What is the VAT rate for clean water used for production in Vietnam from July 1, 2025?

What is the VAT rate for clean water used for production in Vietnam from July 1, 2025?

Based on point a, clause 2, Article 9 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), the specific provision regarding the 5% tax rate is as follows:

Tax Rate

...

2. The 5% tax rate applies to the following goods and services:

a) Clean water used for production and living, excluding bottled, packaged drinking water, and other types of beverages;

b) Fertilizers, ores for fertilizer production, pesticides, and growth stimulants for livestock as prescribed by law;

c) Services of digging, dredging canals, ditches, ponds to serve agricultural production; planting, taking care of, preventing pests for crops; preliminary processing, preserving agricultural products;

...

Thus, according to the above regulation, clean water used for production from July 1, 2025, applies a value-added tax rate of 5%.

What is the VAT rate for clean water used for production in Vietnam from July 1, 2025? (Image from the Internet)

When does the Law on Value-Added Tax 2024 come into force in Vietnam?

Based on Article 18 of the Law on Value-Added Tax 2024, the specific provisions for the law's effective date are as follows:

Effective Date

1. This Law comes into force from July 1, 2025, except for the provisions specified in clause 2 of this Article.

2. The provisions regarding the revenue threshold of households, individuals producing, and doing business not subject to tax in clause 25, Article 5 of this Law and Article 17 of this Law come into force from January 1, 2026.

3. The Law on Value-Added Tax No. 13/2008/QH12 amended and supplemented by Law No. 31/2013/QH13, Law No. 71/2014/QH13, and Law No. 106/2016/QH13 shall cease to be effective from the date this Law comes into force.

Thus, according to the above regulation, the Law on Value-Added Tax 2024 comes into force from July 1, 2025.

How is the value-added tax calculated in Vietnam starting from July 1, 2025?

Based on Article 7 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), the specific provisions for calculating value-added tax are as follows:

[1] The tax calculation price is defined as follows:

- For goods and services sold by businesses, the sale price is exclusive of value-added tax; for goods and services subject to special consumption tax, the selling price includes special consumption tax but excludes value-added tax; for goods subject to environmental protection tax, the selling price includes environmental protection tax but excludes value-added tax; for goods subject to both special consumption tax and environmental protection tax, the selling price includes both taxes but excludes value-added tax;

- For imported goods, the taxable price is determined according to the law on export, import taxes, plus import tax plus any supplementary import taxes as stipulated by law (if any), plus special consumption tax (if any), and environmental protection tax (if any);

- For goods, services used for exchange, internal consumption, gifts, donations, the tax base is the value-added tax calculation value of similar or equivalent goods, services at the time these activities occur. For goods, services used for promotion according to law on commerce, the tax calculation price is determined as zero (0);

- For asset leasing activities, the leasing price is exclusive of value-added tax. In case of rental payment in periodic installments or advance payment for the rental period, the tax base is the amount paid for each term or in advance exclusive of value-added tax;

- For goods sold through installment or deferred payment methods, the tax base is the one-time selling price of the goods exclusive of value-added tax, not including the interest for installment or deferred payment;

- For processing goods, the processing price is exclusive of value-added tax;

- For construction and installation activities, the tax base is the value of the projects, work items, or parts handed over exclusive of value-added tax. If the construction and installation exclude materials, machinery, and equipment, the tax base is the value excluding the value of materials, machinery, and equipment;

- For real estate business activities, the selling price is exclusive of value-added tax minus land levy or land rent paid to the state budget (deductible land price). the Government of Vietnam prescribes the method to determine the deductible land price specified at this point in accordance with the law on land;

- For agency, brokerage activities to sell goods and services earning commission, the commission amount collected from these activities is exclusive of value-added tax;

- For goods, services used with invoices that include payment price as tax-inclusive, the tax rate is determined by the following formula:

- For casino services, rewarding electronic games, betting, the money collected from these activities minus the unused exchanged money and the money paid to winners (if any), includes special consumption tax, excludes value-added tax;

- For production and business activities including: power generation activities of Vietnam Electricity, transport, loading and unloading services; tourism services in the form of tours; pawn services; books subject to value-added tax sold at publication price (cover price); printing activities; agency services for assessment, agency for compensation, agency for third-party recovery, agency for handling 100% indemnity cases enjoying commission or fee, the tax base is the selling price exclusive of value-added tax. the Government of Vietnam stipulates the tax rate for production, business activities specified at this point.

[2] The tax base for goods and services specified in clause 1, Article 7 of the Law on Value-Added Tax 2024 includes all surcharge and additional fees that businesses are entitled to collect.