What is the abbreviation for Value Added Tax?

What is the abbreviation for Value Added Tax?

VAT is the abbreviation for Value Added Tax, previously also referred to as Thuế trị giá gia tăng, which is a type of turnover tax and an indirect tax levied on the final consumer, even though the entity that submits it to the tax authority is the business.

The final consumer is the one who bears the VAT, while businesses participating in the supply chain merely collect and remit this tax to the tax authorities.

Furthermore, according to the provisions of Article 2 of the Law on Value Added Tax 2008, the definition of VAT is as follows:

Value Added Tax

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

Thus, it can be seen that the abbreviation for Value Added Tax in English is VAT (Value Added Tax).

What is the abbreviation for Value Added Tax? (Image from the Internet)

Which entities are value added tax payers in Vietnam?

According to the provisions of Article 4 of the Law on Value Added Tax 2008:

The VAT payers are organizations and individuals producing and trading goods and services subject to VAT (hereinafter referred to as business establishments) and organizations and individuals importing goods subject to VAT (hereinafter referred to as importers).

However, in practice, the characteristic of VAT is an indirect tax added to the sale price of goods and services and paid by consumers when using the product.

Thus, the actual VAT bearers are consumers, but the VAT payers are business establishments.

What are regulations on value added tax rates in Vietnam?

Based on Article 8 of the Law on Value Added Tax 2008 (amended by Clause 3, Article 1 of the Value Added Tax Law on Amendments to the Law 2013, Article 1 of the Law on Amendments to the Law on Value Added Tax, Special Consumption Tax, and Tax Management 2016, Article 3 of the Law on Amendments to the Law on the Laws on Taxation 2014) and Decree 72/2024/ND-CP regulating VAT rates as follows:

[1] Rate of 0% 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 Value Added Tax 2008 (amended by Article 1 of the Law on Amendments to the Law on Value Added Tax, Special Consumption Tax, and Tax Management 2016, supplemented by Article 3 of the Law on Amendments to the Law on the Laws on Taxation 2014) upon export, except for the following cases:

- Transfer of technology, transfer of intellectual property rights abroad;

- Reinsurance services abroad;

- Credit granting services;

- Capital transfer;

- Derivative financial services;

- Postal, telecommunications services;

- Exported products as specified in Clause 23, Article 5 of the Law on Value Added Tax 2008 (amended by Article 1 of the Law on Amendments to the Law on Value Added Tax, Special Consumption Tax, and Tax Management 2016).

Exported goods and services are goods and services consumed outside Vietnam, in the non-tariff zones, or provided to foreign customers as per the regulations of the Government of Vietnam.

[2] Rate of 5% applies to the following goods and services:

- Clean water for production and daily life;

- Ores for fertilizer production; pesticides and growth stimulants for animals and plants;

- Services of digging, dredging canals, ditches, ponds to serve agricultural production; cultivating, caring for, and preventing pests for plants; preliminary processing, preserving agricultural products;

- Unprocessed products of cultivation, livestock, and aquaculture, except for products specified in Clause 1, Article 5 of the Law on Value Added Tax 2008 (amended by Article 1 of the Law on Amendments to the Law on Value Added Tax, Special Consumption Tax, and Tax Management 2016).

- Processed rubber latex; processed turpentine; nets, twines, and yarns for fishing nets;

- Fresh food; unprocessed forestry products, except wood, bamboo shoots, and products specified in Clause 1, Article 5 of the Law on Value Added Tax 2008 (amended by Article 1 of the Law on Amendments to the Law on Value Added Tax, Special Consumption Tax, and Tax Management 2016).

- Sugar; by-products in sugar production, including molasses, bagasse, sludge;

- Products made from jute, sedge, bamboo, reed, coconut leaves, coconut shells, water hyacinth, and other handicraft products made from agricultural waste; processed cotton; newsprint;

- Medical equipment and instruments, medical cotton, sanitary napkins; preventive and curative drugs; pharmaceutical products and raw materials for the production of preventive and curative drugs;

- Teaching aids, including models, charts, boards, chalk, rulers, compasses, and specialized equipment and instruments for teaching, research, and scientific experiments;

- Cultural, exhibition, physical training, and sports activities; art performances, film production; import, distribution, and screening of films;

- Children's toys; books of all kinds, except those specified in Clause 15, Article 5 of the Law on Value Added Tax 2008 (amended by Article 1 of the Law on Amendments to the Law on Value Added Tax, Special Consumption Tax, and Tax Management 2016).

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

- Sale, lease, lease-purchase of social housing as per the Housing Law.

[3] Rate of 10% applies to goods and services not subject to 0% and 5% tax rates.

[4] Rate of 8% for goods and services subject to VAT reduction as per Decree 72/2024/ND-CP, effective from July 1, 2024, to December 31, 2024.

Thus, depending on the taxable subject, the applicable VAT rates are 0%, 5%, 8%, or 10%.