From February 7, 2025, what does it mean for pharmaceutical products to show evidence of being unsafe for users in Vietnam? Are pharmaceutical products subject to VAT?

From February 7, 2025, what does it mean for pharmaceutical products to show evidence of being unsafe for users in Vietnam?

Based on Clause 8, Article 1 of Circular 45/2024/TT-BYT (document effective from February 7, 2025), supplements regulations on pharmaceutical products showing evidence of being unsafe for users as follows:

- pharmaceutical products exhibiting unsafe evidence are those with reports of adverse reactions of a severe or repetitive nature, related to the pharmaceutical product but not known adverse reactions;

- pharmaceutical products suspected to contain substances or impurities exceeding safety limits for users;

- pharmaceutical products suspected of failing to meet quality standards;

- pharmaceutical products suspected of having counterfeit evidence or incorrect origin;

- pharmaceutical products manufactured from raw materials with unclear origin or failing to meet quality standards;

- pharmaceutical products suspected of being manufactured at facilities that seriously violate principles and standards of Good Manufacturing Practice for pharmaceutical products and pharmaceutical product materials or are not certified by the pharmaceutical management authority as qualified to maintain pharmaceutical product production.

From February 7, 2025, what does it mean for pharmaceutical products to show evidence of being unsafe for users in Vietnam? Are pharmaceutical products subject to VAT? (Image from the Internet)

Are pharmaceutical products subject to VAT in Vietnam ?

Based on Article 2 of Circular 219/2013/TT-BTC regarding subjects liable to value-added tax, the regulation is as follows:

Subjects liable to tax

Subjects liable to value-added tax (VAT) are goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from overseas organizations and individuals), excluding subjects not liable to VAT as guided in Article 4 of this Circular.

Concurrently, based on Clause 9, Article 4 of Circular 219/2013/TT-BTC amended by Point a, Clause 1, Article 1 of Circular 130/2016/TT-BTC regarding subjects not liable to value-added tax, the regulation is as follows:

Subjects not liable to VAT

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9. Medical services, veterinary services, including examination, treatment, and disease prevention for humans and animals, family planning services, health recovery services, and rehabilitation services for patients, services for the elderly and disabled; transportation of patients, room rental, and bed rental services of healthcare facilities; testing, scanning, X-ray services, blood, and blood products used for patients.

Services for the elderly and disabled include healthcare, nutrition, and organizing cultural, sports, recreational, physiotherapy, and rehabilitation activities for the elderly and disabled.

In cases where the medical service package (as stipulated by the Ministry of Health) includes the use of pharmaceutical products, the revenue from pharmaceutical products within the medical service package is also not subject to VAT.

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Thus, pharmaceutical products may be subject to value-added tax, except in cases where the pharmaceutical products are included in the medical service package (as stipulated by the Ministry of Health), then the revenue from pharmaceutical products within the medical service package is not subject to VAT.

What is the VAT rate applied to pharmaceutical products?

Based on Clause 11, Article 10 of Circular 219/2013/TT-BTC amended by Clause 7, Article 147 of Decree 96/2023/ND-CP regarding the types of goods and services subject to a 5% VAT rate, the regulation is as follows:

VAT rate of 5%

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11. Medical equipment and instruments include medical machinery and tools: scanning, screening machines for patient examination and treatment; specialized equipment and instruments for surgery, wound treatment, ambulances; blood pressure, heart, and pulse measurement devices, blood transfusion equipment; syringes; contraceptive devices; medical equipment and tools with Import Licenses or Registration Certificates or Acceptance Certificates according to legal regulations on healthcare or according to the List of medical devices under specialized management by the Ministry of Health as determined by the list of exported and imported goods of Vietnam issued attached to Circular No. 14/2018/TT-BYT dated May 15, 2018, of the Minister of Health and amendment or supplementation documents (if any).

Cotton, medical gauze, and medical bandages; preventive and curative pharmaceutical products including finished pharmaceutical products, pharmaceutical product ingredients, excluding functional foods; vaccines; medical biological products, distilled water for preparing injections, infusion solutions; medical caps, clothes, masks, surgical drapes, gloves, leg coverings, shoe covers, specialized medical-use garments, chest implants, and fillers (excluding cosmetics); testing and disinfection chemicals used in healthcare.

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Thus, preventive and curative pharmaceutical products including finished products and pharmaceutical product ingredients will be subject to a 5% VAT rate, except for functional foods.