E-invoices have been permitted and applied by a small number of taxpayers in Vietnam for some time, however the Vietnamese authorities are commencing their drive to make E-Invoicing and electronic information sharing mandatory in Vietnam in the near future for all taxpayers.
The General Department of Taxation, under the Ministry of Finance’s guidance, is drafting a proposed Decree to replace Decree No. 51/2010 /ND-CP and Decree No. 04/2014 /ND-CP concerning invoices for the sales of goods and services. Significant changes within the proposed Decree focus on E-Invoices, the first stages of which are likely to come into effect from 1 July 2018, where E-Invoices are to become compulsory for many enterprises, organizations and State agencies. The Government’s stated aim is for 90% of enterprises to be issuing E-Invoices by 2020.
Who will be required to apply e-invoices
In time, E-Invoices will become compulsory for all taxpayers. The first wave of compulsory application will likely be for enterprises in industrial parks, economic zones, export processing zones and high-tech zones, along with State Agency units having production or commercial activities and newly established enterprises.
Moving to e-invoices
To register to commence using E-Invoices, enterprises are required to first apply for E-Signatures and E-Tax Declarations through the dedicated government portals/processes.
Once these have been completed, enterprises will need to contract with an authorised supplier of E-Invoice software. When installed and integrated with the operating processes of the enterprises, the following forms need to be submitted to the Tax Authorities.
Step 1: The enterprise is to complete Form 1 confirming its decision to apply and utilise E-Invoices (Form 1, Circular 32)
Step 2: An announcement is published, using Form 2, informing of the commencement of application of E-Invoices in the enterprise (Form 2, Circular 32)
Step 3: Apply the E-signature on the E-Invoice template.
All three procedures are sent to the tax office via the electronic portal, however they can also be printed and delivered to the Tax Authorities if desired, and following submission the enterprise is eligible to issue E-Invoices.
Advantages and disadvantages when converting e-invoices
E-Invoices will be a factor of life for all Vietnamese enterprises in the future, and will enable stronger compliance management by authorities. Some of the advantages and disadvantages arising for enterprises include:
Advantages:
Time Savings: The issuing of invoices electronically will save time and decrease administration tasks in completing, maintaining and submitting invoices. Inspections by Tax Authorities will also be streamlined with tax refunds or penalties much more clearer.
Distribution Costs: As not all invoices will require physical printing for customers, and can be transferred between parties electronically, there will be a significant cost saving with printing and distribution of invoices. This will be significant for high-volume and large scale enterprises.
Convenience: As customers can receive immediate invoices via e-mail or electronic messaging, wait times will be a thing of the past. In addition, as all data & invoices will be saved on enterprise servers, missing or misplaced invoices will be significantly reduced.
Disadvantages:
Power and System faults: Businesses will be disadvantaged if power or system faults arise, as they will not be able to issue E-Invoices immediately, despite customer expectations that they will be able to expect immediate invoices.
There is currently no provision for Enterprises to revert to paper (manual) invoices should the need arise if power or systems issues arise. We are awaiting further guidance from the Authorities on how to manage these issues.
Enterprises will have less room to manipulate invoices or accounting records, as all revenue will be recorded/declared as it arises and invoices issued immediately.
What should enterprises do to prepare?
We encourage all taxpayers to study the regulations as they are updated and released, and prepare a timeline to upgrade systems and processes to move towards E-Invoices and remain compliant. For many, E-Invoices will be a positive move, and early adoption should certainly be considered.
However, some businesses may require system upgrades to be compliant, and many processes will need changing within businesses. Therefore the implications should not be taken lightly and work should commence promptly on what this means to your business.