LATE PAYMENT DISQUALIFIES INPUT VAT DEDUCTION
Several local Tax Departments have issued official documents guiding that input VAT shall not be deductible in cases of late payment beyond the contractual deadline, specifically including:
- Official Letter No. 434/VLO-QLDN2 dated August 21, 2025, from Vinh Long Tax Department
- Official Letter No. 2563/NBI-QLDN2 dated September 19, 2025, from Ninh Binh Tax Department
- Official Letter No. 1744/DAN-QLDN2 dated October 7, 2025, from Da Nang City Tax Department, and
- Official Letter No. 3367/TPHCM-QLDN1 dated October 8, 2025, from Ho Chi Minh City Tax Department
According to these documents, in cases where enterprises purchase goods or services on deferred payment or installment terms with a value of VND 5 million or more (including VAT):
- By the contractual payment due date, if there is no non-cash payment evidence, the enterprise must declare and adjust to reduce the previously deducted input VAT corresponding to the unpaid amount without non-cash payment evidence.
- The reduction adjustment must be made in the tax period in which the payment obligation arises under the contract.
- After the contractual payment deadline, if the enterprise subsequently makes payment via non-cash methods, the corresponding input VAT shall not be deductible again, even if valid payment documents are provided.
However, on October 31, 2025, during a dialogue conference with key private sector enterprises in the area, the Ho Chi Minh City Tax Department clarified: if the contract and its annexes clearly stipulate deferred or installment payment terms, and by the due date there is no payment evidence, the enterprise must exclude the unpaid portion from VAT deduction. Later, once payment evidence is available, the VAT may be deducted. There is no regulation stating a “permanent loss of deduction rights.”
Accordingly, enterprises should carefully consider and determine the appropriate application method based on the guidance of their direct tax authority, the terms of the contract, and potential tax risks, to ensure compliance while safeguarding their right to input VAT deduction.
