What is value-added tax?

What is value-added tax?

Based on the provisions of Article 2 of the Law on value-added tax 2008, the definition of VAT is stated as follows:

value-added tax

value-added tax is calculated on the added value of goods and services generated during the process from production, circulation to consumption.

Thus, it can be seen that value-added tax arises during the production and circulation process before reaching the consumer.

What is value-added tax? (Image from the Internet)

What is the VAT rate for international transport and goods in Vietnam?

Based on Article 8 of the Law on value-added tax 2008 (amended by Clause 3, Article 1 of the Amended Law on value-added tax 2013, Article 1 of the Amended Law on value-added tax, the Amended Special Consumption Tax Law and Tax Management Law 2016, Article 3 of the Amended Laws on Taxation 2014) and the Government's regulations on VAT rates as follows:

(1) 0% tax rate is applied to exported goods and services, international transport, and goods and services not subject to VAT as specified in Article 5 of this Law when exported, except for the following cases:

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

- Reinsurance services abroad;

- Credit services;

- Capital transfer;

- Derivative financial services;

- Postal and telecommunications services;

- Exported products specified in Clause 23, Article 5 of this Law.

Exported goods and services are those consumed outside Vietnam, in non-tariff zones; goods and services provided to overseas customers as prescribed by the Government of Vietnam.

(2) 5% tax rate applies to the following goods and services:

- Clean water for production and domestic use;

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

- Services for digging, dredging canals, ditches, ponds for agricultural production; cultivation, care, pest control for plants; preliminary processing, preservation of agricultural products;

- Unprocessed cultivation, husbandry, aquaculture products, except for products specified in Clause 1, Article 5 of this Law;

- Preliminary processed rubber latex; preliminary processed pine resin; nets, ropes, and yarns for weaving fishing nets;

- Fresh food; unprocessed forestry products, except for wood, bamboo shoots, and products specified in Clause 1, Article 5 of this Law;

- Sugar; by-products from sugar production, including molasses, bagasse, filter mud;

- Products made from jute, sedge, bamboo, rattan, leaves, straw, coconut husks, coconut shells, water hyacinths, and other handicrafts produced from agricultural waste; preliminary processed cotton; newsprint;

- Medical equipment, tools, cotton, medical sanitary napkins; preventive and curative medicines; pharmaceutical products, medicinal ingredients used for producing preventive and curative medicines;

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

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

- Children's toys; all kinds of books, except for books specified in Clause 15, Article 5 of this Law;

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

- Sale, rental, and hire purchase of social housing as prescribed by the Housing Law

(3) 10% tax rate applies to goods and services not subject to 0% and 5% tax rates.

(4) 8% tax rate applies from July 1, 2023, to December 31, 2023, specifically:

At the 5th Session of the 15th National Assembly on June 24, 2023, the National Assembly approved a 2% VAT reduction for groups of goods and services subject to the 10% VAT rate down to 8%, according to Resolution 43/2022/QH15 dated January 11, 2022, except for the following groups of goods and services:

- Telecommunications and information technology services,

- Financial, banking, securities services,

- Insurance services,

- Real estate business services,

- Metal products, fabricated metal products, mineral products (excluding coal mining), coke, refined petroleum, chemical products, goods

- Special consumption tax services;

the 0% tax rate applies to exported goods, international transport, and goods/

Thus, in accordance with the regulations, international transport and goods apply a VAT rate of 0 percent.

Where to pay VAT in Vietnam?

Based on Article 20 of Circular 219/2013/TT-BTC stipulating where to pay taxes as follows:

- Taxpayers declare and pay VAT at the locality where production or business is carried out.

- Taxpayers declaring and paying VAT by the deduction method with subsidiaries accounting separately in provinces, centrally-run cities different from the province, city where the head office is located must pay VAT at the locality where the subsidiary is located and the locality where the head office is located.

- In case businesses, cooperatives applying the direct method have production facilities in provinces, cities different from where the head office is located or have intermittent sales activities outside the province, businesses, cooperatives shall declare and pay VAT as a percentage of revenue for the revenue generated in the province where the production facility and local sales activities take place. Businesses, cooperatives do not have to pay VAT as a percentage of revenue at the head office for revenue generated outside the province that has been declared and paid tax.

- In case telecommunication service providers have postpaid telecommunications services in provinces, centrally-run cities different from the province, city where the head office is located and establish dependent accounting branches paying VAT by the deduction method participating in postpaid telecommunications business in that locality, the telecommunication service provider shall declare and pay VAT for postpaid telecommunications services as follows:

+ Declare VAT for the revenue of postpaid telecommunications services for the entire business at the tax authority directly managing the head office.

+ Pay VAT at the locality where the head office is situated and the locality where the dependent accounting branch is located.

The VAT to be paid at the locality where the dependent accounting branch is located is determined at a rate of 2% (for postpaid telecommunications services subject to VAT at 10%) on revenue (excluding VAT) of postpaid telecommunications services at the locality where the dependent accounting branch is located.

- The declaration and payment of VAT are conducted in accordance with the Law on Tax Management and guiding documents of the Law on Tax Management.