Shall a 8% or 10% VAT rate apply for food services in Vietnam in 2024?

Shall a 8% or 10% VAT rate apply for food services in Vietnam in 2024?

VAT (also known as Value Added Tax) is a tax levied on the added value of goods and services arising during the production, circulation, and consumption process as stipulated in Article 2 of the Law on Value Added Tax 2008.

Pursuant to Article 11 of Circular 219/2013/TT-BTC, which provides for goods and services subject to a 10% tax rate as follows:

10% Tax Rate

The 10% tax rate applies to goods and services not specified in Article 4, Article 9, and Article 10 of this Circular.

The VAT rates mentioned in Article 10 and Article 11 are uniformly applied to each type of goods and services at all stages of import, production, processing, or commercial business.

Example 50: If garments are subject to a 10% tax rate, then this item at the stages of import, production, processing, or commercial business is subject to a 10% tax rate.

Recovered scrap materials for recycling or reuse, when sold, are subject to the VAT rate applicable to the sold scrap materials.

A business establishment dealing in multiple types of goods and services with different VAT rates must declare VAT at each prescribed rate for each type of goods and services; if the business establishment cannot specify each rate, they must calculate and pay tax at the highest rate applicable to the goods and services produced or traded.

During implementation, if there is any inconsistency between the VAT rate in the VAT rate schedule as per the Preferential Import Tariff and the guidance in this Circular, follow the guidance in this Circular. If the VAT rate is not uniformly applied to the same type of imported and domestically produced goods, the local tax and customs authorities shall report to the Ministry of Finance for prompt guidance to ensure uniform implementation.

Thus, it means that the 10% tax rate applies to goods and services not exempt from VAT, subject to a 0% tax rate, or a 5% tax rate, including food services.

Additionally, Article 1 of Decree 72/2024/ND-CP stipulates the VAT reduction policy for goods and services until the end of 2024 as follows:

Reduction of VAT for groups of goods and services currently applying the 10% tax rate, except for the following groups of goods and services:

- Telecommunications, finance activities, banking, securities, insurance, real estate business, metals and fabricated metal products, mineral products (excluding coal mining), coke, refined petroleum, chemical products. Details in Appendix I attached to Decree 72/2024/ND-CP.

- Goods and services subject to special consumption tax. Details in Appendix II attached to Decree 72/2024/ND-CP.

- Information technology according to the law on information technology. Details in Appendix III attached to Decree 72/2024/ND-CP.

- The VAT reduction for each type of goods and services stipulated in Clause 1 Article 1 of Decree 72/2024/ND-CP is uniformly applied at all stages of import, production, processing, commercial business. For coal extracted and sold (including coal extracted then sorted, classified through a closed process before being sold) subject to VAT reduction. Coal items in Appendix I attached to Decree 72/2024/ND-CP, at other stages outside of the extraction and sale stage, are not subject to VAT reduction.

Large companies and economic corporations implementing a closed loop process before selling coal extracted are also subject to VAT reduction for the extracted coal items.

In cases where goods and services listed in Appendices I, II, and III attached to Decree 72/2024/ND-CP fall under the categories not subject to VAT or subject to 5% VAT according to the Law on Value Added Tax 2008, they shall comply with the provisions of the Law on Value Added Tax 2008 and are not eligible for VAT reduction.

Thus, from the above regulations, it can be inferred that VAT on food services is 10% but reduced to 8% according to Decree 72/2024/ND-CP (the VAT reduction is applicable until December 31, 2024).

Shall a 8% or 10% VAT rate apply for food services in Vietnam in 2024? (Image from the Internet)

Who is responsible for paying VAT and bearing VAT in Vietnam?

According to the provisions of Article 4 of the Law on Value Added Tax 2008, entities responsible for paying VAT are organizations and individuals producing, trading goods and services subject to VAT (hereinafter referred to as business establishments) and organizations and individuals importing goods subject to VAT (hereinafter referred to as importers).

Furthermore, VAT is an indirect tax calculated on the added value of goods and services arising during the production, circulation, and consumption stages, thus VAT is included in the sale price of goods and services and is ultimately paid by the consumer when purchasing the product. In other words, the consumer is the one who bears VAT when using goods and services.

Therefore, the entities responsible for paying VAT are the business establishments or importers, while the entities bearing VAT are the consumers.

When is the VAT determined in Vietnam?

As regulated in Article 8 of Circular 219/2013/TT-BTC, the time for determining VAT is as follows:

- For the sale of goods, it is the time of transfer of ownership or right to use the goods to the buyer, regardless of whether payment has been collected or not.

- For service provision, it is the time when the service is completed or the time of issuance of the service provision invoice, regardless of whether payment has been collected or not.

For telecommunication services, it is the time of completion of data reconciliation on telecommunication connection charges as per economic contracts between telecommunication service businesses but not later than 2 months from the month of arising telecommunication connection charges.

- For electricity and clean water supply activities, it is the date of recording the electricity and water consumption meter readings for billing on the invoice.

- For real estate business, infrastructure construction, house construction for sale, transfer, or lease, it is the time of payment collection as per project implementation progress or as stated in the contract. Based on the collected amount, the business establishment declares VAT for the period.

- For construction and installation, including shipbuilding, it is the time of work acceptance and handover, regardless of whether payment has been collected or not.

- For imported goods, it is the time of registration of the customs declaration.