Answer

 Question: Our company has been investing in a project of construction of apartments building since 2006. The construction will be completed in 2010 but we began to sell the apartments in 2007. Based on the agreement between our company and the buyers, the buyers would paid us into 5 installments, in which 02 installments would paid before January 01, 2009 and 03 installments would be paid after that. We have not issued VAT invoice, declared and paid output VAT on the money we receive from the buyers. Our understanding is under the new regulations on VAT, as from January 01, 2009, for each installment that we receive from the buyer, the VAT shall be determined and declared in the tax calculation period that we receive that payment. How would the VAT on the installments that we received before January 01, 2009 be declared?

Answer:

Under the old regulations of the Law on Value Added Tax (VAT) 1997 (as amended) and its guiding implementation documents, the output VAT would be determined at the time when the business transferred the ownership of the products or the using rights of the products to the buyers regardless of receipt of money or not.

The the Law on VAT 1997 has been replaced by the Law on VAT 2008.

According to Section B.I.2 of the Circular No. 129/2008/TT-BTC of the Ministry of Finance dated December 26, 2008, guiding the implementation of the Government’s Decree no. 123/2008/ND-CP dated December 8, 2008 and detailing the implementation of the Law on Value Added Tax 2008, with regard to the activities of real estate business, infrastructure construction, apartment construction for sale, transfer or lease, the time for determining VAT is the time of receiving money in consistence with the progress of project implementation or the installments as agreed in the contract. Based on the money received, the business declares the output VAT arising in the period.

Recently, the Ministry of Finance issued the Official Letter No. 6992/BTC-TCT dated May 18, 2009 on VAT. According to the said Official Letter, your company shall have to issued the VAT invoice, declare and pay the VAT on the total money received from the buyers, including the installments received before January 01, 2009 and the installments to be received in 2009. Your company shall have to declare the VAT on the payment made into installments from the buyers before January 01, 2009 no later than the tax calculation period of August, 2009.