What types of goods and services are not eligible for VAT reduction in Vietnam in the first 06 months of 2025?

What types of goods and services are not eligible for VAT reduction in Vietnam in the first 06 months of 2025?

Pursuant to Clause 1, Article 1 of Decree 180/2024/ND-CP, which regulates the types of goods and services not eligible for VAT reduction in the first 06 months of 2025 as follows:

- Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products. Details can be found in Appendix 1 attached to Decree 180/2024/ND-CP.

- Goods and services subject to special consumption tax. Details can be found in Appendix 2 attached to Decree 180/2024/ND-CP.

- Information technology according to the law on information technology. Details can be found in Appendix 3 attached to Decree 180/2024/ND-CP.

Note: Coal categories specified in Appendix 1 attached to Decree 180/2024/ND-CP, at stages other than the extraction for sale, are not eligible for VAT reduction.

What types of goods and services are not eligible for VAT reduction in Vietnam in the first 06 months of 2025? (Image from Internet)

What is the VAT reduction rate in Vietnam in the first 06 months of 2025?

Pursuant to Clause 2, Article 1 of Decree 180/2024/ND-CP, which regulates the rate of VAT reduction in the first 06 months of 2025 as follows:

- Business establishments calculating VAT by the credit method are eligible for a VAT rate of 8% for goods and services stipulated in Clause 1, Article 1 of Decree 180/2024/ND-CP.

- Business establishments (including households and individuals conducting business) that calculate VAT at a percentage rate on revenue are allowed a 20% reduction of such rate to compute VAT when issuing invoices for goods and services eligible for VAT reduction specified in Clause 1, Article 1 of Decree 180/2024/ND-CP.

Which entities are VAT payers in Vietnam?

Pursuant to Article 3 of Circular 219/2013/TT-BTC, the VAT payer refers to organizations, individuals producing, trading goods, services subject to VAT in Vietnam, irrespective of business sector, form, trade organization (hereinafter referred to as business establishments), and organizations, individuals importing goods, purchasing services from abroad subject to VAT (hereinafter referred to as importers), including:

- Business organizations established and registered in accordance with the Enterprise Law 2020, Law on Cooperatives 2023, and other specialized business laws;

- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, units of the people's armed forces, career organizations, and other organizations;

- Enterprises with foreign investment capital and foreign parties participating in business cooperation under the Law on Investment; foreign organizations, individuals conducting business in Vietnam without establishing legal personalities in Vietnam;

- Individuals, households, independent group of persons, and other subjects engaged in production, business, import activities;

- Organizations, individuals conducting business in Vietnam purchasing services (including cases involving services associated with goods) from foreign organizations without permanent establishments in Vietnam, non-resident foreign individuals in Vietnam, shall be the tax payer, unless otherwise guided for non-declaration, non-submission of VAT as per Clause 2, Article 5 of Circular 219/2013/TT-BTC.

Regulations on permanent establishments and non-resident subjects are implemented in accordance with laws on corporate income tax and personal income tax.

- Branches of export processing enterprises established to trade in goods and conduct activities directly related to goods trading in Vietnam, as regulated by laws on industrial parks, export processing zones, and economic zones.

How is the Tax Basis for Determining VAT for Goods and Services Defined?

Based on Clause 1, Article 7 of Circular 219/2013/TT-BTC, which regulates the tax basis for determining VAT for goods and service transactions as follows:

- For goods, services sold by production, business establishments, the basis is the selling price excluding VAT.

- For goods, services subject to special consumption tax, the basis is the selling price including special consumption tax but excluding VAT.

- For goods subject to environmental protection tax, the basis is the selling price including environmental protection tax but excluding VAT; for goods subject to both special consumption and environmental protection tax, the basis is the selling price including special consumption tax, environmental protection tax, but excluding VAT.