Letters of Credit (L/C) is subject to Value Added Tax (“VAT”)

Dịch vụ thư tín dụng (L/C) chịu thuế Giá Trị Gia Tăng (“GTGT”)

KPMG Vietnam

1st July 2020

On 22 April 2020, the General Department of Taxation (“GDT”) issued Official Letter No. 1606/TCT-DNL to provincial tax departments confirming that the letter of credit service is subject to VAT according to the Law on VAT and the Law on Credit Institution.
Ngày 22/04/2020, Tổng Cục thuế (TCT) đã ban hành Công văn số 1606/TCT-DNL gửi Cục thuế các tỉnh, thành phố trực thuộc trung ương, theo đó xác nhận dịch vụ thư tín dụng (L/C) thuộc đối tượng chịu thuế GTGT theo quy định của Luật thuế GTGT và Luật các Tổ chức tín dụng.

Letters of Credit (L/C) is subject to Value Added Tax (“VAT”) The provision of credit (i.e. lending) in Vietnam is VAT exempt (without input credit) for under current VAT regulations. However, the treatment of letters of credit for VAT purpose has been an area of ongoing uncertainty. A letter of credit is a document that guarantees the buyer’s payment to a seller. The question therefore is whether the issue of a letter of credit by a credit institution is in the nature of lending (and exempt from VAT) or the provision of a payment service (and subject to VAT). On 22 April 2020, the General Department of Taxation (“GDT”) issued Official Letter No. 1606/TCT-DNL to provincial tax departments confirming that the letter of credit service is subject to VAT according to the Law on VAT and the Law on Credit Institution.

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