Domestic L/C: Can the Issuing Bank Refuse a VAT Invoice Issued After the Shipment Date?

Under a domestic letter of credit subject to UCP 600, can an issuing bank refuse a presentation simply because the VAT invoice was issued after the shipment date, even though this appears to be inconsistent with Vietnamese tax regulations? This question highlights the distinction between documentary examination under UCP 600 and compliance with domestic law.

Question

Dear Mr. Old Man,

May I ask for your opinion on the following case?

A domestic L/C is issued subject to UCP 600.

The beneficiary presents a VAT invoice that was issued after the shipment date.

According to Article 9(1) of Decree No. 123/2020/ND-CP on invoices and documents, the time of issuing an invoice is when ownership or the right to use the goods is transferred to the buyer.

Although the L/C does not incorporate Vietnamese law, the transaction takes place in Vietnam. Therefore, the VAT invoice appears to have been issued contrary to the requirements of Vietnamese regulations.

In this case, can the issuing bank refuse the presentation on the ground that the VAT invoice was issued after the shipment date?

PTT

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Answer

Hi PTT,

According to Article 1 of UCP 600, when a letter of credit expressly states that it is subject to UCP 600, documents must be examined in accordance with UCP 600, unless the credit expressly modifies or excludes any of its provisions.

In your case, the L/C is subject to UCP 600 but contains no additional requirement that the VAT invoice must be issued at the time ownership of the goods is transferred. Nor does it refer to Decree No. 123/2020/ND-CP or otherwise require compliance with its provisions regarding the timing of invoice issuance.

Accordingly, the issuing bank is required to examine the invoice only in accordance with Article 18 of UCP 600 and the relevant guidance in ISBP 821. Under these rules, a commercial invoice is not even required to bear an issuance date or a signature, unless the credit specifically requires otherwise.

Whether a VAT invoice complies with Vietnamese tax regulations is a matter of domestic legal and tax compliance, not documentary compliance under UCP 600. Therefore, unless the credit expressly requires the invoice to be issued on or before the date of shipment or otherwise specifies the timing of its issuance, the issuing bank has no basis to refuse the invoice on that ground.

Conclusion

The issuing bank has no basis to refuse the presentation with the discrepancy:

“VAT invoice issued after the shipment date.”

Note

Under Article 14(i) of UCP 600, a document may be dated prior to the issuance date of the credit, but it must not be dated later than the date on which it is presented.

This principle applies equally to both domestic and international letters of credit that are subject to UCP 600.

Best regards,

Mr. Old Man