VAT Refund to Foreigners: Below Expectation

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After more than one year piloting the VAT refund to exiting foreigners at Noi Bai International Airport in Hanoi and Tan Son Nhat International Airport in Ho Chi Minh City, starting from July 1, 2012, more than 3.7 international visitors have been refunded VAT value of approximately VND13 billion. However, the result still falls short of expectations and targets.

Hard beginning

The pilot implementation of tax refund to foreign visitors in Vietnam is based on the Decision No. 05/2012/QD-TTg dated January 19, 2012 of the Prime Minister with the expectation of bringing greater benefits to the nation: More domestic goods will be consumed; more foreign tourists will go to Vietnam, and more inward remittances will be sent from foreign countries to help balance trade payments. The pilot duration is two years. If the policy is good enough, the pilot period will be shortened and the policy will be applied to airports, seaports and inland ports across the country.

The Export Import Tax Bureau under the General Department of Customs said the purpose of pilot policy is basically on the right track. VAT refund matches international common practices and real conditions of Vietnam.

However, the number of visitors having VAT refunded is small and the refund value is humble because the quality of Vietnamese goods is not attractive enough for tourists to buy. VAT refund is not broadly informed foreigners. Not many companies are allowed to sell duty-free goods.

According to the General Department of Customs, VAT refunded to foreigners at Ho Chi Minh City-based Tan Son Nhat International Airport was more than VND10 billion while the value at Noi Bai International Airport of Hanoi was over VND2 billion. The value at Tan Son Nhat International Airport was greater because more international visitors pass it than the counterpart in Hanoi.

Rapid modernisation of procedures

The Export and Import Tax Bureau said there is a need for closer coordination of sellers, tax authorities, payment banks and customs agencies in verification, calculation and payment of refunded tax to foreign visitors in a quicker manner.

-According to the Prime Minister’s Decision 05/2012/QD-TTg, foreigners and overseas Vietnamese are subjected to have VAT refunded.

-VAT-refunded goods must meet the following conditions: Subject to VAT, not banned from export or export restriction, have bills and tax refund declaration document, and have value of goods purchased in one shop in one day from VND2 million onwards. Reimbursement value equals to 85 percent of VAT payable.

-At present, four banks are chosen to refund VAT: BIDV and Vietinbank at Tan Son Nhat International Airport and Vietcombank and Maritime at Noi Bai International Airport.

Basically, the Prime Minister’s Decision and the Ministry of Finance’s Circular 58/2012/TT-BTC provide full legal foundation and procedures for implementation. However, the refund is now being handled manually rather than electronically. We lack a suitable software programme to interconnect sellers, customs offices and tax authorities. This is a big drawback that needed immediate remedy.

To continue this work more effectively, in early August 2013, the General Department of Customs ordered the Hanoi Customs Department and the Ho Chi Minh City Customs Department to strengthen cooperation with commercial banks and Vietnam Airport Corporation (specifically, Noi Bai International Airport and Tan Son Nhat International Airport) to install more signs and boards to highlight duty-free shopping zones at the airports.

The customs departments of Hanoi and Ho Chi Minh City continue supporting foreigners and commercial banks to deal with problems arising at the airports in the process of refunding VAT to foreigners.

Hai Ly

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