What is the VAT calculation rate based on the direct method on revenue in Vietnam?

What is the VAT calculation rate based on the direct method on revenue in Vietnam?

Based on Clause 2, Article 12 of the Value Added Tax Law 2024 (effective from July 1, 2025) stipulating that the value-added tax payable by the direct method on revenue is calculated as a percentage (%) multiplied by the revenue applied as follows:

Direct Calculation Method

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2. The value-added tax payable by the direct calculation method on revenue is calculated as a percentage (%) multiplied by the revenue applied as follows:

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b) The % rate to calculate the value-added tax is stipulated as follows:

b1) Distribution, supply of goods: 1%;

b2) Services, construction not including materials: 5%;

b3) Manufacturing, transportation, services associated with goods, construction including materials: 3%;

b4) Other business activities: 2%;

...

Thus, from July 1, 2025, the VAT calculation rate by the direct method on revenue is stipulated as follows:

- Distribution, supply of goods: 1%;

- Services, construction not including materials: 5%;

- Manufacturing, transportation, services associated with goods, construction including materials: 3%;

- Other business activities: 2%.

What is the VAT calculation rate based on the direct method on revenue in Vietnam? (Image from the Internet)

How to calculate VAT by the direct method in Vietnam from July 1, 2025?

Based on Article 12 of the Value Added Tax Law 2024, the VAT calculation by the direct method from July 1, 2025, is as follows:

(1) For activities of buying, processing gold, silver, gemstones

- The value-added tax payable by the direct method on the value-added is calculated by multiplying the value-added with the VAT rate applicable to the activities of buying, selling, processing gold, silver, gemstones.

The value-added of buying, selling, processing gold, silver, and gemstones is determined as the payment price of gold, silver, gemstones sold minus the payment price of gold, silver, gemstones purchased correspondingly.

Note: In case a business establishment engages in buying, selling, processing gold, silver, gemstones, it must separately account for this activity to pay tax by the direct method on value-added.

(2) For other activities (excluding activities of buying, processing gold, silver, gemstones)

- The value-added tax payable by the direct method on revenue is calculated as a percentage (%) multiplied by the revenue applied as follows:

+ Applicable entities include:

++ Enterprises, cooperatives, unions of cooperatives with annual revenue below the threshold of 01 billion VND, except in cases where voluntarily applying the credit-invoice method as per Clause 2, Article 11 of the Value Added Tax Law 2024

++ Households, individuals producing, doing business, except as stipulated in Clause 3, Article 12 of the Value Added Tax Law 2024

++ Foreign organizations without a permanent establishment in Vietnam, individuals abroad who are non-residents in Vietnam with revenue generated in Vietnam who have not fully implemented accounting policies, invoices, vouchers, excluding foreign suppliers as stipulated in Clause 4, Article 4 of the Value Added Tax Law 2024

++ Other organizations, except in cases of paying tax by the credit-invoice method as per Clause 2, Article 11 of the Value Added Tax Law 2024

+ The percentage (%) to calculate the value-added tax is stipulated as follows:

++ Distribution, supply of goods: 1%;

++ Services, construction not including materials: 5%;

++ Manufacturing, transportation, services associated with goods, construction including materials: 3%;

++ Other business activities: 2%;

+ Revenue for calculating value-added tax is the total amount of sales of goods, services recorded on sales invoices, including surcharges and additional fees that the business establishment is entitled to.

- Households, individuals producing, doing business who do not fully implement or do not implement accounting policies, invoices, vouchers according to the provisions of the law shall pay VAT according to the fixed tax method stipulated in the Tax Management Law 2019.

When is the time of determining value-added tax in Vietnam?

Based on Article 8 of the Value Added Tax Law 2024, the time of determining value-added tax is stipulated as follows:

(1) The time of determining value-added tax is stipulated as follows:

- For goods, it is the time of transfer of ownership or right to use the goods to the buyer or the time of issuing an invoice, irrespective of whether the money has been collected or not;

- For services, it is the time of completing the provision of the service or the time of issuing a service provision invoice, irrespective of whether the money has been collected or not.

(2) The time of determining value-added tax for the following goods, services is stipulated by the Government of Vietnam:

- Exported and imported goods;

- Telecommunications services;

- Insurance business services;

- Electricity supply activity, electricity production, clean water;

- Real estate business activity;

- Construction, installation, and petroleum activities.

Note: The Value Added Tax Law 2024 is effective from July 1, 2025, except for the stipulation regarding revenue levels of households, individuals producing, doing business subject to non-taxable status in Clause 25, Article 5, and Article 17 of the Value Added Tax Law 2024 which is effective from January 1, 2026.