No VAT refund is available for the input VAT accumulated prior to 1 July 2016, yet has not been declared as a VAT refund item in the VAT declaration for June 2016 or Quarter II 2016.
Under the provision of Law No. 106/2016/QH13 and its subordinating guidance, with the exception of input VAT on exported goods and service, investment projects and in other cases, a business unit declaring tax according to the VAT credit method is not entitled to a VAT refund. Previously, a VAT refund was available for the input VAT not fully credited and accumulated for 12 months or 4 quarters.
A practical question is whether a VAT refund should be available if a company incurs accumulated input VAT that has not been fully credited as at 1 July 2016, yet has not been declared as a VAT refund item in the VAT declaration for June 2016 or quarter II 2016 VAT declaration.
According to the guidance of Official Letter No. 373/TCT-KK dated 6 February 2017, if a company has not declared the accumulated input VAT as a VAT refund item in the June 2016 VAT return (when subject to the monthly declaration method), or the quarter II 2016 VAT return (when subject to the quarterly declaration method), and the company has carried forward creditable input VAT into the July 2016 VAT return or the quarter III 2016 VAT return, such a company is not eligible to claim a VAT refund. The input VAT is allowed to be credited against the VAT payable in subsequent periods.
This strict regulation may lead to a negative impact on the cash flow of companies that have accumulated high amounts of input VAT in the period prior to July 2016.
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