Are food and beverage invoices eligible for VAT reduction in Vietnam in 2024?

Is there a VAT reduction on food and beverage invoices in Vietnam in 2024?

VAT, known in English as Value Added Tax, is a tax calculated on the added value of goods and services that arises during the process from production, circulation to consumption, as stipulated in Article 2 of the Law on Value Added Tax 2008.

Based on the guidance in Article 11 of Circular 219/2013/TT-BTC, a VAT rate of 10% is applied on goods and services not stipulated in Articles 4, 9, and 10 of Circular 219/2013/TT-BTC.

This implies that a 10% tax rate is applied on goods and services not exempt from VAT, and not subject to VAT rates of 0% or 5%, including dining services.

From July 1, 2024, Decree 72/2024/ND-CP comes into effect concerning the VAT reduction policy as per Resolution 142/2024/QH15.

Based on Article 1 of Decree 72/2024/ND-CP, goods and services that currently incur a 10% VAT rate will have the VAT rate reduced to 8% for the rest of 2024.

However, the reduction will not apply to:

[1] Telecommunications, financial services, banking, securities, insurance, real estate business, metals and products from pre-fabricated metal, mineral products (excluding coal mining), coke, refined petroleum, and chemical products. Details in Appendix 1 issued with this Decree. (Download Appendix 1)

[2] Goods and services subject to special consumption tax. Details in Appendix 2 issued with this Decree. (Download Appendix 2)

[3] Information technology as per the laws on information technology. Details in Appendix 3 issued with this Decree. (Download Appendix 3)

[4] The VAT reduction for each type of goods and services specified in Clause 1, Article 1 of Decree 72/2024/ND-CP is applied uniformly at import stages, production, processing, and commercial trade.

For coal products sold (including coal mined and then sorted and classified through a closed procedure before being sold) that are subject to VAT reduction, details are provided in Appendix 1 issued with this Decree (Download Appendix 1). Other stages beyond the initial sale are not entitled to VAT reduction.

Companies and economic groups that carry out the closed procedure from mining to the final sale are also eligible for VAT reduction for coal sold.

Goods and services in Appendices 1, 2, and 3 issued with this Decree, if falling under non-taxable VAT or subject to 5% VAT as per the Law on Value Added Tax, the provisions of the Law on Value Added Tax shall apply without VAT reduction.

Thus, based on the above regulations, during the VAT reduction period until December 31, 2024, VAT on food and beverage invoices will be reduced to 8%, and from January 1, 2025, the VAT rate may revert to 10% (if the VAT reduction policy is not extended).

Are food and beverage invoices eligible for VAT reduction in Vietnam in 2024? (Image from the Internet)

What goods and services are exempt from VAT in Vietnam?

According to Article 5 of the Law on Value Added Tax 2009 (amended by Clause 1 Article 3 of the Law on Amendments to Tax Laws 2014; amended by Article 1 of the Amended Law on VAT, Special Consumption Tax, and Tax Administration 2016), the following entities are exempt from VAT:

[1] Products from cultivation, animal husbandry, aquaculture that have not yet been processed into other products or have been only preliminarily processed by organizations, individuals to be sold and at the import stage.

Agricultural products purchased by enterprises, cooperatives from organizations, individuals producing, catching unprocessed or preliminarily processed agricultural, aquaculture products sold to other enterprises or cooperatives are not required to declare, calculate, and pay VAT but input VAT shall be deducted.

[2] Products being breeding animals and seeds, including breeding eggs, breeding animals, seeds, grafts, semen, embryos, genetic materials.

[3] Watering, irrigating drainage; plowing, harrowing; dredging canals and ditches for agricultural production; agricultural product harvesting services.

[4] Salt products produced from seawater, natural rock salt, refined salt, and iodized salt where the main component is sodium chloride (NaCl).

[5] State-owned houses sold to current tenants.

[6] Land use rights transfer.

[7] Life insurance, health insurance, student insurance, other human-related insurance services; insurance for livestock, crops, other agricultural insurance services; insurance for fishing vessels, equipment, and other necessary devices for direct fishing; reinsurance.

[8] Financial services, banking, and securities trading as follows:

- Credit granting services including: lending; discounting, rediscounting transferable instruments and other valuable papers; guarantee; financial leasing; issuance of credit cards; domestic factoring; international factoring; other forms of credit granting as per law provisions;

- Lending services of taxpayers who are not credit institutions;

- Securities trading including: securities brokerage; proprietary trading of securities; securities issuance guarantees; securities investment consultancy; securities custody; fund management organizations of securities exchanges or securities trading centers; other securities trading activities as stipulated by the law on securities;

- Capital transfer including: the transfer of part or all of the invested capital, including the sale of enterprises to other enterprises for production, business; securities transfer; other forms of capital transfer as stipulated by the law;

- Sale of debts;

- Foreign exchange trading;

- Derivative financial services including: interest rate swaps; forward contracts; futures contracts; option contracts for buying and selling foreign exchange; other derivative financial services as stipulated by the law;

- Sale of secured assets of credit institutions' bad debts established by the Government of Vietnam.

[9] Medical services, veterinary services, including examination, treatment, prevention services for humans and animals; elderly care services, disabled care services.

[10] Public postal services, telecommunications, and internet services under the universal service programs of the Government of Vietnam.

[11] Maintenance and management of public parks, zoos, botanical gardens, urban greenery, public lighting; funeral services.

[12] Repair, maintenance, and construction services funded by public contributions or humanitarian aid for cultural, artistic works, public service works, infrastructures, and housing for social policy beneficiaries.

[13] Educational and vocational training services regulated by laws.

[14] Radio and television broadcasting funded by the state budget.

[15] Publishing, importing, and circulating newspapers, magazines, bulletins, specialized books, political books, textbooks, teaching materials, law books, scientific-technical books, books printed in ethnic minority scripts, and propaganda artworks, including tapes, disks, recorded images, and electronic data; currency; money printing.

[16] Public transportation services provided by buses, electric vehicles.

[17] Machinery, equipment, spare parts, and supplies that are not produced locally and need to be imported for use directly in scientific research, technology development; machinery, equipment, spare parts, specialized vehicles, and supplies that are not produced locally and need to be imported for oil and gas exploration, development, and extraction activities; aircraft, drilling rigs, ships that are not produced locally and need to be imported to form fixed assets of enterprises or leased abroad for use in production, business, lease, and sublease.

[18] Specialized weapons and combat equipment serving national defense and security.

[19] Imported goods for humanitarian aid, non-refundable aid; gifts to state agencies, political organizations, socio-political organizations, socio-professional political organizations, social organizations, socio-professional organizations, armed forces; gifts to Vietnamese individuals following the specified limits of the Government of Vietnam; items of foreign organizations and individuals granted diplomatic immunity; items carried along within the duty-free luggage allowance.

Goods and services sold to foreign organizations and individuals, international organizations for humanitarian aid, and non-refundable aid to Vietnam.

[20] Goods transshipped, in transit through Vietnamese territory; temporary imported goods for re-export; temporary exported goods for re-import; raw materials imported for production, processing of export goods under manufacturing contracts; processing export goods signed with foreign parties; goods and services bought and sold between foreign parties and non-tariff areas and between non-tariff zones.

[21] Technology transfer under the Technology Transfer Law; intellectual property transfer under the Intellectual Property Law; computer software.

[22] Imported gold bars, bullion that have not been processed into jewelry products, artworks, or other products.

[23] Export products that are resources, minerals that have not been processed into other products; export goods processed from resources, minerals with the total value of resources and minerals plus energy costs constituting 51% or more of the product cost.

[24] Artificial products used to replace parts of the human body; canes, wheelchairs, and other specialized devices for the disabled.

[25] Goods and services of household and individual businesses with annual revenues of one hundred million VND or less.

Entities dealing with non-taxable VAT goods and services outlined above are not entitled to VAT credit and refund, except cases of 0% tax rate specified in Clause 1, Article 8 of the Law on Value Added Tax 2009 amended by Clause 2, Article 1 of the Amended Law on VAT, Special Consumption Tax, and Tax Administration 2016).

Which entities shall pay VAT in Vietnam?

According to Article 2 of the Law on Value Added Tax 2008:

Value Added Tax

Value Added Tax is a tax on the added value of goods and services arising in the process from production to circulation to consumption.

Hence, Value Added Tax is levied based solely on the added value rather than the total value of goods and services.

Meanwhile, as stipulated in Article 4 of the Law on Value Added Tax 2008:

VAT payers are organizations, individuals producing, trading goods, and services subject to VAT (hereinafter called business establishments) and organizations, individuals importing goods subject to VAT (hereinafter called importers).

Thus, the actual bearer of VAT is the end consumer.