Prakas No. 559 on Instruction over Value Added Tax Implementation on Nontaxable Supplies

Ministry of Economic and Finance (MEF) has issued the Prakas No. 559 dated May 25, 2017 on the instruction of the implementation for VAT on non-taxable supplies in accordance with the Article 57 of the Law on Taxation amended by the Law on Financial Management 2017. This Prakas aims to clarify the goods and services those are non-taxable supplies in order to ensure the consistency of VAT implementation.
The Prakas applies to the self-assessment taxpayers in making non-taxable supplies below:

1. Public postal service
2. Hospitals, clinics, medical and dental services, and the sale of medical and dental goods incidental to the performance of such services
3. The services of transportation of passengers by a wholly state owned public transportation system
4. Insurance services
5. Primary financial services
6. The importation of materials for personal use those are exempt from customs duties in accordance with the customs provisions
7. Non-profit activities for serving the public interest
8. Educational service
9. Electric power and clean water
10. Unprocessed agricultural products
11. Solid and liquid waste removal or collection services

The Prakas specifically defined the term of “primary financial services” and includes certain kind of transactions and services which fall under the term as follow:
- The deposition operations and granting loans except fees relating to such granting loans.
- The initial securities public offering in the market, securities trade or other financial instruments, and the clearing and settlement services in the securities market.
- Money Exchange Service
- Security Service
- Trading of Unshaped Gold
NOTE: There was a significant event that the public misunderstand and misinterpreted that this Prakas was issued to impose VAT on above 11 goods and services supplies. Regardless, the Prakas was issued to clarify that the aforementioned goods and services supplies are exempted from VAT and they are called “non-taxable goods and services supplies”.