Proposal to exempt VAT for handling secured assets
In a comment to the Ministry of Finance, the Vietnam Banking Association said that handling collateral (GS) to recover debt is a profession that arises directly from the credit granting activities of credit institutions (CIs). This activity plays an important role in debt collection and bad debt handling.
According to the Association, Decree No. 209/2013/ND-CP of the Government and Circular No. 219/2013/TT-BTC of the Ministry of Finance, along with amended and supplemented documents, clearly stipulate: the sale of assets owned by credit institutions, enforcement agencies or self- lending borrowers is not subject to value added tax (VAT). However, in the draft Circular detailing a number of articles of the Law on VAT and guiding the implementation of the Decree detailing the implementation of a number of articles of the Law on VAT, this content has not been specifically stated.
The Association believes that if not clearly regulated, different understandings may arise when applied, leading to the calculation of VAT for the sale of dietary supplements. This will make it difficult for credit institutions to handle bad debts, increase costs for borrowers and prolong debt collection time.
Therefore, the Vietnam Banking Association recommends that the drafting agency supplement the following provisions:
Selling secured loans by credit institutions, enforcement agencies or borrowers who sell themselves under the authorization of the lending party to repay secured loans not subject to value added tax.
Ministry of Finance: Not within the scope of guidance in the draft Circular
Responding to this comment, the Ministry of Finance cited Clause h, Clause 9, Article 5 of the Law on VAT, which stipulates that subjects not subject to VAT include:
Selling collateral of debt of an organization in which the State owns 100% of charter capital, established by the Government and has the function of buying and selling debt to handle bad debts of Vietnamese credit institutions.
According to the Ministry of Finance, this regulation has clearly identified tax-free subjects, limiting them to organizations established by the State to handle bad debts of the credit institution system. Thus, the general sales of collateral of credit institutions, enforcement agencies or borrowers are not subject to tax exemption under law.
In addition, the above draft Circular is not assigned the task of specifying in detail the subjects not subject to VAT outside the content existing in the law, nor is the Ministry of Finance assigned the authority to expand the scope of application. The Law on VAT only assigns the Minister of Finance to issue regulations on records and procedures for determining subjects not subject to tax, not including determining new subjects.
From the above legal bases, the Ministry of Finance affirmed that the recommendation of the Vietnam Banking Association is not within the scope of regulation of the draft Circular, and there is currently not enough legal basis to supplement the proposed content.
The draft Circular is currently in the process of collecting opinions, along with the draft Decree detailing the implementation of the amended Law on VAT. The Ministry of Finance said it will continue to receive and synthesize comments, and at the same time review the legality and feasibility to report to competent authorities for consideration and decision.
