New tax refund guidance aims to ease long-standing bottlenecks for businesses

The Tax Department under the Ministry of Finance released Official Letter No. 6939 to guide municipal and provincial tax authorities on handling Value-Added Tax (VAT) refunds for businesses. The guidance aims to resolve long-standing bottlenecks in VAT procedures.

A key point emphasized by the Tax Department is that a risk warning alone does not mean a business is ineligible for a refund. The warning is meant for risk management and verification purposes only, and should not be used to conclude that a transaction is fake, an invoice is unlawful, or a business fails the refund requirements.

Businesses have proposed that eligible portions of refund applications should be processed first, while potentially risky portions should be verified separately. However, if an F1, F2, F3 or other supplier in the supply chain is flagged for invoice risks, the tax refund process may be delayed or related invoices may be excluded.

Under the new guidance, flagging such a supplier's information merely serves as a basis for tax authorities to assess risks and conduct necessary verification. It does not automatically result in a business being ineligible for a refund.

Tax authorities will evaluate refund applications based on invoices, supporting documents, transaction legality, and authenticity, as well as whether businesses meet the refund requirements for the relevant period. Refunds will only be recovered if inspection or verification shows the business did not meet the requirements or violated regulations.

Businesses are advised to make truthful and complete declarations, retain records proving transaction legality, and coordinate with tax authorities upon receiving notices. They should provide required explanations and supplementary documents.

While many businesses welcome the guidance, they are still awaiting its practical implementation. HAWA, a business association, notes that delays often arise when a risk warning arises at one link in the supply chain. Under the new guidance, this should not lead to an entire refund application being transferred to pre-refund inspection, rejected, or requiring VAT recovery.

Deputy Head of the Ho Chi Minh City Tax Department, Nguyen Tien Dung, confirmed that tax authorities have promptly disseminated the guidance to ensure consistent implementation, which should help improve VAT refund processing efficiency for businesses.