Expedition for VAT Refund Initiative Pursued by FIES
In the bustling landscape of foreign investment in Vietnam, a significant issue has arisen for Vina Kyoei Steel Co., Ltd., a company operating in the iron and steel production sector. The company has faced a prolonged VAT refund process, which has caused a financial capital shortage, hindering business operations and planned production expansion.
Vina Kyoei filed a complaint against the refund denial notice, but the complaint was rejected. The reasons cited for the refund denial were the use of invoices from taxpayers who were no longer operating at their registered business addresses and those flagged as high-risk for tax purposes. However, it's important to note that the classification of high-risk enterprises is an internal tax authority management process and is not publicly disclosed.
The Tax Department has directed regional tax branches to speed up the settlement of VAT refunds and review all outstanding VAT refund requests based on classifying item groups. The ministry of Finance has also proposed comprehensive modifications to regulations pertaining to VAT refunds, aiming to align Vietnam's regulations with international standards, including enhanced transparency and OECD compliance.
Accelerating the VAT refund process is beneficial for investors as it provides capital for reinvestment and boosts their confidence in the investment environment, encouraging long-term commitment. In response to this issue, Ko Tae Yeon, chairman of the Korea Chamber of Business in Vietnam, proposed establishing a VAT refund consultation centre under the central government to directly assist businesses.
Foreign-invested enterprises in Vietnam, including those in the iron and steel production sector, can receive VAT refunds if they meet specific regulatory conditions. To qualify, businesses must submit a complete application dossier to the tax authority, comply with tax laws, and conduct transactions through commercial banks. Eligible companies generally must adopt the VAT credit method, be operational or in the investment phase, and have accumulated input VAT credits exceeding VND 300 million (about USD 12,860) on business-related goods or services.
Recent 2025 reforms have tightened VAT refund policies, emphasizing stricter documentation, audits, and aligning Vietnam's regulations with international standards. These changes may impact refund eligibility and timing. The refund process typically takes two to six months and often includes tax audits. Required documentation includes the Enterprise Registration Certificate (ERC), Investment Registration Certificate (IRC), company stamp, accounting records, designated bank account, and a correctly completed refund application form.
Although no sector-specific exemptions or modifications for iron and steel producers were explicitly noted in the latest updates, these companies are subject to the same general VAT refund regime applied to foreign-invested enterprises engaged in production. Thus, iron and steel firms must comply fully with the refund conditions and be prepared for the rigors of documentation and audit during the refund process.
Meanwhile, other foreign-invested companies have been successful in their VAT refund applications. Samsung Electronics Vietnam will be refunded $23.3 million in VAT on April 15. The problem of VAT refund delays has been discussed at major gatherings such as the Vietnam Business Forum, and delays in VAT refund procedures have been highlighted as a problem in some localities, causing inconvenience to businesses.
As the situation with Vina Kyoei Steel Co., Ltd. unfolds, the company awaits a response from the Ministry of Finance (MoF) and its Tax Department to review and address issues related to its VAT refund case. The company has provided comprehensive documentation proving the authenticity and legitimacy of its transactions with suppliers, and the Bac Ninh Tax Department is coordinating with Bac Ninh People's Committee to allocate the refund budget for Vina Kyoei Steel Co., Ltd.
In conclusion, foreign-invested iron and steel companies in Vietnam can obtain VAT refunds under the updated 2025 policies by meeting standard eligibility criteria, maintaining rigorous documentation, and navigating a potentially more complex and scrutinized tax environment. However, the process can be challenging, and it's crucial for companies to ensure they meet all the requirements and are prepared for the rigors of documentation and audit during the refund process.
The prolonged VAT refund process for Vina Kyoei Steel Co., Ltd. has caused a financial capital shortage, hindering business operations and planned production expansion. To increase investors' confidence and encourage long-term commitment, foreign-invested enterprises, including those in the iron and steel production sector, should prioritize compliance with VAT regulations and rigorous documentation to be eligible for VAT refunds.
