Shall a business establishment that only manufactures products or provides services subject to a 5% VAT rate receive a tax refund in Vietnam from July 1, 2025?

Shall a business establishment that only manufactures products or provides services subject to a 5% VAT rate receive a tax refund in Vietnam from July 1, 2025?

Pursuant to Clause 3, Article 15 of the Law on Value Added Tax 2024 (effective from July 1, 2025), the regulation on VAT refunds is as follows:

Value Added Tax Refund

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3. A business establishment that solely produces goods or provides services subject to a 5% VAT rate can receive a VAT refund if the input VAT amount not yet deducted reaches 300 million VND or more after 12 consecutive months or 4 consecutive quarters; in cases where the business establishment produces goods or provides services subject to multiple VAT rates, the refund shall be made according to the allocation ratio prescribed by the Government of Vietnam.

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Thus, from July 1, 2025, a business establishment that deals solely in goods and services subject to a 5% VAT rate can receive a tax refund if it meets the condition of having an input VAT amount not yet deducted of 300 million VND or more after 12 consecutive months or 4 consecutive quarters.

Additionally, in cases where the business establishment produces goods or provides services subject to multiple VAT rates, the refund shall be made according to the allocation ratio prescribed by the Government of Vietnam.

Shall a business establishment that only manufactures products or provides services subject to a 5% VAT rate receive a tax refund in Vietnam from July 1, 2025? (Image from the Internet)

What types of goods and services are subject to a 5% VAT rate in Vietnam?

Pursuant to Clause 2, Article 9 of the Law on Value Added Tax 2024 (effective from July 1, 2025), the types of goods and services subject to a 5% VAT rate are as follows:

- Clean water for production and daily life, excluding bottled water, canned water, and other beverages;

- Fertilizers, ores for fertilizer production, plant protection chemicals, and livestock growth stimulants as prescribed by law;

- Services for digging and dredging canals, ditches, ponds, and lakes for agricultural production; cultivating, caring, pest control for plants; preliminary processing, preservation of agricultural products;

- Products from crops, planted forests (except wood, bamboo shoots), livestock, aquaculture, fishing that have not been processed into other products or only undergone ordinary preliminary processing, except for products stipulated in Clause 1, Article 5 of the Law on Value Added Tax 2024;

- Rubber latex in crepe, sheet, bun, or crumb form; nets, twine, and fibers for weaving fishing nets;

- Products made from jute, rush, bamboo, rattan, leaves, straw, coconut shell, water hyacinth, and other handicraft products produced from reused agricultural materials; cotton fibers that have undergone coarse or fine combing; newspaper printing paper;

- Fishing vessels for exploitation in the sea; machinery, specialized equipment for agricultural production as prescribed by the Government of Vietnam;

- Medical equipment as prescribed by the law on medical equipment management; preventive and therapeutic medicines; pharmaceutical substances and herbal materials for manufacturing preventive and therapeutic medicines;

- Equipment for teaching and learning, including models, drawings, boards, chalk, rulers, compasses;

- Activities of traditional and folk performing arts;

- Toys for children; all kinds of books, except for those prescribed in Clause 15, Article 5 of the Law on Value Added Tax 2024;

- Scientific and technological services as prescribed by the Law on Science and Technology;

- Sale, lease, lease-purchase of social housing as prescribed by the Housing Law 2023.

What are the conditions for VAT refund according to the new regulations for business establishments in Vietnam?

Pursuant to Clause 9, Article 15 of the Law on Value Added Tax 2024 (effective from July 1, 2025), the conditions for a business establishment to receive a VAT refund are as follows:

Value Added Tax Refund

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9. A business establishment falling under the refund cases prescribed in this Article must meet the following conditions:

a) Business establishments eligible for a refund as prescribed in Clauses 1, 2, 3, and 4 of this Article must submit VAT under the deduction method, maintain and store accounting records and documentation in accordance with the legal regulations on accounting; maintain a bank account registered with the tax code of the business establishment;

b) Comply with the regulations on the deduction of input VAT as prescribed in Clause 2, Article 14 and not falling under the cases prescribed in Clause 3, Article 14 of this Law;

c) The seller has declared and paid VAT for the invoice issued to the business establishment requesting a refund.

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Additionally, according to the provisions in Clauses 2 and 3 of Article 14 of the Law on Value Added Tax 2024 (effective from July 1, 2025) regarding the deduction of input VAT.

Thus, a business establishment eligible for a VAT refund must meet the following conditions:

- Fall under the cases eligible for VAT refund as prescribed in Clauses 1, 2, 3, and 4, Article 15 of the Law on Value Added Tax 2024.

- Be a business establishment submitting VAT under the deduction method, maintaining and storing accounting records and documentation in accordance with the legal regulations on accounting.

- Maintain a bank account registered with the tax code of the business establishment.

- Meet the conditions for input VAT deduction as follows:

+ Have VAT invoices for purchased goods or services or documents of VAT payment at the import stage or VAT payment certificates on behalf of overseas parties as prescribed in Clauses 3 and 4, Article 4 of the Law on Value Added Tax 2024. The Minister of Finance prescribes VAT payment certificates on behalf of overseas parties;

+ Have non-cash payment documents for purchased goods or services, except for certain special cases as prescribed by the Government of Vietnam;

+ For export goods or services, in addition to the conditions prescribed at Points a and b, Clause 2, Article 14 of the Law on Value Added Tax 2024, must also have: signed contracts with foreign parties for the sale, processing of goods, provision of services; sales invoices for goods or services; non-cash payment documents; customs declarations for export goods; packing slips, bills of lading, and insurance documents for goods (if any). The Government of Vietnam prescribes the conditions for deduction concerning exports through overseas e-commerce platforms and several other special cases.

- Not falling under the case of a business establishment not meeting the conditions for input VAT deduction and invoices, documents created from prohibited acts under the Law on Value Added Tax 2024.

- The seller has declared and paid VAT for the invoices issued to the business establishment requesting a refund.