Whilst Vietnam has allowed the issue of electronic invoices since 2011, this has not proved popular with domestic businesses. This is mainly due to the lack of an efficient framework for commercial processes and the technical capabilities required to issue e-invoices compliantly.
During the last decade, the Vietnamese government has developed a more robust legal framework for the issue of e-invoices, making adoption of an automized system for invoicing purposes more attractive for domestic companies. As the government takes steps to reduce its VAT gap and to make invoicing more transparent, it has approved legislation to mandate e-invoicing nationwide.
From 1 November 2020, companies operating in Vietnam must issue e-invoices following not only the rules established by the law but also in compliance with the technical parameters required by the General Department of Taxation (GDT).
Most companies established and operating in Vietnam are affected and will need to comply. The legislation includes organizations, enterprises, households and individuals that sell goods and provide services; public non-business units; limited liability companies; partnerships; private enterprises; tax administration agencies at all levels and organizations and individuals involved in the management, registration and use of invoices, among others.
The process of issuing e-invoices will depend on the type of e-invoice the businesses are obliged to use for their operations. The legislation permits two types of e-invoices, with or without a so-called verification code that can only be obtained by sending invoice data to the GTD prior to sending the invoice to the buyer.
1. E-invoices without a verification code
This type of e-invoice must be issued by taxpayers operating in certain defined sectors e.g. telecommunications, petroleum, electricity, transportation, credit financing, insurance, e-commerce, trading, and supermarket sectors. These companies operating in Vietnam must be registered to use this type of e-invoice.
2. E-invoices with a verification code
These apply to other defined sectors e.g. forestry, agriculture, and fishery. For construction companies, the number of employees and the annual turnover are factors that must be considered to assess whether this type of e-invoice must be used.
This e-invoice requires a unique code issued by the tax authority before an organization or individual selling goods or providing services can send it to the buyer. Therefore, the invoice data must be sent to the GDT to obtain the code to be included in the valid e-invoice, i.e. a form of clearance system.
It’s important to highlight that currently, Vietnamese taxpayers are under a transition period until 1 November 2020, to develop and deploy a compliant invoicing solution or use a third-party service provider. However, the GDT may require companies established in Vietnam between November 2018 and October 2020 to start issuing e-invoices immediately. This is a prerogative of the tax authority that new enterprises in Vietnam must consider.
This legislation furthers Vietnam’s plans to reduce fraud and close its VAT gap and modernize its tax regulation by replacing traditional paper with electronic invoices. It places the country ahead of others in the region in digitizing tax controls but others, including Thailand and China, will be close behind.