What is a direct invoice? How to calculate VAT on direct invoices

What is the difference between a direct invoice and a VAT invoice (VAT invoice)? Formula for calculating VAT on direct sales invoices. Where to buy a direct invoice?

I. What is direct billing?

Among the invoices in circulation today, there are two popular types: value added tax (VAT) invoices and direct invoices.

A direct invoice (or sales invoice) is a document prepared by the seller to record sales information or service provision information according to the provisions of law.

So how is a direct invoice different from a VAT invoice? The content below fdiinvietnam.com will share with you in detail.

II. Distinguishing between direct invoices and VAT invoices (VAT invoices)

Direct sales invoices and VAT invoices (VAT invoices or red invoices) are applied to different cases, specifically:

➧ VAT invoice: Used for businesses that declare VAT using the deduction method.

➧ Direct sales invoice: Used for businesses that declare taxes using the direct method.

>> See more: VAT declaration method.

In addition to the applicable cases, direct invoices and VAT invoices also have other differences according to the following table.

III. Where to buy direct invoices?

Enterprises and business households can register to purchase invoices directly through the electronic invoice provider (this unit will transmit information to the Tax Department) in accordance with Circular 78/2021/TT-BTC dated September 17, 2021.

IV. Regulations on direct invoices

1. How to calculate direct invoice tax

Method 1: According to the direct method, VAT is equal to VAT multiplied by the tax rate applicable to gold, silver, and precious stones.

➧ Applicable subjects:

• Foreign businesses and organizations that do not have a permanent establishment in Vietnam but have income in Vietnam and do not fully comply with the document regime;
• Buying and selling of gold, silver and precious stones.

➧ Formula for calculating VAT payable on gold, silver, and precious stones: 

Note:

During the tax period:

• If there is a negative VAT (-) on gold, silver, and precious stones, it will be offset against the positive (+) value of gold, silver, and precious stones;
• In case there is no positive (+) VAT, or the positive (+) VAT is not enough to offset the negative (-) value added, it can be carried forward to the next period. However, by the end of the calendar year, if the negative (-) value added is not fully deducted, it cannot be carried forward to the next year.

Method 2: Direct method on VAT equals percentage multiplied by revenue

➧ Applicable subjects:

• Enterprises and cooperatives with annual revenue of less than 1 billion VND;
• Newly established enterprises and cooperatives, registered by direct method;
• Business households, individual businesses;
• Other economic organizations that are not enterprises or cooperatives.

➧ Formula for calculating VAT payable in this case:

(*) The percentage levels are as follows:

• Distribution and supply of goods: Rate 1%;
• Services, construction excluding materials: Rate 5%;
• Transportation, production, construction and material contracting: Rate 3%;
• Other business activities: Rate 2%.

2. Direct invoice tax declaration form

For direct sales invoices, no tax declaration is required.

3. Payment method for sales invoices from 20 million VND

For sales invoices of VND 20 million or more, payment must be made via bank to be eligible for deduction when calculating corporate income tax. 

According to Article 4 of Circular 96/2015/TT-BTC, enterprises are allowed to deduct all expenses if they meet the following conditions:

• Expenses related to actual production and business activities;
• Expenses have sufficient legal invoices and documents;
• Non-cash payment documents for each invoice for goods and services with a value of 20 million VND or more (including VAT).

V. Frequently asked questions about direct billing

1. What is a sales invoice?

Sales invoice (direct invoice) is a document created by the seller to record sales revenue or service provision.

2. The company operates in the pawn business and declares VAT using the direct method on revenue. Revenue in May 2023 is 1 billion, how does the company calculate the VAT payable?

VAT payable = 1 billion x 5% = 50 million VND.