According to the new 2025 regulation, is the VAT rate for food and beverage service 8% or 10% in Vietnam?

According to the new 2025 regulation, is the VAT rate for food and beverage service 8% or 10% in Vietnam?

VAT stands for "Value Added Tax," which is a tax on the additional value of goods and services arising in the process from production, circulation to consumption as stipulated in Article 2 of the Value Added Tax Law 2008.

Pursuant to Article 11 of Circular 219/2013/TT-BTC which stipulates cases where the 10% VAT rate is applicable as follows:

10% Tax Rate

The 10% tax rate applies to goods and services not covered by Articles 4, 9, and 10 of this circular.

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In alignment with the stipulations in Articles 4, 9, and 10 of Circular 219/2013/TT-BTC concerning the objects not subject to VAT and cases where 0%, 5% VAT rates are applicable, the food and beverage service will be subject to a 10% tax rate.

However, as per Article 1 of Decree 180/2024/ND-CP regulating VAT reduction as follows:

Reduction in Value Added Tax

1. A reduction in VAT applicable to the groups of goods and services currently subject to a 10% tax rate, excluding the following groups:

a) Telecommunications, financial, banking, securities, insurance activities, real estate business, metals and prefabricated metal products, mining products (except coal), coke, refined petroleum, chemical products. Details in Appendix I attached to this Decree.

b) Products and services subject to excise tax. Details in Appendix II attached to this Decree.

c) Information technology as defined by the law on information technology. Details in Appendix III attached to this Decree.

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2. Rate of VAT Reduction

a) Entities calculating VAT using the credit method shall apply an 8% VAT rate on goods and services specified in Clause 1 of this Article.

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Besides, according to the list provided in Appendices 1, 2, 3 of Decree 180/2024/ND-CP, food and beverage services are not included.

And, pursuant to Article 2 of Decree 180/2024/ND-CP regarding the effective date for the VAT reduction decree as follows:

Effective Date and Implementation

1. This Decree is effective from January 1, 2025, until June 30, 2025.

2. Ministries according to their functions, and People's Committees of provinces and centrally-run cities, shall direct the relevant agencies to propagate, guide, inspect, and supervise so that consumers understand and benefit from the VAT reduction provisions of this Decree, focusing on solutions to stabilize the supply-demand of goods and services subject to VAT reduction to maintain price stability (prices excluding VAT) from January 1, 2025, to June 30, 2025.

3. If any issues arise during the implementation, the Ministry of Finance shall provide guidance and resolution.

4. Ministers, heads of equivalent-level agencies, heads of Government-affiliated agencies, Chairs of People's Committees of provinces and centrally-run cities, and related enterprises, organizations, and individuals are responsible for implementing this Decree.

Hence, during the first six months of 2025 from January 1, 2025, to June 30, 2025, food and beverage services will benefit from a VAT reduction and be subject to an 8% tax rate. After June 30, 2025, if the VAT reduction policy is not extended, food and beverage services will revert to the 10% tax rate.

According to the new 2025 regulation, is the VAT rate for food and beverage service 8% or 10% in Vietnam? (Image from Internet)

What is the method of VAT deduction in Vietnam?

Pursuant to Clause 1, Article 10 of the Value Added Tax Law 2008 as amended by Clause 4, Article 1 of the Amended Value Added Tax Law 2013, the following stipulations on the deduction method are provided:

- The VAT payable using the deduction method is equal to the output VAT minus the input VAT deductible;

- The output VAT is the total VAT of goods and services sold, as recorded on the VAT invoice.

The VAT of goods and services sold as recorded on the VAT invoice is calculated by multiplying the taxable price of taxable goods and services sold by their respective VAT rate.

In cases where the payment price includes VAT, the output VAT is determined by subtracting the taxable value from the payment price as determined pursuant to point k, Clause 1, Article 7 of the Value Added Tax Law 2008;

- The deductible input VAT is the total VAT recorded on VAT invoices for purchased goods and services, documents for VAT paid on imported goods, and meeting the conditions stipulated in Article 12 of the Value Added Tax Law 2008.

What are entities liable for VAT in Vietnam?

According to Article 3 of Circular 219/2013/TT-BTC, entities liable for VAT include organizations and individuals producing, trading goods, and providing services subject to VAT within Vietnam, irrespective of their field, form, or business organization (hereinafter referred to as business establishments), and organizations and individuals importing goods, purchasing services from abroad subject to VAT (referred to as importers), including:

- Business organizations established and registered in accordance with the Enterprise Law 2020, Cooperative Law 2023, and other relevant specific business laws;

- Economic organizations affiliated with political, socio-political, social, social-professional organizations, people's armed units, professional bodies, and other organizations;

- Enterprises with foreign-invested capital and foreign parties in business cooperation under the Investment Law; foreign organizations, individuals conducting business activities in Vietnam without establishing legal entities in Vietnam;

- Individuals, households, independent business groups, and other entities engaged in production, business, and import activities;

- Organizations and individuals conducting production or business in Vietnam and purchasing services (including cases of purchasing services associated with goods) from foreign organizations without a permanent establishment in Vietnam, or individuals outside Vietnam who are non-residents, whereby the purchasing organization or individual is subject to tax, except cases not required to declare, calculate, and pay VAT as guided in Clause 2, Article 5 of Circular 219/2013/TT-BTC.

Regulations concerning "permanent establishment" and "non-resident entities" are enforced as per the laws on corporate income tax and personal income tax.

- Branches of export processing enterprises established to engage in goods trading and other activities directly related to goods trading in Vietnam, according to the regulations of law on industrial zones, export processing zones, and economic zones.