,000,000
Step 2. How to determine the input VAT
- Is the amount of tax indicated on the invoice input when businesses buy goods and services used for BUSINESS has output VAT.
- To check the validity of the invoice and proof of payment.
Note:
- The costs such as cost of living, promotion gifts... must carefully consider the intended use.
- The bill invalid, non-payment through bank will not be deducted.
Step 3. Allocation of input VAT in the mixed operations
- When business medium business taxable goods, just not taxable → must allocate input tax.
- Allocated according to the proportion of taxable revenues on total revenue.
Formula allocation: VAT deductible = Total input VAT x (taxable revenue / Total revenue)
5. The case is not made by the tax VAT is deducted input
Whether bills, vouchers, not tax input would also be deducted. Businesses need to take note of the cases excluded below:
Goods not serve BUSINESS customers subject to VAT
- Purchases of service for activities not taxable → 't be deducted.
- For example: goods used for the project tax-exempt, educational activities for tax...
No proof of payment by bank
- With bill ≥ 20 million that cash payment → excluded from the deductible.
- Payment to the right audience, the right account, there are clear content.
Bills not valid
- Bill is the wrong information, erasing, the seller does not operate... will be removed.
- A number of units purchase invoice “virtual” will be tax arrears, severe sanctions.
Some cost peculiarities is the deductible limit
- Cars passenger ≤ 9 place: only deduct the VAT, if used for the transport business, travel, for rent.
- Cost of living, promotion: have to prove is served BUSINESS tax output.
Note new updates: According to dispatch 5116/TCT-CS dated 14/12/2023 of the General department of Taxation, the deduction of input VAT as is tightened to required business need to use the system for electronic invoicing standard, periodic testing, transparent vouchers.
6. Test procedures, accounting and tax VAT is deducted in business
To ensure the calculation of VAT is deducted true enough, timely, enterprises need to build a process control input tax clear:
Step 1. Reviewing stored valid invoice
- Use software electronic invoice can lookup function auto bill.
- Check the tax code the seller, content, goods, conditions of payment.
Step 2. Properly accounted accounts accounting
- Input VAT is credited to your account:
- TK 1331: VAT deductible of goods and services.
- TK 1332: VAT deductible of fixed assets.
- End collate TK 133 with TK 3331 (VAT payable) to set up the declaration.
Step 3. Application accounting software support how to calculate VAT deductible
- Integrated accounting software (for example: AccNet Cloud, MISA...) to automatically check, allocate, update invoice input.
- Minimize the risks of errors crafts, help accounting declare exactly the states.
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7. Errors frequently encountered and precautions when VAT deduction
Errors common when performing the calculation of VAT is deducted:
- Do not check the seller → invoice is not valid.
- Payment by cash > 20 million.
- No declaration of right states → overlooked deductions.
- Declaration wrong purpose use invoice input.
Precautions:
- The set up process internal audit: accounting – purchase – treasurer – bank.
- Applied management software invoicing – accounting related information.
- Training periodically for accounting personnel, especially about the new rules.
8. Information latest updates on policy tax VAT is deducted (2024-2025)
- Decree 44/2023/ND-CP: strengthen control over invoice, payment via bank.
- Policies for reducing taxes, temporary for some of the affected areas after translation COVID.
- Enhance application eTax Mobile, iTaxViewer, e-Invoice lookup helps business to check the condition deductible.
Trends 2025:
- All business must declare electronic collation electronic invoice to be deducted.
- The business application solution electronic accounting – eTax sync – integrated e-Invoice will have the advantage pronounced in handling VAT.
Understand and use properly how to calculate VAT deductible is a survival skill in the operation of financial business. To avoid loss of rights, violation of regulations, business needs:
- Standardized process control, invoicing, billing and accounting.
- Equipped with accounting software has the function of automatic goods-deductible VAT.
- Continuous update policy, internal training.
Experience accounting software AccNet Cloud – Solution accounting integration electronic invoicing, support, tax-deductible VAT exact – to help businesses comply with the law, financial optimization.
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