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

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

Based on Clause 2, Article 8 of the VAT Law 2008, as amended by Clauses 2 and 3, Article 3 of the Law on Amending Various Tax Laws 2014 supplemented by Clause 3, Article 1 of the Law on Amending VAT Law 2013, the VAT rate of 5% applies to:

- 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.

What are the goods and services subject to the VAT rate of 5% in Vietnam? (Image from the Internet)

What are the goods and services subject to the VAT rate of 0% in Vietnam?

Under Clause 1, Article 8 of the VAT Law 2008, as amended by Clause 3, Article 1 of the Law on Amending VAT Law 2013 as amended by Clause 2, Article 1 of Law No. 106/2016/QH13, the VAT rate of 0% applies to exported goods and services, international transport, and goods and services not subject to VAT as prescribed in Article 5 of the VAT Law 2008 when exported, except for the following cases:

- Transfer of technology and intellectual property rights abroad;

- Reinsurance services abroad;

- Credit services;

- Capital transfer;

- Derivative financial services;

- Postal and telecommunications services;

- Exported goods specified in Clause 23, Article 5 of the VAT Law 2008.

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

What is the VAT rate applicable to goods and services currently subject to the VAT rate of 10% from July 01, 2024 in Vietnam?

Under Article 1 of Decree 72/2024/ND-CP, the regulations are as follows:

VAT reduction

1. VAT on goods and services that are currently subject to 10% VAT shall be reduced, except the following goods and services:

a) Telecommunication, financial activities, banking activities, securities, insurance, trading of real estate, metal and precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products. Further details are provided in Appendix I enclosed herewith.

b) Goods and services subject to excise tax. Further details are provided in Appendix II enclosed herewith.

c) Information technology products and services as prescribed in the Law on information technology. Further details are provided in Appendix III enclosed herewith.

d) VAT on goods and services of a specific type as specified in Clause 1 of this Article shall be reduced consistently in all stages, including import, production, processing and trading. Coal products mined for sale (including coal products mined and then washed, sieved and classified under a closed process before they are sold) are eligible for VAT reduction. Coal products in Appendix I enclosed herewith are not eligible for VAT reduction in any stages other than the mining stage.

Coal products produced under a closed process of economic corporations or groups shall be also eligible for VAT reduction.

In case any of the goods and services in Appendixes I, II and III enclosed herewith is not subject to VAT or is subject to 5% VAT in accordance with the Law on value-added tax, VAT on that good or service shall be paid in accordance with the Law on value-added tax and shall not be reduced.

2. VAT reduction rates

a) Business establishments that pay VAT using the credit-invoice method shall pay 8% VAT on the goods and services specified in Clause 1 of this Article.

b) Business establishments (including household businesses and individual businesses) that pay VAT using the direct method (as a percentage (%) on revenue) shall be eligible for 20% reduction in the rate (%) used as the basis for calculating VAT when issuing invoices for the goods and services eligible for VAT reduction specified in Clause 1 of this Article.

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Thus, from July 01, 2024, the VAT rate applicable to goods and services currently subject to the VAT rate of 10% will include:

- Groups of goods subject to a reduction from the VAT rate of 10% to 8% according to Decree 72/2024/ND-CP.

- Groups of goods not entitled to a VAT reduction and continuing to apply VAT rate of 10% as specified in Appendix 1, Appendix 2, and Appendix 3 attached to Decree 72/2024/ND-CP, including:

+ Telecommunications, finance, banking, securities, insurance, real estate business, metals and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products.

+ Goods and services subject to special consumption tax.

+ Information technology according to the law on information technology.