From July 1, 2025, how will business establishment sells goods or services with different VAT rates determine the VAT rates in Vietnam?

From July 1, 2025, how will business establishment sells goods or services with different VAT rates determine the VAT rates in Vietnam?

Based on Clause 4, Article 9 of the 2024 Law on Value-Added Tax (VAT) (effective from July 1, 2025) that stipulates the VAT rates as follows:

Tax Rates

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4. business establishment sells goods or services with different VAT rates (including non-VAT applicable sectors) must declare VAT at each rate specified for each type of goods and services; if businesses do not determine according to each rate, they must calculate and pay VAT at the highest rate applicable to the goods and services produced and operated by the business.

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Thus, from when the 2024 Law on Value-Added Tax becomes effective on January 1, 2025, business establishment sells goods or services with different VAT rates (including non-VAT applicable sectors) must declare VAT according to each rate specified for each type of goods and services.

In cases where businesses do not determine according to each rate, they must calculate and pay VAT at the highest rate applicable to the goods and services that the business produces and operates.

From July 1, 2025, how will business establishment sells goods or services with different VAT rates determine the VAT rates in Vietnam? (Image from the Internet)

Which entities are VAT payers in Vietnam from July 1, 2025?

Based on Article 4 of the 2024 Law on Value-Added Tax (effective from July 1, 2025) regarding VAT payers as follows:

- Organizations, households, and individuals producing and trading goods and services subject to value-added tax (hereinafter referred to as business establishments).

- Organizations and individuals importing goods subject to value-added tax (hereinafter referred to as importers).

- Organizations and individuals producing and trading in Vietnam that purchase services (including services associated with goods) from foreign organizations without permanent establishments in Vietnam, non-resident individuals abroad, except for cases specified in Clauses 4 and 5 of this Article; organizations producing and trading in Vietnam purchase goods and services for conducting activities like exploration and exploitation of oil and gas fields of foreign organizations without permanent establishments in Vietnam, non-resident individuals abroad.

- Foreign suppliers without permanent establishments in Vietnam conducting e-commerce and digital platform-based business with organizations and individuals in Vietnam (hereinafter referred to as foreign suppliers); organizations managing foreign digital platforms implement withholding tax obligations on behalf of foreign suppliers; organizations conducting business in Vietnam applying the value-added tax calculation method by the deduction method purchase services from foreign suppliers without permanent establishments in Vietnam through e-commerce channels or digital platforms implement withholding tax obligations on behalf of the foreign suppliers.

- Organizations managing e-commerce trading platforms, digital platforms with payment functions, implementing withholding taxes on behalf, declaring the withheld tax for business households, and individuals conducting business on e-commerce platforms, digital platforms.

According to the new regulations, when is the time for determination of VAT for goods and services in Vietnam?

Based on Article 8 of the 2024 Law on Value-Added Tax (effective from July 1, 2025), the time of determination for value-added tax is stipulated as follows:

- For goods, it is the time of transferring ownership or the right to use goods to the buyer or the time of issuing the invoice, irrespective of whether the payment has been collected or not;

- For services, it is the time of completion of the service provision or the time of issuing the service provision invoice, irrespective of whether the payment has been collected or not.

- The Government of Vietnam prescribes in detail the timing of VAT determination for goods and services, including: Export goods, import goods; Telecommunication services; Insurance business services; Electricity supply activities, electricity production activities, clean water services; Real estate business activities; Construction and installation activities, and oil and gas activities.