VAT Refunds for FDI Companies

Cases eligible for VAT refunds

Article 15 of VAT Law No. 48/2024/QH15 (effective from 01/7/2025) provides the cases in which business establishments are entitled to VAT refunds. For FDI enterprises, the following four cases are the most practical:

1. Exported goods and services. This is the most common case for export-manufacturing FDI enterprises. Business establishments with exported goods and services, if having uncredited input VAT of VND 300 million or more after 12 months or 4 quarters (depending on the declaration period), are entitled to VAT refunds. The logic: exported goods are subject to a 0% rate, so businesses have no output tax to credit against, and accumulated input tax is refunded so it does not become sunk capital cost.

2. New investment projects during the investment phase. FDI enterprises implementing new investment projects, not yet in operation, incurring input VAT on purchased goods and services for investment (factory construction, machinery purchase) are entitled to refunds as prescribed. Note: the project must have an investment registration certificate, capital contributed on schedule, and actual implementation — “suspended” projects lacking implementation capacity are not eligible.

3. Establishments only producing goods/services subject to a 5% rate. This is a newly added case in Law 48/2024/QH15: business establishments only producing goods or supplying services subject to a 5% VAT rate, if having uncredited input VAT of VND 300 million or more after 12 months or 4 quarters, are entitled to VAT refunds. Where goods and services are produced or traded at multiple rates, refunds follow proportional allocation. This provision addresses the situation where input is taxed at high rates while output is taxed at only 5%, causing prolonged input tax accumulation.

4. Expansion investment projects. The new law also extends refunds to expansion investment projects where uncredited input VAT reaches VND 300 million or more.

Conversely, the law excludes certain cases from VAT refunds: VAT refunds do not apply to cases of ownership conversion, enterprise conversion, merger, consolidation, division, or split-up. FDI enterprises undergoing restructuring should note this point when calculating tax cash flow.

Refund conditions under the new law

In addition to falling into one of the above cases, businesses must meet the general conditions for input VAT credit: having lawful VAT invoices for purchased goods and services; having non-cash payment documentation for purchased goods and services (except special cases as prescribed); purchased goods and services serving production and business activities subject to VAT.

Law 48/2024/QH15 adds an important condition that many FDI enterprises trip over in practice: the seller must have declared and paid tax on the output VAT on invoices issued to the refund-claiming business. In other words, if a domestic supplier issues invoices to the business but fails to declare or pay that tax into the budget, the purchasing business risks having the corresponding input tax disallowed upon refund review — even though the business itself is not at fault. This is why selecting and vetting suppliers is no longer merely a commercial matter, but directly affects refund rights.

For exported goods, the dossier must also fully evidence: export contracts, commercial invoices, transport documents, cleared customs declarations, and bank payment documentation. Missing any link in this documentary chain means the corresponding tax may be excluded from the refundable amount.

Refund request dossiers and procedures

Businesses prepare and submit VAT refund request dossiers to their directly managing tax authorities, including the declaration form and documents evidencing eligibility for a refund. The tax authorities receive, classify, and process the dossier within statutory time limits — actual processing time depends heavily on whether the dossier falls into “refund first, examine later” or “examine first, refund later” (see the next section).

For preparation, FDI enterprises should maintain a “refund-ready” dossier from the start, rather than collecting documents only when the refund period arrives:

• Detailed input VAT ledger reconciled with periodic declarations;
• All input invoices organized by supplier, with bank payment documentation;
• For investment projects: investment registration certificate, capital contribution progress reports, construction and asset procurement contracts;
• For exports: complete export documentary sets per shipment as noted in section 2;
• Minutes and explanatory documents for transactions showing abnormal signs (large values, new suppliers, circular payments).

Practical experience: most refund dossiers are delayed not because businesses are ineligible, but because documentation is disorganized and cannot be reconciled between accounting books, declarations, and invoices. This preparation should begin from the period when input tax arises, not from the period when the refund dossier is prepared.

Refund first or examine first?

This is the decisive point for how quickly businesses receive refunded money. Tax authorities classify refund dossiers by risk level and apply two different processing mechanisms:

• Refund first, examine later: applied to dossiers classified as low or medium risk — the business receives the refund first, and tax authorities examine later. This is the mechanism every business hopes for.
• Examine first, refund later: applied to dossiers classified as high risk — tax authorities examine the dossier (and may inspect at the head office) before issuing the refund decision. Processing time is therefore significantly longer.

From 01/7/2026, Circular 94/2026/TT-BTC on compliance and risk management in taxation details this classification: VAT refund dossiers classified as high risk are examined before refund (point a, Clause 1, Article 16), except for certain exceptional cases — e.g., a dossier showing the same risk signs as the immediately preceding refund period where the prior examination found no misdeclaration. Notably, during processing, if additional risk signs are discovered, tax authorities may move the dossier from refund-first to examine-first.

Before Circular 94/2026/TT-BTC takes effect, classification follows Circular 31/2021/TT-BTC and Decision 1388/QD-TCT of 2023 of the General Department of Taxation under similar principles.

For FDI enterprises, signs that commonly push dossiers into high risk include: requesting large refunds in the first periods of operation; suppliers in the chain showing invoice risk signs; abnormal input-tax-to-revenue ratios compared to the industry; sudden business-model changes before the refund period. Early identification of these signs helps businesses proactively prepare explanations, rather than reacting after being moved to pre-refund examination.

Risks causing refund rejection

Problematic supplier input invoices. As noted, the “seller must declare and pay tax” condition makes businesses dependent on supplier compliance. Cases where suppliers flee, cease operations, or are determined by tax authorities to use unlawful invoices all lead to disallowance of the corresponding input VAT — and in the worst case, the entire refund dossier is moved to pre-refund examination.

Non-compliant payments. Purchase invoices of VND 5 million or more (under current non-cash payment thresholds) must have bank payment documentation to qualify for credit and refund. Cash payments, improperly offset liabilities, or payments through personal accounts are common reasons for input tax disallowance.

Missing links in export documentation. For export businesses, missing any document (contract, commercial invoice, bill of lading, customs declaration, bank payment documentation) means the corresponding shipment does not qualify for the 0% rate and refund. Special attention is needed for on-the-spot export shipments and transit processing goods — their documentary procedures are more complex than ordinary exports.

Deemed tax assessment and penalties. Where tax authorities discover misdeclarations increasing refundable tax or reducing payable tax, businesses not only face recovery of refunded amounts but also administrative tax penalties and late-payment interest. Subsequent refund dossiers are almost certainly classified as examine-first.

When to contact a lawyer

• The business is preparing its first large refund request and wants all conditions and dossiers reviewed before filing;
• The refund dossier has been moved to examine-first, or the business is repeatedly asked for explanations and supplements;
• A supplier in the chain is found to show invoice risk signs and the impact on the requested refund amount needs assessment;
• The business has received a non-refund decision, recovery of refunded tax, deemed assessment, or penalty decision — and wants to file complaints or lawsuits;
• The business is restructuring (merger, division, split-up, ownership conversion) and needs to recalculate the treatment of uncredited input VAT.

How FLAT LAW FIRM assists

FLAT LAW FIRM advises on tax from a legal perspective for FDI enterprises — we do not provide accounting or tax agency services, but focus on the legal aspects of tax obligations:

• Reviewing VAT refund eligibility conditions and dossier validity before businesses file with tax authorities;
• Assessing input invoice risks in the supply chain and proposing preventive measures;
• Drafting explanatory documents and working with tax authorities during pre-refund examinations;
• Advising on complaints against non-refund decisions, deemed assessment decisions, and administrative tax penalty decisions; representing cases through to the end;
• Advising on transaction structuring for M&A and restructuring from a tax perspective — in coordination with FLAT’s tax consulting services for FDI enterprises.

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