Warning of Risk of Loss of Input VAT Deduction for Overdue Invoices for Deferred Purchases
Dear Readers,
In daily accounting work, purchasing goods on credit is a common practice. However, according to Vinasc’s observations and analysis, paying these invoices is potentially a major tax risk that many businesses may not fully anticipate.
Vinasc finds that tax authorities are taking a very strict management approach to compliance with payment deadlines in contracts. This directly affects the right to deduct VAT and calculate valid expenses when calculating corporate income tax.
Risk analysis from Vinasc
However, for the form of installment or deferred payment purchase, Vinasc especially notes an important legal risk as follows:
When does the risk arise? When the time comes to make payment as committed in the contract, the business does not have a non-cash payment document (late payment).
What are the consequences?
In the tax period when payment obligations arise under the contract, enterprises are required to declare and adjust the previously declared and deducted input VAT amount.
More importantly, even if a business makes a non-cash payment after this deadline, it is not allowed to declare and deduct that input VAT.
Simply put: Late payment (after the time limit committed in the contract) will cause the business to permanently lose the right to deduct VAT for that invoice, and the value of these goods and services is also at risk of being excluded from valid expenses when calculating corporate income tax.
Advice from Vinasc: What should businesses do?
The above analysis shows the very tough stance of the tax authorities in monitoring contract compliance. To protect your rights and avoid unnecessary financial risks, Vinasc recommends that your business take immediate action:
Review and monitor aging of accounts payable closely: The accounting department should immediately review all deferred purchase contracts, especially large invoices. There should be a system to strictly track payment due dates.
Priority on timely payment: Ensure all payments for invoices of 5 million VND or more are made on or before the deadline committed in the contract.
The “golden” solution when unable to pay on time: If the business expects to be unable to pay on time due to cash flow reasons, it is absolutely forbidden to allow late payment to arise unilaterally. Instead, the business must proactively:
Work with the supplier again.
Sign the Contract Addendum to formally extend the payment period before the old payment due date.
At that time, the new payment term in the Contract Appendix will be the legal basis for the tax authority to review the validity of the payment documents, thereby protecting the VAT deduction rights of the enterprise.
This is a real risk and can cause significant financial loss. Vinasc hopes that this newsletter will help your business promptly review its internal processes.
If you have any questions about the above content, do not hesitate to contact us for timely advice and support.
Best regards,
Vinasc Accounting and Tax Consulting Company Limited
Website: vinasc.vn
Legal basis for reference: Clause 2, Article 14 of the Law on Value Added Tax 2024 stipulates the conditions for input VAT deduction.