What are regulations on the retail electricity price in Vietnam from February 1, 2025? What is the VAT for residential electricity?
What are regulations on the retail electricity price in Vietnam from February 1, 2025?
Based on Clause 1, Article 50 of the Law on Electricity 2024 (effective from February 1, 2025), regulations on electricity pricing are as follows:
Electricity Pricing
- The retail electricity price is regulated as follows:
a) The retail electricity price is constructed by the retail electricity unit based on electricity pricing policies, the pricing framework of the average retail electricity price, mechanisms for adjusting the average retail electricity price, and the structure of the retail electricity price schedule;
b) Retail electricity prices are detailed for each category of electricity consumer, appropriate to the socio-economic conditions of each period and the level of the competitive electricity market, including: production, business, administrative undertakings, and residential use. Time-of-use retail electricity prices throughout the day apply to qualified electricity consumers, including peak, off-peak, and standard electricity rates. For residential consumers who do not qualify or do not choose to participate in the competitive electricity market, tiered progressive residential electricity prices apply.
- The wholesale electricity price under the electricity purchase agreement is negotiated and agreed upon by electricity units as specified in point e of Clause 12, Article 5 of this Law.
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Thus, from February 1, 2025, the retail electricity price is regulated as follows:
- The retail electricity price is constructed by the retail electricity unit based on electricity pricing policies, the framework of the average retail electricity price, mechanisms for adjusting the average retail electricity price, and the structure of the retail electricity price schedule;
- Retail electricity prices are detailed for each category of consumer, appropriate to the socio-economic conditions of each period and the level of the competitive electricity market, including: production, business, administrative undertakings, and residential uses.
Time-of-use retail electricity prices throughout the day apply to qualified electricity consumers, including peak, off-peak, and standard electricity rates.
For residential consumers who do not qualify or do not choose to participate in the competitive electricity market, tiered progressive residential electricity prices apply.
What are regulations on the retail electricity price in Vietnam from February 1, 2025? (Image from Internet)
What are the State’s policies regarding electricity pricing and electricity service pricing in Vietnam?
According to Clause 12, Article 5 of the Law on Electricity 2024, state policies on electricity pricing and electricity service pricing are specified as follows:
- Ensure the reflection of reasonable and legitimate production and business costs of electricity companies; facilitate the investment and development of the electricity sector by various economic components with reasonable profit, save energy resources, use renewable and new energy sources in electricity activities, contributing to socio-economic development, especially in rural, ethnic minority, mountainous, border, island areas, and areas with particularly difficult socio-economic conditions;
- Electricity retail prices are implemented according to the market mechanism with state-regulated prices suitable to the level of the competitive electricity market;
- Ensure that electricity prices encourage efficient and economical use of electricity;
- Implement a reasonable retail electricity price structure, gradually eliminate cross-subsidization of electricity prices among customer groups not participating in the competitive retail electricity market when they are unqualified or do not choose to participate in buying and selling electricity in the competitive retail electricity market;
- Gradually eliminate cross-subsidization of electricity prices among customer groups, regions, and localities, in line with the competitive electricity market level;
- Ensure the right to self-decision on electricity purchase prices, sales prices not exceeding the electricity price frame, and retail electricity price structure prescribed by the State;
- Protect the legal rights and interests of electricity companies and electricity consumers. Electricity prices must be implemented transparently, openly, and equally without discrimination among electricity units;
- Establish suitable electricity pricing mechanisms for special consumer groups following state policies appropriate to the socio-economic development situation in each period.
What is the current VAT rate for residential electricity in Vietnam?
According to Article 3 of the Value Added Tax Law 2008, goods and services used for production, business, and consumption in Vietnam are subject to VAT, except for subjects specified in Article 5 of the Value Added Tax Law 2008.
According to the above regulation, electricity (whether for residential or business purposes) is subject to VAT.
Additionally, according to the provisions in Article 8 of the Value Added Tax Law 2008 (amended by Clause 3 Article 1 of the Value Added Tax Amendment Law 2013, Clause 2 Article 3 of the Tax Amendment Law 2014, and Clause 2 Article 1 of the VAT, Excise Tax and Tax Administration Amendment Law 2016), the current VAT rates are regulated as follows:
- A 0% rate applies to export goods and services (in line with international practices).
- A 5% rate applies to essential goods and services for everyday life and inputs for agricultural production.
- A 10% rate applies to other common goods and services.
Thus, electricity (whether for residential or business purposes) is subject to a VAT rate of 10%.
VAT is levied on goods and services without distinguishing by the object or purpose of usage. The VAT Law does not stipulate any exemptions or reductions for VAT applied. Individuals and households using electricity (for residential purposes or business) apply a VAT rate according to the stipulated tax rate.
Additionally, pursuant to Article 1 of Decree 180/2024/ND-CP, regulations on VAT reduction are stipulated as follows:
Value Added Tax Reduction
1. VAT reduction for groups of goods and services currently applying the 10% tax rate, except for the following groups of goods and services:
a) Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and fabricated metal products, mineral products (excluding coal mining), coke, refined petroleum, chemical products. Details are in Appendix I attached to this Decree.
b) Goods and services subject to excise tax. Details are in Appendix II attached to this Decree.
c) Information technology in accordance with information technology law. Details are in Appendix III attached to this Decree.
d) The VAT reduction for each type of goods and services specified in Clause 1 of this Article is applied uniformly at import, production, processing, and commercial business stages. For coal sold after extraction (including cases where coal is extracted and then sorted, classified in a closed process before sale), it is eligible for VAT reduction. Coal products in Appendix I issued with this Decree, in stages other than the extraction sale, are not eligible for VAT reduction.
Corporations and economic groups operating in a closed process before sales also qualify for VAT reduction on coal products extracted and sold.
In cases where goods and services in Appendices I, II, and III attached to this Decree are not subject to VAT or subject to a 5% VAT according to the Value Added Tax Law, follow the provisions of the Value Added Tax Law and are not eligible for VAT reduction.
- Level of VAT reduction
a) Business establishments applying the credit-invoice method apply a VAT rate of 8% for goods and services stipulated in Clause 1 of this Article.
b) Business establishments (including business households, individual businesses) applying the percentage method on revenue are entitled to a 20% reduction in the percentage used to calculate VAT when issuing invoices for goods and services eligible for VAT reduction according to Clause 1 of this Article.
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Thus, the current VAT rate for residential electricity is 8%.
