What 02 goods and services that are exempt from VAT shall be subject to 5% VAT rate in Vietnam from July 1, 2025?

What 02 goods and services that are exempt from VAT shall be subject to 5% VAT rate in Vietnam from July 1, 2025?

Firstly, according to Clause 3a, Article 5 of the Law on VAT 2008 as supplemented by Clause 1, Article 3 of the Law Amending and Supplementing Certain Articles of the Tax Laws 2014, the non-taxable objects are specified as follows:

Non-taxable objects

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3a. Fertilizers; specialized machinery and equipment for agricultural production; offshore fishing vessels; feed for livestock, poultry, and other animals.

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Additionally, at Clause 3a, Article 4 of Circular 219/2013/TT-BTC supplemented by Clause 2, Article 1 of Circular 26/2015/TT-BTC, the non-VAT objects are specified as follows:

Non-VAT Objects

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3a. Fertilizers including organic and inorganic fertilizers such as phosphate, urea, NPK, mixed nitrogen fertilizers, phosphate, potash fertilizers; microbial fertilizers, and other fertilizers;

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Offshore fishing vessels are those with main engine capacity from 90HP or more used for fisheries or logistical services for fisheries; special machines and equipment used for harvesting and preserving products for fishing vessels with main engine capacity from 90HP or more used for fisheries or logistical services for fisheries;

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Thus, according to the current Law on VAT 2008, fertilizers are not subject to VAT.

However, on July 1, 2025, the Law on VAT 2024 will officially come into effect, whereby two items (previously non-taxable) will transition to a 5% tax rate as stipulated in Clause 2, Article 9 of the Law on VAT 2024 Download as follows:

Tax Rates

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2. A 5% tax rate applies to the following goods and services:

a) Clean water for production and domestic use excluding bottled, canned water and other beverages;

b) Fertilizers, ores for fertilizer production, pesticides, and livestock growth stimulants according to the law;

c) Services of excavation and dredging of channels, ditches, ponds for agricultural production; planting, caring for, pest control for plants; preliminary processing, preservation of agricultural products;

d) Plant products, planted forests (except wood, bamboo shoots), livestock, aquaculture, catching and processing that have not been transformed into other products or only through ordinary preliminary processing, excluding products specified in Clause 1, Article 5 of this Law;

đ) Latex in the form of crepe rubber, sheet rubber, rubber threads, crum rubber; nets, ropes and threads for knitting fishing nets;

e) Products made from jute, reed, bamboo, rattan, leaves, straw, coconut shells, coconut husks, water hyacinth and other handicraft products produced from agricultural exploitation materials; raw combed cotton, carded cotton; newsprint paper;

g) Fishing vessels at sea; specialized machinery and equipment for agricultural production according to the regulations of the Government of Vietnam;

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Therefore, in summary, the two products not subject to VAT transitioning to 5% VAT from July 1, 2025, are:

- Fertilizers;

- Fishing vessels at sea.

What 02 goods and services that are exempt from VAT shall be subject to 5% VAT rate in Vietnam from July 1, 2025? (Image from the Internet)

What are the 0% tax rate provisions in Vietnam under the Law on VAT 2024?

According to Article 9 of the Law on VAT 2024 Download, the following are prescribed:

- A 0% tax rate applies to the following goods and services:

+ Exported goods including: goods from Vietnam sold to organizations, individuals abroad and consumed outside Vietnam; goods from domestic Vietnam sold to organizations in non-tariff areas and consumed within non-tariff areas serving directly the production for export; goods sold in isolation areas for individuals (foreigners or Vietnamese) who have completed exit procedures; goods sold in duty-free shops;

+ Exported services including: services provided directly to organizations, individuals abroad and consumed outside Vietnam; services provided directly to organizations in non-tariff areas and consumed within non-tariff areas serving directly the production for export;

+ Other exported goods and services include: international transportation; rental of transportation vehicles used outside Vietnam’s territory; services of the aviation and maritime industries provided directly or through agents for international transportation; overseas or non-tariff area construction and installation activities; digital content information products provided to abroad parties that have dossiers and documents proving use outside Vietnam as per the Government of Vietnam regulations; accessories, spare parts for repair, maintenance of vehicles, machinery, equipment for overseas parties and used outside Vietnam; processed goods for export transition per law; goods, services exempted from VAT when exported, except for cases not applying the 0% tax rate as specified at point d, this Clause;

+ Cases not applying the 0% tax rate include: technology transfer, intellectual property right transfer abroad; reinsurance services abroad; credit granting services; capital transfer; derivative products; postal, telecommunication services; product exports specified in Clause 23, Article 5 of this Law; tobacco, alcohol, beer imported then exported; gasoline purchased domestically sold to businesses in non-tariff areas; automobiles sold to organizations, individuals in non-tariff areas.

What are some notes regarding the Law on VAT 2024 in Vietnam?

Pursuant to Article 18 of the Law on VAT 2024 Download:

Note: The Law on VAT 2024 takes effect from July 1, 2025, except for cases specified in Clause 2, Article 18 of the Law on VAT 2024 Download.

- Provisions on revenue levels for households, individuals engaged in production and business subject to tax exemption as per Clause 25, Article 5 of this Law and Article 17 of this Law shall take effect from January 1, 2026.

- The Law on VAT No. 13/2008/QH12 amended and supplemented by Law No. 31/2013/QH13, Law No. 71/2014/QH13, and Law No. 106/2016/QH13 shall cease to be effective from the date when the Law on VAT 2024 comes into effect.