Does the 2024 Law on Value-Added Tax come into force in Vietnam? What's new in Law No. 48 on Value-Added Tax in Vietnam?

Does the 2024 Law on Value-Added Tax come into force in Vietnam?

The 2024 Law on Value-Added Tax, numbered 48/2024/QH15, is among the laws officially passed by the National Assembly during its 15th session, at the 8th meeting. The new Law will take effect from July 1, 2025, replacing the 2008 Law on Value-Added Tax.

Download the 2024 Law on Value-Added Tax...Download

Does the 2024 Law on Value-Added Tax come into force in Vietnam? What's new in Law No. 48 on Value-Added Tax in Vietnam? (Image from the Internet)

What's new in Law No. 48 on Value-Added Tax in Vietnam?

The 2024 Law on Value-Added Tax, number 48/2024/QH15, consists of 4 chapters and 17 articles, setting out notable provisions such as:

(1) Adjusting Subjects Not Subject to VAT

Article 5 of the amended 2024 Law on Value-Added Tax adjusts regulations on subjects not subject to VAT as stipulated in Article 5 of the 2008 Law on Value-Added Tax (amended by Law No. 31/2013/QH13 and Law No. 106/2016/QH13) as follows:

- Omit certain entities not subject to VAT

Certain entities not subject to VAT under current regulations have been omitted, including:

Fertilizers; specialized machinery and equipment for agricultural production; offshore fishing vessels;

Securities custody; services organizing the market of stock exchanges or trading centers; other securities business activities...

- Export products that are resources, minerals mined and processed into other products not subject to VAT must be applied according to a list prescribed by the Government of Vietnam.

Previously, regulations stated that export products made from resources and minerals with the combined value of resources, minerals, and energy costs accounting for 51% or more of the product cost were not subject to VAT.

- Add imported goods for humanitarian aid, disaster relief, disease, war prevention as prescribed by the Government of Vietnam as entities not subject to VAT.

(2) Amending Taxable Price Regulations for Imported Goods

Currently, Article 7 of the 2008 Law on Value-Added Tax stipulates that the taxable price for imported goods is the import price at the border gate plus import duty (if any), plus special consumption tax (if any), and plus environmental protection tax (if any). The import price at the border gate is determined according to the regulations on the taxable price for imported goods.

In Article 7 of the amended 2024 Law on Value-Added Tax, the taxable price for imported goods is amended to be the taxable import value according to regulations on export duty, import duty, plus import duty, plus import duty surtax according to legal regulations (if any), plus special consumption tax (if any), and plus environmental protection tax (if any).

(3) Adding Taxable Price for Promotional Goods and Services

Article 7 of the amended 2024 Law on Value-Added Tax adds a provision: The taxable price for promotional goods and services according to commercial law is determined to be zero.

(4) Adjusting Tax Rates for Certain Goods and Services

Article 9 of the amended 2024 Law on Value-Added Tax adjusts tax rates for certain goods and services as follows:

1. Add New Objects Subject to 0% Tax Rate

- International transportation;

- Construction and installation projects abroad, in non-tariff zones;

- Goods sold in the isolation area to individuals (foreigners or Vietnamese) who have completed exit procedures; goods sold at duty-free shops;

- Export services provided to foreign organizations and individuals, including: Transport rental services used outside Vietnam's territory; services in the aviation and maritime sectors directly supplying international transportation or through agents.

2. Products Not Subject to Tax Now Subject to 5% Tax

- Fertilizers;

- Offshore fishing vessels;

- Plowing machines; harrows; milling machines; ridging machines; plantation cover equipment; field leveling equipment; seeders; plant cane machinery; sowing system machines and equipment; tillage machines, shaping machines, spreading, distributing and fertilizing machines; sprayers and equipment for protection paste;

- Rice, corn, sugarcane, coffee, cotton harvesters; harvesters for tubers, fruits, roots; tea pruning machines, tea picking machines; threshers; peeling machines for corn husks; corn threshers; soy threshers;

- Peanut peeling machines; coffee hullers; equipment for processing wet coffee, rice; agricultural dryers (rice, corn, coffee, pepper, cashew nuts...), seafood;

- Collecting, loading machines for sugarcane, rice, straw on the fields; incubators and hatchers for poultry eggs; grass harvesters, balers for straw, grass; milking machines and specialized machinery and equipment for agricultural production according to regulations of the Government of Vietnam.

3. Products Subject to 5% Tax Moving to 10%

- Unprocessed forest products;

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

- Various equipment and instruments specifically used for teaching, research, scientific experiments

- Cultural activities, exhibitions, gym, sports; art performances; film production; importing, releasing, and screening films.

(5) Changing Conditions for Input VAT Credit

1. Purchase of Goods, Services Under 20 Million VND Must Have Non-Cash Payment Documents

Previously, goods or services purchased individually valued at under 20 million VND did not require non-cash payment documents for crediting VAT as stipulated in Clause 2, Article 12 of the 2008 Law on Value-Added Tax.

However, according to Clause 2, Article 13 of the amended 2024 Law on Value-Added Tax, all purchased goods, services must have non-cash payment documents, except for special cases as prescribed by the Government of Vietnam.

2. Add Certain Documents Eligible for Input VAT Credit

According to Clause 2, Article 13 of the amended 2024 Law on Value-Added Tax, for exported goods and services, packing slips, consignment notes, insurance documents (if any) can be credited for input VAT, except for certain special cases as prescribed by the Government of Vietnam.

This is a provision not previously stipulated.

(6) Add New Cases for Tax Refund

Article 14 of the amended 2024 Law on Value-Added Tax adds the following cases eligible for tax refund:

Business establishments that only produce goods or provide services subject to a 5% VAT rate, if having unchecked input VAT from 300 million VND or more after 12 months or 4 quarters, are eligible for VAT refund.

Who are VAT payers in Vietnam?

According to Article 3 of Circular 219/2013/TT-BTC, VAT payers include organizations, individuals producing, trading goods, and services subject to VAT in Vietnam, regardless of industry, form, or business organization (hereinafter referred to as business establishments) and organizations, individuals importing goods, and purchasing services from abroad subject to VAT (hereinafter referred to as importers) including:

- Business organizations established and registered under the 2020 Enterprise Law, 2023 Cooperative Law, and other specialized business laws;

- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, armed forces units, professional organizations, and other organizations;

- Foreign-invested enterprises and foreign parties participating in business cooperation under the Investment Law; foreign organizations and individuals conducting business activities in Vietnam but not establishing legal entities in Vietnam;

- Individuals, households, independent groups conducting business activities, and other subjects who have production, business, and import activities;

- Organizations, individuals conducting business in Vietnam purchasing services (including services linked with goods) from foreign organizations not having permanent establishments in Vietnam, individuals overseas who are non-residents in Vietnam, shall be responsible for paying tax, except for cases not required to declare and pay VAT as guided in Clause 2, Article 5 of Circular 219/2013/TT-BTC.

Regulations on permanent establishments and non-resident subjects follow the laws on corporate income tax and personal income tax.

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