Capital tax is considered a special tool to help the State collect a large source of revenue for the budget to serve development goals and social goals. Taxes are divided into two types, including direct taxes and indirect taxes, based on the relationship between tax authorities and taxpayers. In particular, indirect tax is a tax that is more widely applied because it has tax collectors who are sellers and importers, but the taxpayers are consumers, so it does not create a reaction from consumers. taxpayer. Value-added tax is an indirect tax that plays an important role in economic regulation as well as a large source of budget revenue due to its wide taxable object. Because of that important role of value-added tax as well as its influence, the following article will compare two methods of value-added tax calculation, thereby demonstrating the superiority in calculating value-added tax. increased, and at the same time showed the State’s interest in tax payers and equality in tax collection.
Similarities of tax deduction method and method of direct calculation on added value.
Although they are two different methods of calculating value added tax, there are similarities between the tax deduction method and the method of direct calculation on added value:
The two methods of tax deduction and the method of direct calculation on added value are both methods for calculating value-added tax, calculating tax collected on the added value of goods and services arising in the process of producing goods and services. export, circulation to consumption. Both tax calculation methods have widely taxable objects and taxpayers and are strongly applied to most domestic goods and services production and business establishments.
The two tax calculation methods are based on basic value-added tax bases, including the value-added taxable price and the value-added tax rate of goods and services prescribed by law. The tax deduction method and the method of direct calculation on added value can both be applied to enterprises and cooperatives with an annual turnover of less than 1 billion dong.
The difference between the tax deduction method and the method of direct calculation on added value.
First, in essence:
The tax of the tax credit method is determined based on the difference between the output tax and the input tax based on the data on the value-added tax invoice.
The method of direct calculation on added value is a form and measure to postulate tax, the tax is determined based on the added value which is determined directly through the stages.
Second, about the object of application. The tax credit method is applied to enterprises with annual revenue from selling goods and providing services of VND 1 billion or more. In addition, it also applies to business establishments that voluntarily register to apply the tax deduction method (except for business households and individuals).
The method of direct calculation on added value is applicable to enterprises and cooperatives with annual revenue of less than 1 billion VND; business households and individuals; Foreign organizations and individuals doing business without a permanent establishment in Vietnam but having revenue generated in Vietnam have not fully implemented the accounting, invoice and voucher regime, except for foreign organizations and individuals. in addition to providing goods and services to conduct activities of prospecting, exploration, development and extraction of oil and gas, paying tax by the deduction method paid on behalf of the Vietnamese party; other economic organizations. Applies to businesses dealing in gold, silver, and gems.
Third, about the value-added tax calculation method: For the tax credit method, the value-added tax amount equals the output value-added tax minus the deductible input value-added tax. For the method of calculating directly on added value: The amount of value-added tax payable to gold and jewelry business establishments is equal to the added value times the value-added tax rate applicable to the purchase. selling and processing gold, silver and precious stones. Value-added tax applies to enterprises, cooperatives, business households and individuals, etc., applying the method of calculating directly on added value by the percentage multiplied by revenue.
Fourth, about tax rates and percentages. The tax rate of the tax credit method is clearly specified for each type of business line, each type of goods and services. There are three types of tax rates applicable to goods and services subject to the tax credit method specified in Article 8 of the 2008 Law on Value Added Tax, including:
– Tax rate of 0%: applied to exported goods and services, international transportation and goods and services not subject to value-added tax specified in Article 5 of the Law on Value-Added Tax upon export.
– Tax rate of 5%: applied to goods of basic documentary nature.
– Tax rate of 10%: is the most common tax rate, applicable to most goods and services (except for goods and services that apply the tax rate of 0% and the tax rate of 5%)
In addition, the tax rate of the method of direct calculation on added value applied to the trading and processing of gold, silver and gemstones applying the method of direct calculation on added value is the tax rate. 10% as prescribed in Article 8 of the Law on Value Added Tax. The percentages for calculating value added tax are specified with the following levels:
– Distribution and supply of goods: 1%
– Construction services excluding raw materials: 5%
– Producing, transporting services associated with goods, construction including raw materials: 3%
– Other business activities: 2%
Fifth, about the invoice and voucher regime. The tax deduction method requires the use of value-added invoices; Invoices must be written in full and in accordance with regulations, including surcharges and additional fees (if any). In case the value-added invoice does not indicate the value-added tax, the value-added tax Output is determined by the payment price stated on the invoice multiplied by the value-added tax rate
As for the method of direct calculation on added value, business establishments that pay tax by the method of direct calculation on added value shall use sales invoices.
Sixth, about input value-added tax deduction. Only business establishments that pay value-added tax by the tax credit method can deduct input value-added tax. The input value-added tax deduction is not applicable to production and business establishments that pay tax by the method of direct calculation on added value.
Above is the consulting article on “Different two methods of calculation of value added tax” of Apra Lawfirm. If you still have questions about the above issues and need to be answered, please contact the hotline for advice and support.
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