Which entities are the subjects applying the direct method of value-added tax calculation in Vietnam according to the Law on Value-Added Tax 2024?

How many methods are there for calculating value-added tax in Vietnam?

According to Article 10 of the Law on Value-Added Tax 2024, the methods of tax calculation are regulated as follows:

Tax Calculation Methods

The methods for calculating value-added tax include the tax deduction method and the direct calculation method.

As such, according to the new Law on Value-Added Tax, two methods for calculating value-added tax remain:

- Value-added tax deduction method

- Direct calculation method on value added.

Which entities are the subjects applying the direct method of value-added tax calculation in Vietnam according to the Law on Value-Added Tax 2024? (Image from the Internet)

Which entities are the subjects applying the direct method of value-added tax calculation in Vietnam according to the Law on Value-Added Tax 2024?

According to Article 12 of the Law on Value-Added Tax 2024, the subjects applying the direct method of value-added tax calculation include the direct calculation on value added and the direct calculation according to revenue.

To be specific:

(1) Value-added tax payable calculated directly on value added is the value added multiplied by the value-added tax rate applicable to the activities of purchasing, selling, processing gold, silver, and precious stones.

(2) Value-added tax payable calculated directly according to revenue is the percentage rate multiplied by revenue, applicable to:

- Enterprises, cooperatives, and cooperative unions with annual revenue below the 1 billion VND threshold, except for those voluntarily applying the tax deduction method as stipulated in clause 2, Article 11 of the Law on Value-Added Tax 2024;

- Households, individuals engaged in production and business, except in cases where households, individuals in production and business do not conduct or fail to fully conduct accounting, invoicing, and document policies according to the law must pay value-added tax by the tax allocation method as regulated in the Tax Administration Law 2019;

- Foreign organizations without permanent establishments in Vietnam, individuals residing abroad who are non-residents in Vietnam with revenue arising in Vietnam not fully implementing accounting, invoicing, and documentation policies.

Not including foreign suppliers without permanent establishments in Vietnam engaged in e-commerce, digital platform-based business transactions with organizations and individuals in Vietnam (hereinafter referred to as foreign suppliers);

Organizations that are foreign digital platform managers undertaking to withhold and fulfill tax obligations on behalf of foreign suppliers;

Business organizations in Vietnam applying the value-added tax deduction method buying services from foreign suppliers without permanent establishments in Vietnam through e-commerce channels or digital platforms undertaking to withhold and fulfill tax obligations on behalf of foreign suppliers.

- Other organizations, except those paying tax by the tax deduction method as stipulated in clause 2, Article 11 of the Law on Value-Added Tax 2024.

What is the percentage rates for calculating VAT by the direct method in Vietnam from July 1, 2025?

According to clause 2, Article 12 of the Law on Value-Added Tax 2024, the value-added tax payable calculated directly according to revenue using the percentage rate is applicable as follows:

Direct Calculation Method

...

2. Value-added tax payable calculated directly according to revenue using the percentage rate is applicable as follows:

a) Applicable subjects include:

a1) Enterprises, cooperatives, and cooperative unions with annual revenue below the 1 billion VND threshold, except for voluntary application of the tax deduction method stipulated in clause 2, Article 11 of this Law;

a2) Households, individuals engaged in production and business, except as stipulated in clause 3 of this Article;

a3) Foreign organizations without permanent establishments in Vietnam, individuals residing abroad who are non-residents in Vietnam with revenue arising in Vietnam not fully implementing accounting, invoicing, and documentation policies, excluding foreign suppliers stipulated in clause 4, Article 4 of this Law;

a4) Other organizations, except those paying tax by the tax deduction method as stipulated in clause 2, Article 11 of this Law;

b) The percentage rates for calculating value-added tax are stipulated as follows:

b1) Distribution, supply of goods: 1%;

b2) Services, construction without materials: 5%;

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

b4) Other business activities: 2%;

...

Thus, from July 1, 2025, the percentage rates for calculating value-added tax by the direct method are stipulated as follows:

- Distribution, supply of goods: 1%;

- Services, construction without materials: 5%;

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

- Other business activities: 2%.