The Vietnam Banks Association (VNBA) has sent a document to the Ministry of Finance, the State Bank and a number of functional agencies, reporting and proposing to remove obstacles in value-added tax (VAT) for letter of credit (L/C) services.
The Association said that, regarding the regulations on VAT payment for L/C services, based on the provisions of the Law on VAT and documents guiding the Law on VAT, credit granting services are not subject to VAT. Accordingly, from 2011 to present, credit institutions (CIs) do not collect VAT on fees related to bank payment guarantee commitments; only collect VAT on fees related to L/C payment services.
However, in 2019, the State Audit Office commented that: based on Clause 15, Article 4 of the Law on Credit Institutions 2010, which defines the provision of payment services through accounts including L/C, the failure of credit institutions to declare and pay VAT on L/C services is not in accordance with the provisions of the Law on VAT.
The General Department of Taxation then issued an official dispatch requesting local tax departments to review tax declarations of credit institutions in the area.
However, the Banking Association believes that the fact that from 2011 to now, credit institutions have not paid VAT on L/C fees of a credit nature is not the fault of the credit institutions, the credit institutions have not intentionally violated or intentionally evaded tax obligations.
Because the nature of L/C services does not change before and after January 1, 2011 (the effective date of the Law on Credit Institutions 2010). After the Law on Credit Institutions took effect, the Ministry of Finance did not amend the official dispatch guiding the payment of VAT; the General Department of Taxation still maintained the VAT policy guidance for L/C fees.
According to VNBA, the nature of VAT is an indirect tax. In case of additional tax payment arising from 2011, the credit institution must contact and collect it from the customer. The customer will not agree because the bank's fee schedule has listed the L/C fee items related to credit granting that are not subject to VAT. Furthermore, many customers have completed the preparation of annual financial statements and audits.
In addition, from 2011 to present, many customers no longer have a transaction relationship with the credit institution or have dissolved/go bankrupt/no longer exist, so the credit institution cannot collect additional taxes from customers, so it must record and track receivables in accounting books and financial statements.
In case of not collecting additional tax from customers, can VAT payment expenses be deducted when calculating corporate income tax for each year, or included in retained earnings? This affects the restatement of the audited financial statements in the previous fiscal year of the credit institution as well as negatively impacts the business results, safety indicators, stock prices, dividends distributed to shareholders... of the years, tax declarations and the distribution of profits that have been finalized, especially banks with more than 50% state capital are not allowed to account for non-deductible expenses when calculating corporate income tax according to the provisions of Circular 16/2018/TT-BTC.
Regarding invoice adjustment and additional declaration of tax declaration dossiers, when collecting VAT (if any) to pay to the State Budget, credit institutions and enterprises will encounter difficulties in issuing VAT adjustment invoices, adjusting declared data, paying taxes, deducting taxes, etc.;
On the part of credit institutions, the system of many branches and transaction offices spread across the country has undergone many changes, separations, and mergers since 2011, with a large number of transactions occurring over a long period of time and involving many currencies. Therefore, it will take a lot of time, effort, and resources to review, make statements, separate, calculate, and synthesize data with a huge data source from 2011 to the present.
The principle of VAT is that when credit institutions declare and pay output VAT, corporate customers (mainly import enterprises) will be declared, deducted/refunded corresponding input VAT. Accordingly, the collection leads to a series of procedures and costs for the whole society to adjust invoices, data on declaration, tax payment, deduction/refund, increasing the operations of all enterprises, credit institutions and tax authorities.
After the issuance of Document No. 324/TB-VPCP, tax authorities in some localities have requested credit institutions to pay VAT, although there has not been a specific guidance document from the General Department of Taxation - Ministry of Finance. This has caused confusion and anxiety for credit institutions' branches about the implementation of state policies. In addition, to prevent risks, some credit institutions have proactively complied with and issued a fee schedule for collecting VAT from customers. However, the current tax collection has many shortcomings because some groups of goods are not subject to VAT when sold, so when banks collect more, customers' costs increase significantly. In addition, VAT collection is not uniform among banks or some banks collect and some banks do not, leading to a lack of consistency in the entire system. Some customers reacted strongly and requested an official document from the state agency...
Regarding late tax payment and administrative fines for tax violations, for the arising penalty costs including late payment fines and administrative fines: Due to the collection of VAT arising from 2011 to present, the late payment penalty costs arising are very large (possibly double the amount of VAT payable), and at the same time, as presented above, this is not the fault of the credit institutions, the credit institutions do not evade tax obligations for L/C. In addition, the credit institutions have difficulties in accounting for tax payment sources for late payment fines and administrative fines (if any).
In addition, collecting and fining commercial banks for late payment of large amounts of money, which are not caused by the banks' fault, will be unfair to banks, especially those that have always complied with and complied with legal regulations; at the same time, if this policy is forced to be implemented, it will seriously affect the reputation and image of our country's banking system, and at the same time cause a loss of confidence in the State's policies and guidelines as well as the investment environment in Vietnam.
Based on the above-mentioned difficulties and shortcomings and the recommendations of credit institutions, the Vietnam Banking Association proposes that the Ministry of Finance recommend that the Government allow credit institutions to implement after 3 months from the date of specific instructions from the Ministry of Finance because credit institutions need time to review specifically and in detail.
Accounting for the VAT amount for L/C activities collected from 2011 to present into deductible expenses when calculating corporate income tax because this tax is the Customer's obligation that the credit institution has no basis/cannot recover from the Customer.
No need to issue adjustment/replacement invoices for invoices with incorrect VAT rates
Allows credit institutions to declare and pay VAT centrally at the Head Office, without having to declare and pay tax to the local Tax Department. In case it is necessary to regulate to the local Tax Department, the General Department of Taxation will regulate to the local Tax Department.
No penalties for late payment of VAT or administrative violations are imposed because this is not the fault of the credit institutions.
Direct local tax departments not to require credit institutions to make adjusted declarations and pay additional taxes until there are specific instructions from the Ministry of Finance and the General Department of Taxation for uniform implementation nationwide.
TM
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