What groups of goods and services are subject to a 10% VAT rate in Vietnam?

What groups of goods and services are subject to a 10% VAT rate in Vietnam?

Based on Article 11 of Circular 219/2013/TT-BTC, the 10% VAT rate applies to goods and services that are not subject to non-VAT items, 0% VAT, or 5% VAT.

- The VAT rates stated in Articles 10 and 11 of Circular 219/2013/TT-BTC are uniformly applied to each type of goods and services at the stages of import, production, processing, or commercial business.

- Recovered scrap and by-products for recycling and reuse when sold are subject to VAT rates according to the rates of the scrap and by-products sold.

- Businesses dealing in multiple types of goods and services with different VAT rates must declare VAT according to each specified VAT rate for each good and service type. If the business cannot determine the rate for each type, it must calculate and pay tax at the highest rate of the goods and services produced or traded.

- In the implementation process, if there are cases where the VAT rates in the VAT rate schedule according to the Preferential Import Tariff Schedule are inconsistent with the guidance in this Circular, the guidance in Circular 219/2013/TT-BTC should be followed.

*Note: Where VAT rates are inconsistently applied to the same imported and domestically produced goods, local tax authorities and local customs authorities report to the Ministry of Finance for prompt unified guidance.

From July 1, 2024, Decree 72/2024/ND-CP will officially take effect, reducing the current 10% VAT rate on certain groups of goods and services to 8%. However, the following groups are excluded from this reduction based on Clause 1, Article 1 of Decree 72/2024/ND-CP:

[1] Telecommunications, finance, banking, securities, insurance, real estate business, metals and metal products, mineral products (excluding coal mining), coke, refined petroleum, and chemical products. Details in Appendix 1 issued with this Decree. (Download Appendix 1)

[2] Goods and services subject to excise tax. Details in Appendix 2 issued with this Decree. (Download Appendix 2)

[3] Information technology according to IT laws. Details in Appendix 3 issued with this Decree. (Download Appendix 3)

[4] VAT reduction for each type of goods and services specified in Clause 1, Article 1 of Decree 72/2024/ND-CP is uniformly applied at the stages of import, production, processing, and commercial business.

For coal products sold (including cases where coal after mining is sifted, classified through a closed process before being sold), they are subject to VAT reduction.

Coal products listed in Appendix 1 issued with this Decree (Download Appendix 1), at stages other than mining sales, are not eligible for VAT reduction.

The economic corporations, groups implementing closed processes also fall under the VAT reduction category for coal products sold.

In cases where goods and services listed in Appendices 1, 2, and 3 issued with this Decree fall under non-VAT items or 5% VAT items under the Law on VAT, the Law on VAT regulations will be applied, and no VAT reduction will be available.

What groups of goods and services are subject to a 10% VAT rate in Vietnam? (Image from the Internet)

What is VAT?

Based on the provisions of Article 2 of the Law on VAT 2008, VAT is defined as follows:

Value Added Tax

Value Added Tax is a tax calculated on the added value of goods and services arising during the process from production, circulation to consumption.

According to the definition, VAT is a tax applied only to the added value and not based on the entire value of the goods or services.

According to the provisions of Article 4 of the Law on VAT 2008:

Taxpayers are organizations and individuals producing and trading VAT-liable goods and services (hereinafter referred to as business establishments) and organizations and individuals importing VAT-liable goods (hereinafter referred to as importers).

Thus, the actual VAT taxpayer is the final consumer who uses the product service, and the business establishment acts as the VAT collector for the tax authority.

What are regulations on VAT payment in Vietnam?

Based on Article 20 of Circular 219/2013/TT-BTC stipulating the tax payment location:

Tax payment location

1. Taxpayers declare and pay VAT at the localities where production and business activities are conducted.

2. Taxpayers declaring and paying VAT under the deduction method have subordinate production accounting units located in other provinces different from the province where the head office is located. They must pay VAT at the localities where the production units are located as well as the localities where the head office is located.

3. In cases where enterprises and cooperatives applying the direct method have production units in a province different from where the head office is located or have sales activities in a different province, the enterprises and cooperatives must declare and pay VAT at the localities where the production units and sales activities are conducted. The VAT is declared and paid based on a percentage of revenue generated in the external province. Enterprises and cooperatives do not have to pay VAT at the head office for revenues arising out of the province that has been declared and paid.

4. In cases where telecommunication service providers engage in telecommunications services with postpaid charges in provinces different from where their head office is located, and they have established dependent branches applying the deduction method, the VAT declaration and payment for telecommunications services with postpaid charges should follow these steps:

- Declare VAT on postpaid telecommunications service revenue of the entire business to the tax authority directly managing the head office.

- Pay VAT at the localities where the head office is located and where the dependent branches are located.

The VAT payable at the localities where dependent branches are located is determined as 2% (for postpaid telecommunications services subject to 10% VAT) out of the revenue (excluding VAT) of the postpaid telecommunications services at those locations.

5. Tax declaration and payment are carried out under the provisions of the Tax Administration Law and guiding documents.

Accordingly, taxpayers declare and pay VAT at the localities where production and business activities are conducted. The actual operational situation determines the appropriate tax payment location under the above regulations.