What is the VAT rate for pharmaceutical products in Vietnam?

What is the VAT rate for pharmaceutical products in Vietnam?

Based on Article 2 of Circular 219/2013/TT-BTC, the following provisions apply:

Taxable Entities

Entities subject to Value Added Tax (VAT) include goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from foreign organizations or individuals), except for those non-taxable under VAT as guided in Article 4 of this Circular.

Thus, pharmaceutical products are subject to Value Added Tax.

According to Clause 11, Article 10 of Circular 219/2013/TT-BTC, amended by Clause 7, Article 147 of Decree 96/2023/ND-CP, it is stated as follows:

5% Tax Rate

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11. Medical equipment and instruments include machines and medical instruments such as diagnostic devices; specialized equipment for surgeries, treatment of wounds, and ambulances; blood pressure, heart, and circulatory measurement instruments; syringes and needles; contraceptive devices; medical equipment with an Import License or Registration Certificate or Standard Publication Dossier Receipt as per legal regulations on healthcare, or as per the list of medical equipment under the specialized management of the Ministry of Health, determined by the commodity code in the list of export and import goods of Vietnam issued under Circular No. 14/2018/TT-BYT dated May 15, 2018, by the Minister of Health, and any amendments and supplements (if any).

Medical cotton, bandages, gauze, and sanitary medical napkins; preventive and curative drugs, including finished drugs and raw materials for drugs, excluding functional foods; vaccines; medical biological substances; distilled water for manufacturing injectables, intravenous solutions; caps, clothing, masks, surgical sheets, gloves, stockings, shoe covers, towels, specialized gloves for medical purposes, breast implant bags, and dermal fillers (excluding cosmetics); chemicals and materials for testing and sterilizing used in healthcare.

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Additionally, based on Clause 9, Article 5 of the Law on Value Added Tax 2008, amended and supplemented by Clause 1, Article 1 of the Law on Amendments and Supplements to a Number of Articles of the Laws on VAT, Special Consumption Tax, and Tax Administration 2016:

Non-Taxable Entities

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9. Healthcare services, veterinary services, including medical examination, treatment, and disease prevention for humans and animals; elderly care, disabled care services.

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Thus, pharmaceutical products, including finished drugs and raw materials for drugs, excluding functional foods, are subject to a VAT rate of 5%.

However, for healthcare services and veterinary services, including medical examination, treatment, and disease prevention for humans and animals, as well as elderly and disabled care services, the cost of pharmaceutical products involved in these services is categorized as non-taxable under VAT.

What is the VAT rate for pharmaceutical products in Vietnam? (Image from the Internet)

What is the direct percentage-based VAT calculation method in Vietnam?

Based on Clause 2, Article 13 of Circular 219/2013/TT-BTC, the tax payable via the direct percentage calculation on value-added method is determined as follows:

- Percentage rates for VAT calculation on revenue are specified by activity as follows:

+ Distribution and supply of goods: 1%;

+ Services and construction without materials: 5%;

+ Production, transportation, and services associated with goods, construction with materials: 3%;

+ Other business activities: 2%.

- Revenue for VAT calculation is the total amount recorded on sales invoices for goods and services subject to VAT, including surcharges and additional fees the business is entitled to receive.

When can taxpayers defer the submission of VAT returns in Vietnam?

Based on Article 46 of the Law on Tax Administration 2019, provisions on the postponement of tax declaration document submission are as follows:

Deferral of Tax Declaration Submission

1. Taxpayers unable to submit tax returns on time due to natural disasters, catastrophes, epidemics, fires, unexpected accidents shall be granted extension by the head of the directly managing tax authority.

2. The extension period must not exceed 30 days for monthly, quarterly, annual, or event-based tax declaration; 60 days for tax settlement declarations from the end of the tax return submission deadline.

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Thus, taxpayers can defer the submission of VAT returns when they are unable to meet deadlines due to natural disasters, catastrophes, epidemics, fires, or unexpected accidents.

Simultaneously, taxpayers must send a written request to the tax authority before the tax return submission deadline, explaining the reason for the extension request, with confirmation from the commune-level People's Committee or local police station where the production, business activity subject to tax obligation arises.