What goods and services are not subject to VAT reduction in Vietnam under Decree 72?

What goods and services are not subject to VAT reduction in Vietnam under Decree 72?

Under Clause 1, Article 1 of Decree 72/2024/ND-CP stipulating the VAT reduction:

*  VAT on goods and services that are currently subject to 10% VAT shall be reduced, except the following goods and services:

- Telecommunication, financial activities, banking activities, securities, insurance, trading of real estate, metal and precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products. Further details are provided in Appendix I enclosed herewith. (Download Appendix 1)

- Goods and services subject to excise tax. Further details are provided in Appendix II enclosed herewith. (Download Appendix 2)

- Information technology products and services as prescribed in the Law on information technology. Further details are provided in Appendix III enclosed herewith. (Download Appendix 3)

- VAT on goods and services of a specific type as specified in Clause 1, Article 1 of Decree 72/2024/ND-CP shall be reduced consistently in all stages, including import, production, processing and trading. Coal products mined for sale (including coal products mined and then washed, sieved and classified under a closed process before they are sold) are eligible for VAT reduction. Coal products in Appendix I enclosed herewith (Download Appendix 1) are not eligible for VAT reduction in any stages other than the mining stage.

Coal products produced under a closed process of economic corporations or groups shall be also eligible for VAT reduction.

In case any of the goods and services in Appendixes I, II and III enclosed herewith is not subject to VAT or is subject to 5% VAT in accordance with the Law on value-added tax, VAT on that good or service shall be paid in accordance with the Law on value-added tax and shall not be reduced.

What goods and services are not subject to VAT reduction in Vietnam under Decree 72? (Image from the Internet)

What are the VAT reduction procedures in 2024 in Vietnam?

Pursuant to Clause 3, Article 1 of Decree 72/2024/ND-CP stipulating the VAT reduction procedures:

* Procedures for implementation

- When issuing VAT invoices for goods and services eligible for VAT reduction, the business establishments specified at Point a, Clause 2, Article 1 of Decree 72/2024/ND-CP shall write “8%” on the “VAT rate” line, VAT amount payable, and total amount payable by the buyer on the issued invoice. The good seller or service provider shall declare output VAT and the good buyer or service user shall declare and deduct input VAT according to the VAT amount written on the VAT invoice.

- When issuing sales invoices for goods and services on which VAT is reduced, the business establishments specified in Point b Clause 2, Article 1 of Decree 72/2024/ND-CP shall write the amount before reduction in the "Thành tiền" ("Amount") column, the amount payable after reduction (by 20% of the tax rate on revenue) in the “Cộng tiền hàng hóa, dịch vụ” ("Total amount") line, and the note “đã giảm... (số tiền) tương ứng 20% mức tỷ lệ % để tính thuế giá trị gia tăng theo Nghị quyết số 142/2024/QH15” ("an amount of......., equivalent to 20% of the tax rate used as the basis for calculating VAT, is reduced according to Resolution No. 142/2024/QH15”) on the issued invoice.

What are the regulations on VAT payers in Vietnam?

Pursuant to the provisions of Clauses 1 and 2, Article 2 of Decree 209/2013/ND-CP, regulations on VAT payers are as follows:

Tax payers

1. Value-added tax payers include organizations and individuals producing or trading in goods or services subject to value-added tax (below referred to as business establishments) and organizations and individuals importing goods subject to value-added tax (below referred to as importers).

2. Vietnam-based production and business organizations and individuals that purchase services (including services associated with goods) from foreign organizations without permanent establishments in Vietnam or overseas individuals not residing in Vietnam shall be value-added tax payers, unless they are not required to declare, calculate and pay value-added tax defined at point b Clause 3 of this Article.

Permanent establishments and overseas individuals being non-residents at this Clause must comply with the laws on enterprise income tax and personal income tax.

3. Cases are not required to declare, calculate and pay value-added tax:

a) Organizations and individuals receive amounts involving compensation, awards, subsidies, money for transfer of emission right and other financial revenues.

b) Vietnam-based production and business organizations and individuals that purchase services from foreign organizations without permanent establishments in Vietnam or overseas individuals not residing in Vietnam including the following cases: repair of means of transport, machinery or equipment (including supplies and spare parts); advertisement and marketing; investment and trade promotion; goods sale and service provision brokerage: or training; or share with foreign partners charges for international post or telecommunications services provided outside Vietnam.

c) The non-business organizations and individuals are not value- added tax payer upon selling assets.

d) Organizations and individuals that transfer investment projects for production of and trading in goods or services subject to value-added tax to enterprises or cooperatives.

dd) Cultivation, husbandry and aquatic products which have not yet been processed into other products or have been just preliminarily processed and sold to enterprises or cooperatives, except for case defined at Clause 1 Article 5 of the Law on value-added tax.

The Ministry of Finance shall guide specifically provisions at Clauses 2 and 3 of this Article.

Thus, according to the regulations, VAT payers include:

- Value-added tax payers include organizations and individuals producing or trading in goods or services subject to value-added tax (below referred to as business establishments) and organizations and individuals importing goods subject to value-added tax (below referred to as importers).

- Vietnam-based production and business organizations and individuals that purchase services (including services associated with goods) from foreign organizations without permanent establishments in Vietnam or overseas individuals not residing in Vietnam shall be value-added tax payers, unless they are not required to declare, calculate and pay value-added tax defined at point b Clause 3 of, Article 2 of Decree 209/2013/ND-CP.

*Note: Permanent establishments and overseas individuals being non-residents at this Clause must comply with the laws on enterprise income tax and personal income tax.