Are telecommunication service activities in Vietnam eligible for a value-added tax reduction?

Who are subject to value-added tax in Vietnam?

Based on Article 3 of the Law on Value-Added Tax 2008 stipulating entities subject to value-added tax:

Entities subject to tax

Goods and services used for production, business, and consumption in Vietnam are subject to value-added tax, except for the entities specified in Article 5 of this Law.

Thus, the entities subject to value-added tax are goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad).

Are telecommunication service activities in Vietnam eligible for a value-added tax reduction?

Based on the provisions in Clause 1, Article 1 of Decree 72/2024/ND-CP:

Reduction of value-added tax

1. Reduction of value-added tax for groups of goods and services currently applying the 10% tax rate, except for the following groups of goods and services:

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

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

c) Information technology according to the law on information technology. Details are in Appendix III attached to this Decree.

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Thus, according to the above provisions, telecommunications services are among the cases not eligible for value-added tax reduction.

Are telecommunication service activities in Vietnam eligible for a value-added tax reduction? (Image from the Internet)

Which entities are not subject to value-added tax in Vietnam?

Based on Article 5 of the Law on Value-Added Tax 2008 (amended by Clause 1, Article 1 of the Law on Value-Added Tax, Law on Special Consumption Tax and Law on Tax Administration 2016, Clause 1, Article 1 of the Law on the Amendment of Value-Added Tax Law 2013, and supplemented by Clause 1, Article 3 of the Law on the Amendment of Laws on Tax 2014), entities not subject to value-added tax include:

- Products of cultivation, breeding, aquaculture reared, harvested but not yet processed into other products or only processed through normal preliminary processes, sold by organizations and individuals, and at the import stage.

Enterprises and cooperatives that buy products of cultivation, breeding, aquaculture reared, harvested but not yet processed into other products or only processed through normal preliminary processes, selling to other enterprises and cooperatives, do not have to declare, calculate, and pay value-added tax, but are entitled to a deduction of input value-added tax.

- Products being breeds of livestock, plants, including eggs, young animals, saplings, seeds, semen, embryos, genetic materials.

- Irrigation, drainage services; plowing, harrowing land; dredging canals for agriculture production; harvesting services for agricultural products.

- Fertilizers; specialized machinery, equipment for agricultural production; offshore fishing vessels; feed for livestock, poultry, and other animals.

- Salt products produced from seawater, natural mined salt, refined salt, iodized salt with sodium chloride (NaCl) as the main component.

- State-owned housing sold by the state to current tenants.

- Land use rights transfer.

- Life insurance, health insurance, student insurance, other human-related insurance services; livestock insurance, plant insurance, other agricultural insurance services; insurance for fishing vessels, equipment, and necessary tools directly serving fishery exploitation; reinsurance.

- The following financial, banking, and securities business services:

+ Credit services include: lending; discounting, rediscounting transferable instruments and valuable papers; guarantees; financial leasing; issuance of credit cards; domestic factoring; international factoring; other forms of credit provision according to the provisions of law;

+ Lending service of taxpayers who are not credit institutions;

+ Securities business includes: securities brokerage; securities dealing; underwriting issuance; securities investment consulting; securities deposit; securities investment fund management; securities portfolio management; exchanges services of stock exchanges or trading centers; other securities business activities according to the law on securities;

+ Transfer of capital includes: transfer of part or whole of invested capital, including the case of selling enterprises to other enterprises for production, business, transfer of securities; other forms of capital transfer according to the law;

+ Sale of debts;

+ Foreign exchange business;

+ Derivative financial services include: interest rate swaps; forward contracts; futures contracts; options for foreign currency; other derivative financial services according to the law;

+ Sale of secured property of debts of organizations from which the Government of Vietnam owns 100% of the charter capital established to handle the bad debts of Vietnam credit institutions.

- Medical services, veterinary services, including disease examination, treatment, prevention services for humans and animals; services caring for the elderly, disabled persons.

- Public postal services, telecommunications services, and universal Internet services following the program of the Government of Vietnam.

- Services for zoo maintenance, flower gardens, parks, street green trees, public lighting; funeral services.

- Maintenance, repair, construction with contributions from the people, humanitarian aid funds for cultural, artistic works, public service works, infrastructure, and housing for social policy subjects.

- Teaching, vocational training as stipulated by law.

- Radio and television broadcasting funded by the state budget.

- Publishing, importing, distributing newspapers, magazines, newsletters, political books, textbooks, curricula, legal documents, scientific and technical books, books printed in minority languages, propaganda posters, including audio or video tapes, electronic data; currency, printing money.

- Public passenger transport by bus, tram.

- Machinery, equipment, spare parts, materials that are not manufactured domestically, need to be imported for direct use in scientific research, technology development activities; machinery, equipment, spare parts, specialized vehicles, materials not manufactured domestically, need to be imported for activities of search, exploration, development of oil, gas fields; aircraft, drilling platforms, ships not domestically produced, need to be imported to form fixed assets of enterprises or leased from abroad for production, business, leasing, subleasing.

- Specialized weapons, equipment for national defense, security.

- Imported goods under humanitarian aid, non-refundable aid cases; gifts to state agencies, political organizations, socio-political organizations, socio-professional socio-political organizations, social organizations, professional social organizations, people's armed forces units; gifts to individuals in Vietnam according to the Government's level; personal effects of foreign organizations, individuals according to diplomatic immunity; goods carried by people within duty-free luggage limits.

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

- Transshipped goods, goods in transit through Vietnam's territory; temporarily imported goods for re-export; temporarily exported goods for re-import; raw materials imported for production, processing export goods under production, processing contracts signed with foreign parties; goods and services sold and purchased between foreign parties and non-tariff zones and between non-tariff zones.

- Technology transfer according to the provisions of the Law on Technology Transfer 2017; transfer of intellectual property rights according to the provisions of the Law on Intellectual Property 2005; computer software.

- Imported gold in the form of bullion, pieces, not yet crafted into artworks, jewelry, or other products.

- Exported products are resources, minerals that have not been processed into other products; exported products that are made from resources, minerals with the total value of resources, minerals plus energy costs accounting for 51% or more of the product cost.

- Artificial products used to replace body parts of patients; crutches, wheelchairs, and other specialized tools for the disabled.

- Goods and services of business households and individuals with annual revenue of one hundred million dong or less.

Business establishments that trade in goods and services not subject to value-added tax as stipulated in Article 5 of the Law on Value-Added Tax 2008 are not entitled to a deduction and refund of input value-added tax, except for the case applying the 0% tax rate stipulated in Clause 1, Article 8 of the Law on Value-Added Tax 2008.