Are computer software services and products in Vietnam subject to VAT?

Are computer software services and products in Vietnam subject to VAT?

Under the regulations specified in clause 21, Article 4 of Circular 219/2013/TT-BTC on goods and services that are not subject to VAT:

Goods and services that are not subject to VAT

...

21. Technology transfers according to the Law on Technology transfers; intellectual property right transfers according to the Law on Intellectual property. If a contract of technology transfer or intellectual property right transfer is associated with a transfer of machinery/equipment, only the value of transferred technology or intellectual property right is not subject to VAT. If such value cannot be separated, VAT shall be imposed on the total value of the transferred technology or intellectual property right and machinery/equipment.

Computer software including software products and software services as prescribed by law.

Thus, according to the above regulation, computer software, including software products and software services, are not subject to value-added tax.

Are computer software services and products in Vietnam subject to VAT? (Image from the Internet)

What are the applicable VAT rates in Vietnam?

According to Article 8 of the Law on Value-Added Tax 2008 (as amended by clause 3, Article 1 of the Law on Amending the Law on Value-Added Tax 2013, Article 1 of the Law Amending the Law on Value-Added Tax, Law on Special Consumption Tax, and Law on Tax Administration 2016, and Article 3 of the Law Amending Various Tax Laws 2014), and Decree 72/2024 ND-CP, the applicable VAT rates are stipulated as follows:

(1) The 0% tax rate applies to exported goods and services, international transportation, and goods and services not subject to value-added tax as specified in Article 5 of the Law on Value-Added Tax 2008 when exported, except in the following cases:

- Transferring technology, transferring intellectual property rights abroad.

- Reinsurance services carried out abroad;

- Credit provision services;

- Capital transfer;

- Financial derivative services;

- Postal, telecommunication services;

- Exported products specified in clause 23, Article 5 of the Law on Value-Added Tax 2008.

Exported goods and services are those consumed outside Vietnam, in non-tariff zones; goods and services provided to foreign customers as regulated by the Government of Vietnam.

(2) The 5% tax rate applies to the following goods and services:

- Clean water for production and domestic use;

- Ores for fertilizer production; pesticides and growth stimulants for animals and plants;

- Canal, ditch, pond dredging services for agricultural production; cultivating, caring for, preventing diseases of plants; preliminary processing, preserving agricultural products;

- Unprocessed crop, livestock, aquaculture products, except for products stipulated in clause 1, Article 5 of this Law;

- Semi-processed rubber latex; semi-processed pine resin; fishing nets, ropes, and fibers used to weave fishing nets;

- Fresh food; unprocessed forest products, except timber, bamboo shoots, and products stipulated in clause 1, Article 5 of the Law on Value-Added Tax 2008;

- Sugar; by-products from sugar production, including molasses, bagasse, and mud;

- Products made from jute, sedge, bamboo, rattan, straw, coconut shells, coconut fibers, water hyacinth, and other handicraft products produced from agricultural waste; semi-processed cotton; newspaper printing paper;

- Medical equipment, tools, medical gauze, sanitary napkins; disease prevention and treatment drugs; pharmaceuticals, medicinal materials used as raw materials for the production of medicines for disease prevention and treatment;

- Teaching and learning aids, including models, drawings, boards, chalk, rulers, compasses, and specialized teaching, research, and experimental equipment;

- Cultural, exhibition, sports activities; art performances, film production; import, distribution, and screening of films;

- Children's toys; books of all kinds, except those specified in clause 15, Article 5 of the Law on Value-Added Tax 2008;

- Scientific and technological services as stipulated by the Law on Science and Technology;

- Sale, lease, lease-purchase of social housing as stipulated by the Law on Housing.

(3) An 8% tax rate applies to certain goods and services with reduced VAT (from 10% to 8%) according to Decree 72/2024/ND-CP.

(4) The 10% tax rate applies to goods and services not subject to the 0%, 5%, and 8% tax rates.

Thus, depending on the goods and services subject to VAT, the VAT rate applied is 0%, 5%, 10%, or 8%.

When is the time for calculating VAT in Vietnam?

According to Article 8 of Circular 219/2013/TT-BTC, the time for calculating VAT in Vietnam is as follows:

- For goods sale, VAT shall be calculated when the ownership or the right to use goods is transferred to the buyer, whether the payment is made or not.

- For service provision, VAT shall be calculated when service provision is completed or when the invoice for service provision is made, whether the payment is made or not.

For telecommunications services, VAT shall be calculated when comparing the data about telecommunications charge according to the contracts between telecommunications service providers, but not later than 2 months from the month in which the charge is incurred.

- For electricity and water supply, VAT shall be calculated when the electricity or water consumption is recorded.

- For real estate trading, construction of infrastructural works, houses for sale or for lease, VAT shall be calculated when money is collected according to the project schedule or the contract. The taxpayer shall declare output VAT incurred in the tax period according to collected amount.

- For construction and installation, including shipbuilding, VAT shall be calculated when the construction or a work is completed and put into use, Whether the payment is made or not.

- For imported goods, VAT shall be calculated when the customs declaration is registered.