What are the solutions for VAT policy reform according to the tax reform strategy until 2030 in Vietnam?

What are the solutions for VAT policy reform according to the tax reform strategy until 2030 in Vietnam?

According to Point a, Clause 1, Section 3, Article 1 of Decision 508/QD-TTg of 2022, the solutions for implementing the strategy for reforming value-added tax policy according to the tax reform strategy until 2030 are as follows:

- Broaden tax base by reducing categories of goods and services not subject to value added tax and categories of goods and services subject to the 5% VAT rate;

- strive for the only one tax rate to be applied basically; study the roadmap for increase in value added tax rate;

- review the thresholds of sales subject to VAT calculated according to the tax credit method and adjust them to reality;

- study the single method of taxation according to the percentage of sales and apply it to taxpayers whose sales are below the threshold or are not eligible to apply the tax credit method;

- perfect regulations related to value-added tax on exported goods and services, and ensuring that they reflect matters of substance and conform to international practices.

- Study any necessary amendments and supplements to regulations on VAT deduction and refund with a view to ensuring simplicity, transparency and consistency with other regulatory provisions;

What are the solutions for VAT policy reform according to the tax reform strategy until 2030 in Vietnam? (Image from the Internet)

Currently, what are the objects subject to VAT in Vietnam?

According to Article 3 of the Law on Value-Added Tax 2008:

Taxable objects

Goods and services used for production, trading or consumption in Vietnam are subject to value-added tax, except those specified in Article 5 of this Law.

Thus, goods and services used for production, trading, or consumption in Vietnam (including goods and services purchased from organizations and individuals abroad) are subject to value-added tax, except for:

1. Cultivation and husbandry products, and reared and fished aquatic products which have not yet been processed into other products or have been just preliminarily processed and sold by producing and fishing organizations and individuals, and products at the stage of importation.

2. Products which are animal breeds and plant varieties, including breeding eggs, breeding animals, seedlings, seeds, sperms, embryos and genetic materials.

3. Irrigation and drainage; soil ploughing and harrowing; dredging of intra-field canals and ditches for agricultural production; services of harvesting farm produce.

4. Salt products made of seawater, natural rock salt, refined salt and iodized salt.

5. State-owned residential houses sold by the State to current tenants.

6. Transfer of land use rights;

7. Life insurance, student insurance, insurance on domestic animals, insurance on plants and reinsurance.

8. Credit provision services; securities trading; capital transfer; derivative financial services, including interest-rate swap contracts, forward contracts, futures contracts, call or put options, foreign currency sales, and other derivative financial services as prescribed by law.

9. Healthcare and animal health services, including medical examination and treatment and preventive services for humans and domestic animals.

10. Public post and telecommunications and universal Internet services under the Governments programs.

11. Public services on sanitation and water drainage in streets and residential areas; maintenance of zoos, flower gardens, parks, street greeneries and public lighting; funeral services;

12. Renovation, repair and construction of cultural, artistic, public service and infrastructure works and residential houses for social policy beneficiaries, which are funded with peoples contributions or humanitarian aid.

13. Teaching and vocational training as provided for by law.

14. State budget-funded radio and television broadcasting.

15. Publication, import and distribution of newspapers, journals, specialized bulletins, political books, textbooks, teaching materials, law books, scientific-technical books, books printed in ethnic minority languages as well as propaganda postcards, pictures and posters, including those in the form of audio or visual tapes or discs or electronic data; money printing.

16. Mass transit by bus and tramcar.

17. Machinery, equipment and supplies which cannot be manufactured at home and need to be imported for direct use in scientific research and technological development activities; machinery, equipment, spare parts, special-purpose means of transport and supplies which cannot be manufactured at home and need to be imported for prospecting, exploring and developing oil and gas fields; aircraft, drilling platforms and ships which cannot be manufactured at home and need to be imported for the formation of enterprises fixed assets or which are hired from foreign parties for production and business activities or for lease.

18. Special-purpose weapons and military equipment for security and defense purposes.

19. Goods imported as humanitarian aid or non-refundable aid; gifts for state agencies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations or peoples armed forces units; donations or gifts for Vietnam-based individuals within the Government-prescribed quotas; belongings of foreign organizations and individuals within diplomatic immunity quotas; and personal effects within duty-free luggage quotas.

Goods and services sold to foreign organizations or individuals or international organizations for use as humanitarian aid, and non-refundable aid to Vietnam.

20. Goods transferred out of border gate or transited via the Vietnamese territory; goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials imported for the production or processing of goods for export under contracts signed with foreign parties; goods and services traded between foreign countries and non-tariff areas and between non-tariff areas.

21. Technology transfer under the Law on Technology Transfer; transfer of intellectual property rights under the Law on Intellectual Property; computer software.

22. Gold imported in the form of bars or ingots which have not yet been processed into fine-art articles, jewelries or other products.

23. Exported products which are unprocessed mined resources or minerals as prescribed by the Government.

24. Artificial products used for the substitution of diseased peoples organs; crutches, wheelchairs and other tools used exclusively for the disabled.

25. Goods and services of business individuals who have a monthly income lower than the common minimum salary level applicable to domestic organizations and enterprises.

Establishments trading in non-taxable goods or services specified in Article 5 of the Law on Value-Added Tax 2008 are not entitled to input value-added tax credit or refund, except the cases subject to the tax rate of 0% specified in Clause 1, Article 8 of the Law on Value-Added Tax 2008.

What are the cases where VAT declaration and payment are not required in Vietnam?

According to Clause 3, Article 2 of Decree 209/2013/ND-CP, the cases where VAT declaration and payment are not required in Vietnam include:

- Organizations and individuals receive amounts involving compensation, awards, subsidies, money for transfer of emission right and other financial revenues.

- Vietnam-based production and business organizations and individuals that purchase services from foreign organizations without permanent establishments in Vietnam or overseas individuals not residing in Vietnam including the following cases: repair of means of transport, machinery or equipment (including supplies and spare parts); advertisement and marketing; investment and trade promotion; goods sale and service provision brokerage: or training; or share with foreign partners charges for international post or telecommunications services provided outside Vietnam.

- The non-business organizations and individuals are not value- added tax payer upon selling assets.

- Organizations and individuals that transfer investment projects for production of and trading in goods or services subject to value-added tax to enterprises or cooperatives.

- Cultivation, husbandry and aquatic products which have not yet been processed into other products or have been just preliminarily processed and sold to enterprises or cooperatives, except for case defined at Clause 1 Article 5 of the Law on Value-Added Tax 2008.