Is gasoline subject to VAT? What is the VAT rate applied to gasoline in Vietnam?

Is gasoline subject to VAT? What is the VAT rate applied to gasoline in Vietnam?

Pursuant to the provisions in Article 2 of the Law on Value-Added Tax 2008, the concept of value-added tax is specified as follows:

Value-Added Tax

Value-added tax is a tax levied on the added value of goods and services arising from production, circulation to consumption.

According to Article 3 of the Law on Value-Added Tax 2008, objects subject to value-added tax include goods and services used for production, business, and consumption in Vietnam, except for goods and services stipulated in Article 5 of the Law on Value-Added Tax 2008.

Simultaneously, gasoline do not fall under the regulations for a 0% tax rate applied to exported goods and services; the 5% tax rate applies to a number of essential goods and services such as clean water, agricultural products, and the 10% tax rate applies to other taxable goods and services.

Article 11 of the Law on Value-Added Tax 2008 specifies that gasoline are subject to a 10% VAT rate similar to many other groups of goods and services.

Therefore, gasoline are subject to a 10% value-added tax rate.

Is gasoline subject to VAT? What is the VAT rate applied to gasoline in Vietnam? (Image from the Internet)

Will there be a VAT reduction for gasoline in Vietnam in 2024?

Based on Article 1 of Decree 72/2024/ND-CP, the regulation is as follows:

Reduction of Value-Added Tax

1. Reduce the value-added tax for groups of goods and services currently subject to a 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 can be found in Annex I issued with this Decree.

b) Products and services subject to special consumption tax. Details can be found in Annex II issued with this Decree.

c) Information technology according to the law on information technology. Details can be found in Annex III issued with this Decree.

d) The reduction of value-added tax for each type of goods and services specified in Clause 1 of this Article shall be uniformly applied at importation, production, processing, and commercial business stages. For mined coal sold (including cases where coal is mined and then screened, classified in a closed-loop process before being sold), it is subject to a reduction in value-added tax. Coal is included in Annex I issued with this Decree; other stages besides mining and sale do not receive value-added tax reduction.

State corporations, economic groups following a closed-loop process for selling mined coal are also subject to a reduction in value-added tax on mined coal sold.

In cases where goods and services listed in Annex I, II, and III issued with this Decree are subject to either non-VAT or a 5% VAT according to the Law on Value-Added Tax, regulations of the Law on Value-Added Tax shall be applied, and they shall not receive a VAT reduction.

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Accordingly, gasoline listed as commodities subject to special consumption tax will not see a VAT reduction in 2024.

This also means that the gasoline will still be subject to a 10% VAT rate.

When is the VAT reduction to 8% effective?

According to the provisions in Clause 1, Article 2 of Decree 72/2024/ND-CP as follows:

Effective date and implementation

1. This Decree shall take effect from July 1, 2024, until the end of December 31, 2024.

2. The ministries according to their functions and duties and the People's Committees of centrally run provinces and cities direct relevant agencies to deploy, propagate, guide, inspect, and supervise so that consumers understand and benefit from the VAT reduction specified in Article 1 of this Decree, focusing on solutions to stabilize the supply and demand of goods and services subject to VAT reduction to keep market price levels stable (prices excluding value-added tax) from July 1, 2024, to the end of December 31, 2024.

3. In case of issues arising during implementation, the Ministry of Finance is assigned to guide and resolve them.

4. Ministers, heads of ministerial-level agencies, heads of agencies under the Government of Vietnam, chairpersons of People's Committees of centrally run provinces and cities, and businesses, organizations, and individuals concerned shall be responsible for the implementation of this Decree.

The Decree 72/2024/ND-CP is effective from July 1, 2024, until the end of December 31, 2024.

This means the VAT reduction to 8% will only apply until December 31, 2024.

From January 1, 2025, the VAT rate for goods and services eligible for a reduction will revert to 10% (unless there is another governing document).