Vietnam: Are goods and services subject to the VAT rate of 0% in Vietnam not eligible for VAT?
Are goods and services subject to the VAT rate of 0% in Vietnam not eligible for VAT?
Goods and services not eligible for VAT and goods and services subject to the VAT rate of 0% are often misunderstood.
However, according to the provisions of Clause 1, Article 8 of the Law on Value Added Tax 2008, Article 9 of Circular 219/2013/TT-BTC, Article 5 of the Law on Value Added Tax 2008, Article 4 of Circular 219/2013/TT-BTC and Clause 2 Article 1 of Circular 26/2015/TT-BTC, these are the following differences as follows:
(1) In essence:
- Goods and services subject to the VAT rate of 0% are still eligible for VAT with the preferential tax rate of 0%.
- Goods and services not eligible for VAT are not subject to VAT as prescribed.
(2) Subjects of application:
Goods and services subject to the VAT rate of 0% are:
- Exported goods and services;
- Construction and installation overseas and in free trade zones;
- International transport;
- Exported goods and services not eligible for VAT
(Except for cases where the tax rate of 0% is not applied as prescribed in Clause 3 Article 9 of Circular 219/2013 / TT-BTC)
Exported goods and services are those that are sold to overseas organizations and individuals and are consumed outside Vietnam, sold to entities in free trade zones, or sold to foreign customers as prescribed by law.
Goods and services that are not subject to VAT are a number of subjects in agricultural production, social security, and humanitarian activities as follows:
- Products from farming (including agroforestry products), breeding, and aquaculture that are produced, caught, sold, or imported and are not processed into other products (hereinafter referred to as unprocessed) or have only been preprocessed.
- Irrigation services, plowing services, dredging channels, dredging in-field trenches serving agricultural production; harvesting services.
- Salt derived from seawater, rock salt, pure salt, refined salt, and iodized salt composed primarily of sodium chloride (NaCl).
- State-owned houses sold to tenants.
- Imported goods, goods/services sold to other organizations and individuals as humanitarian aid or non-refundable aid
- The finance, banking, and securities services
- And specific cases as prescribed in Article 4 of Circular 219/2013 / TT-BTC.
(3) Tax declaration:
- Goods and services subject to the VAT rate of 0%: Tax declaration shall comply with the regulations because the above-mentioned goods and services are still subject to VAT.
- Goods and services not subject to VAT: Individuals and organizations are not responsible for declaring tax for goods and services not subject to VAT.
(4) Tax deduction and refund:
- Goods and services subject to the VAT rate of 0%: Establishments trading goods and/or services subject to the VAT rate of 0% are entitled to input VAT deduction and refund as prescribed.
- Goods and services not subject to VAT: Establishments trading goods and/or services not subject to VAT are not entitled to input VAT deduction and refund.
Who are VAT payers in Vietnam?
According to the provisions of Article 4 of the Law on Value Added Tax 2008 on taxpayers as follows:
Taxpayers
Taxpayers include organizations and individuals producing or trading in goods or services subject to value-added tax (below referred to as business establishments) and organizations and individuals importing goods subject to value-added tax (below referred to as importers).
Specifically, in Article 3 of Circular 219/2013 / TT-BTC, specific instructions on taxpayers are as follows:
Payers of VAT are the organizations and individuals that manufacture, and trade in taxable goods and services in Vietnam regardless of their lines and forms of business (hereinafter referred to as business establishments), the organizations and individuals that import goods or purchase services from abroad (hereinafter referred to as importers), including:
- The business organizations established and registered under the Law on Enterprises, the Law on State enterprises (now the Law on Enterprises), the Law on Cooperatives, and other business laws.
- Business organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, the army, public service organizations, and other organizations;
- Foreign-invested companies and the foreign participants under the Law on Foreign investment in Vietnam (now the Law on Investment); the foreign organizations and individuals (hereinafter referred to as foreign entities) that do business in Vietnam without establishing a legal entity in Vietnam;
- Individuals, households, independent groups of businesspeople, and other entities that engage in manufacturing, trading, or importation;
- Any business organization or businessperson in Vietnam that purchases services (including services attached to goods) from a foreign organization that does not have a permanent establishment in Vietnam, or from a foreigner that is not a resident in Vietnam, the business organization or businessperson that purchase services is the taxpayer, except for the cases in which VAT is exempt in Clause 2 Article 5 of this Circular.
Regulations on permanent establishments and residents are introduced in the laws on corporate income tax and personal income tax.
- Branches of export processing companies that are established to trade goods and do the tasks related to goods trading in Vietnam in accordance with the laws on industrial parks, export-processing zones, and economic zones.
What are the current VAT rates in Vietnam?
VAT rates in 2023 include 0%, 5%, and 10%:
- The tax rate of 0% is applied to exported goods and services, international transport, and exported goods and services not subject to VAT specified in Article 5 of the Law on Value Added Tax 2008, except for cases in Clause 3, Article 1 of the Law on Amendments to Law on Value Added Tax 2013.
- The tax rate of 5% is applied to goods and services specified in Clause 2, Article 8 of the Law on Value Added Tax 2008 (amended and supplemented by Clause 3, Article 1 of the Law on Amendments to Law on Value Added Tax 2013, Clause 2, Article 3 of the Law on Amendments to Tax Laws 2014)
- The tax rate of 10% is applied to goods and services not subject to the tax rate of 0% and the tax rate of 5%.
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