What are the applicable VAT rates in Vietnam?

What are the applicable VAT rates in Vietnam?

According to Article 8 of the Law on VAT 2008, amended and supplemented by Clause 3, Article 1 of the Law on Amending Law on VAT 2013 (amended by Clause 2, Article 1 of Law No. 106/2016/QH13); Clause 3, Article 3 of the Law on Amending the Laws on Taxation 2014, the regulations on the VAT rate are as follows:

* The 0% tax rate applies to exported goods and services, international transportation, and goods and services not subject to VAT as stipulated in Article 5 of the Law on VAT 2008 when being exported, except for the following cases:

- Technology transfer and intellectual property rights transfer abroad.

- Reinsurance services abroad.

- Credit granting services.

- Capital transfer.

- Derivative financial services.

- Postal and telecommunications services.

- Exported products stipulated in Clause 23 Article 5 of the Law on VAT 2008.

Exported goods and services are those consumed outside Vietnam, in non-tariff zones; goods and services provided to foreign customers as stipulated by the Government of Vietnam.

* The 5% tax rate applies to the following goods and services:

- Tap water used for production and daily life.

- Ore for fertilizer production; pest control chemicals and growth stimulants for animals and plants.

- Services of earthwork, dredging canals, ditches, ponds, and lakes for agricultural production; tending, pest control for plants; preliminary processing and storage of agricultural products.

- Unprocessed agricultural, livestock, and aquacultural products, except for those stipulated in Clause 1 Article 5 of this Law.

- Preliminarily processed rubber latex; preliminarily processed turpentine; nets, ropes, and fibers for making fishing nets.

- Fresh food; unprocessed forest products except timber, bamboo shoots, and the products stipulated in Clause 1 Article 5 of the Law on VAT 2008.

- Sugar; by-products in sugar production, including molasses, bagasse, and mud.

- Products made from jute, coconut coir, palm leaves, straw, coconut shells, water hyacinth, and other handicraft products made from agricultural by-products; preliminary processed cotton; newsprint.

- Medical equipment, utensils, bandages, and sanitary napkins; preventive and curative medicines; chemical pharmaceutical products and medicinal herbs used for making preventive and curative medicines.

- Teaching and learning aids, including models, charts, boards, chalk, rulers, compasses, and specialized equipment and tools for teaching, research, and scientific experiments.

- Cultural, exhibition, sports activities; art performances, film production; importation, distribution, and screening of films.

- Toys for children; books of all kinds, except those stipulated in Clause 15 Article 5 of the Law on VAT 2008.

- Scientific and technological services as stipulated by the Law on Science and Technology.

- Sale, lease, and lease-purchase of social housing as stipulated by the Housing Law.

* 10% Tax Rate applies to goods and services not specified in Clauses 1 and 2, Article 8 of the Law on VAT 2008.

* From July 1, 2024, reduce VAT rate to 8% for goods and services currently subject to the 10% tax rate, except for the following groups:

- Telecommunications, financial, banking, securities, insurance activities, real estate business, metals and metal products, fabricated metals, mining products (excluding coal mining), coke, refined petroleum, and chemical products. Details are in Appendix 1 issued with Decree 72/2024/ND-CP.

- Products and services subject to special consumption tax. Details are in Appendix 2 issued with Decree 72/2024/ND-CP.

- Information technology under the law on information technology. Details are in Appendix 3 issued with Decree 72/2024/ND-CP.

- The reduction of VAT for each type of goods and services as stipulated in Clause 1, Article 1 of Decree 72/2024/ND-CP is uniformly applied at all stages of import, production, processing, and commercial trade.

For coal products sold (including the case where coal is mined and then screened, classified, and sold as per a closed process), these are subject to VAT reduction. The coal products listed in Appendix 1 issued with Decree 72/2024/ND-CP at other stages besides the stage of direct sale extraction are not eligible for VAT reduction.

Major corporations and economic conglomerates conducting a closed process and selling coal products are also eligible for VAT reduction for coal products extracted and sold.

If goods and services specified in Appendices 1, 2, and 3 issued with Decree 72/2024/ND-CP fall under the scope of non-taxable or 5% tax rate according to the Law on VAT, follow the regulations of the Law on VAT 2008 without a VAT reduction.

(Article 1 of Decree 72/2024/ND-CP).

What are the applicable VAT rates in Vietnam? (Image from the Internet)

What are the methods for calculating VAT in Vietnam?

According to Article 9 of the Law on VAT 2008, the methods for calculating VAT include:

- Value-added tax credit method

- Method of calculation of tax based directly on added value.

Which entities apply the VAT credit method in Vietnam?

According to Clause 2, Article 10 of the Law on VAT 2008, amended by Clause 4, Article 1 of the Law on Amending Law on VAT 2013, the credit method is applied to business establishments that fully adhere to accounting, invoice, and document policies as prescribed by law on accounting, invoices, and documents, including:

- Business establishments with annual revenue from goods sales and services provision of one billion dong or more, except for households and individuals engaged in business;

- Business establishments voluntarily registering to apply the credit method, except for households and individuals engaged in business.

Which entities apply the method of calculation of tax based directly on added value in Vietnam?

According to Clause 2, Article 11 of the Law on VAT 2008, amended by Clause 5, Article 1 of the Law on Amending Law on VAT 2013, the entities applying the method of calculation of tax based directly on added value include:

- Enterprises and cooperatives with annual revenue below the revenue threshold of one billion dong, except those voluntarily registering to apply the credit method stipulated in Clause 2, Article 10 of the Law on VAT 2008;

- Household and individual businesses;

- Foreign organizations and individuals engaged in business without permanent establishment in Vietnam but generating revenue in Vietnam that have not fully adhered to accounting, invoice, and document disciplines, except those foreign organizations and individuals supplying goods and services for activities related to oil and gas exploration, development, and extraction, where tax is paid under the credit method by the Vietnamese party on their behalf;

- Other economic organizations, except those registered to pay tax under the credit method stipulated in Clause 2, Article 10 of the Law on VAT 2008.