Which goods and services are subject to a 5% VAT rate in Vietnam from July 1, 2025?

Which goods and services are subject to a 5% VAT rate in Vietnam from July 1, 2025?

Based on Clause 2, Article 9 of the VAT Law 2024 (effective from July 1, 2025), the goods and services subject to a 5% VAT rate are as follows:

- Clean water used for production and daily life, excluding bottled, tanked drinking water, and other types of beverages;

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

- Services for excavation, dredging of canals, trenches, ponds, and lakes serving agricultural production; cultivation, care, and pest control for crops; preliminary processing, storage of agricultural products;

- Products from crops, planted forests (excluding wood, bamboo shoots), animal husbandry, aquaculture, and fishing that are not processed into different products or only subjected to simple processing, except for products specified at Clause 1, Article 5 of the VAT Law 2024;

- Rubber latex in crepe, sheet, and lump forms; nets, girdles, and yarns used for knitting fishing nets;

- Products made from jute, sedge, bamboo, rattan, leaves, straw, coconut shells, husks, water hyacinth, and other handicraft products made using agricultural by-products; cotton fiber that has been coarsely or finely carded; newspaper printing paper;

- Fishing vessels operating at sea; specialized machinery and equipment serving agricultural production according to Government regulations;

- Medical equipment as prescribed by law on medical equipment management; disease prevention and treatment drugs; pharmaceutical substances, medicinal materials used as raw materials to produce treatment drugs and preventive medicine;

- Equipment used for teaching and learning, including: models, drawings, boards, chalk, rulers, and compasses;

- Traditional and folk performing arts activities;

- Children's toys; books of all kinds, except for books specified at Clause 15, Article 5 of the VAT Law 2024;

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

- Sale, lease, and lease-purchase of social housing as prescribed by the Law on Housing.

Which goods and services are subject to a 5% VAT rate in Vietnam from July 1, 2025? (Image from the Internet)

How to determine the VAT taxable price in Vietnam from July 1, 2025?

According to Article 7 of the VAT Law 2024 (effective from July 1, 2025), the method for determining the VAT taxable price from July 1, 2025, is as follows:

- For goods and services sold by business establishments, the price is the selling price without VAT; for goods and services subject to special consumption tax, the price is the selling price including special consumption tax but excluding VAT; for goods subject to environmental protection tax, the price is the selling price including environmental protection tax but excluding VAT; for goods subject to both special consumption tax and environmental protection tax, the price is the selling price including both taxes but excluding VAT;

- For imported goods, it is the taxable import value as prescribed by the law on export and import duties, plus import tax, any supplementary import duties (if applicable), special consumption tax (if applicable), and environmental protection tax (if applicable);

- For goods and services used for exchange, internal consumption, gifts, donations, it is the taxable price of goods and services of the same kind or equivalent at the time these activities occur.

For promotional goods and services under the law on commerce, the taxable price is set at zero (0);

- For asset lease activities, it is the rental payment before VAT.

In the case of leasing on a periodic payment or prepayment basis, the taxable price is the rental payment for each period or the prepayment for the leasing period before VAT;

- For goods sold on an installment or deferred payment basis, it is the price calculated according to the one-time payment selling price before VAT, excluding installment or deferred interest;

- For processing goods, it is the processing price before VAT;

- For construction and installation activities, it is the value of the work, or part of the project or job accomplished and delivered before VAT. In the case of construction and installation which do not include materials, machinery, and equipment, the taxable price is the construction and installation value excluding the value of materials, machinery, and equipment;

- For real estate business activities, it is the selling price of real estate before VAT, minus land levy or land rent paid to the state budget (deductible land price). The Government of Vietnam prescribes the method of determining the deductible land price specified in this point in accordance with the law on land;

- For agency, brokerage, and trade commission activities for goods and services, it is the commission earned from these activities before VAT;

- For goods and services using invoices showing the payment price inclusive of VAT, the taxable price is determined by the following formula:

Price excluding VAT = Payment price / (1 + tax rate of goods, services (%))

- For casino, electronic gaming with prizes, and betting activities, it is the amount collected from these activities minus the amount exchanged back for unused tokens and the prize money paid to customers (if any), including special consumption tax and excluding VAT;

- For production and business activities including: electricity production activities by the Vietnam Electricity Group; transportation, loading and unloading services; tourism services in the form of travel; pawn services; VAT-taxable books sold at retail price list (cover price); printing activities; agency services for inspection, compensation agency, third-party reimbursement agency, goods handling agency for 100% compensation enjoying labor charges or commission, the taxable price is the sale price before VAT. The Government of Vietnam prescribes the taxable price for production and business activities specified in this point.

Note: The taxable price for goods and services includes any surcharges and additional fees received by the business establishment.

Which entities are VAT payers in Vietnam from July 1, 2025?

The persons liable for paying VAT from July 1, 2025, are stipulated in Article 4 of the VAT Law 2024 (effective from July 1, 2025) as follows:

(1) Organizations, households, and individuals producing and trading goods and services subject to VAT (hereinafter referred to as business establishments).

(2) Organizations and individuals importing goods subject to VAT (hereinafter referred to as importers).

(3) Organizations and individuals producing and trading in Vietnam that purchase services (including services associated with goods) from foreign organizations without a permanent establishment in Vietnam, or individuals residing abroad are considered non-residents in Vietnam, except in cases stipulated in Clauses 4 and 5, Article 4 of the VAT Law 2024; organizations producing and trading in Vietnam that purchase goods and services to conduct exploration, development, and exploitation of oil and gas by foreign organizations without a permanent establishment in Vietnam, or individuals residing abroad who are considered non-residents in Vietnam.

(4) Foreign suppliers without a permanent establishment in Vietnam engaging in electronic commerce, digital-based business with organizations and individuals in Vietnam (hereinafter referred to as foreign suppliers); organizations as managers of foreign digital platforms performing withholding and paying of tax obligations on behalf of foreign suppliers; organizations doing business in Vietnam applying the credit method for VAT calculation when purchasing services from foreign suppliers without a permanent establishment in Vietnam through electronic commerce channels or digital platforms, performing withholding and paying the tax obligations on behalf of foreign suppliers.

(5) Organizations as managers of e-commerce trading floors, managers of digital platforms with payment function, performing tax withholding, paying, and declaring withheld tax amounts for business households, and individual businesses on e-commerce floors, digital platforms.