What is the value added tax rate in Vietnam in 2023? What goods and services are subject to the VAT rate of 0%, 5% and 10%?
What is the value added tax rate in Vietnam in 2023?
Pursuant to Article 9, Article 10 and Article 11 of Circular 219/2013/TT-BTC of Vietnam, there are 03 VAT rates, including:
- VAT rate of 0%
- VAT rate of 5%
- VAT rate of 10%.
According to that, there are currently 03 VAT rates of 0%, 5% and 10%. These tax rates are applied depending on the type of goods and services in accordance with the law on value added tax.
What is the value added tax rate in Vietnam in 2023? What goods and services are subject to the VAT rate of 0%, 5% and 10%?
What goods and services are subject to the VAT rate of 0%?
Pursuant to Article 9 of Circular 219/2013/TT-BTC of Vietnam (amended by Clause 2, Article 1 of Circular 130/2016/TT-BTC of Vietnam) as follows:
Tax rate of 0%
1. 0% VAT is applied to exported goods and services; construction and installation overseas and in free trade zones; international transport; exported goods and services that are not subject to VAT, except for the cases in Clause 3 of this Article, in which 0% VAT is not applied.
Exported goods and services are those that are sold to overseas organizations and individuals and are consumed outside Vietnam, sold to the entities in free trade zones, or sold to foreign customers as prescribed by law.
a) Exported goods include:
- The goods exported to other countries, including those under entrustment contracts;
- The goods sold to free trade zones as prescribed by the Prime Minister; the goods sold to duty-free shops;
- The goods that are delivered to the recipients outside Vietnam;
- Parts and supplies for repairing, maintaining vehicles, machinery, and equipment of foreign entities, and those that are used outside Vietnam;
- Cases of deemed exportation:
+ Forwarded processed goods under trade laws on international goods trade and export processing.
+ Exported goods delivered to a domestic recipient appointed by the importer (hereinafter referred to as domestic exports).
+ The goods exported to be sold at overseas fairs or exhibitions.
b) Exported services include the services directly provided for overseas organizations and individuals and are consumed overseas; the services provided for the entities in free trade zones and consumed within the free trade zones.
Overseas individuals are the foreigners that do not reside in Vietnam, the Vietnamese people that reside overseas and are not present in Vietnam when the services are provided. The entities in free trade zones are the entities that have registered their business and other cases prescribed by the Prime Minister.
If services are provided both in Vietnam and overseas, but the service contract is signed between two taxpayers in Vietnam or two taxpayer that have permanent establishments in Vietnam, 0% tax is only applied to the services provided overseas, except for the case of insurance for imported goods, in which 0% tax is applied to the whole contract value. If the contract does not separate the services provided in Vietnam, the taxable price shall be determined according to the ratio of expense incurred in Vietnam to the total expense.
c) International transport includes passenger transport and freight transport along international routes from to other countries and vice versa, or from one foreign country to another, regardless of the availability of vehicles. If the international contract includes a domestic segment, the segment is also considered international transport.
d) Aviation services and maritime services directly provided to overseas organizations or via agents, including:
0% tax shall be applied to the following aviation services: catering, takeoff and landing, aircraft parking, aircraft security; security scanning; luggage conveyance at terminals; terrestrial technical services; aircraft protection; aircraft towing; aircraft guiding; passenger boarding bridges; air controlling; flight crew and passenger transport in the airport apron; freight handling and checking; passenger services on international flights from Vietnamese airports.
0% tax shall be applied to the following maritime services: ship towing; pilotage; sea rescue; wharves; freight handling; moorings; hatch control; hull cleaning; freight checking; registration,
dd) Other goods and services:
- Construction or installation overseas or in free trade zones;
- The goods and services that are not subject to VAT when being exported, except for the cases in Clause 3 of this Article, in which 0% tax is not applied;
- Repairs to foreign aircraft and ship vessels.
Thus, the value added tax rate of 0% applies to the above-mentioned goods and services when the conditions prescribed by law are satisfied.
In addition, the above goods and services must satisfy the conditions for applying the value added tax rate of 0% as prescribed in Clause 2 of this Article.
What goods and services does the VAT rate of 5% apply to?
Pursuant to Article 10 of Circular 219/2013/TT-BTC of Vietnam (amended by Clauses 6 and 7, Article 1 of Circular 26/2015/TT-BTC of Vietnam and Article 1 of Circular 43/2021/TT-BTC of Vietnam) stipulating as follows:
Tax rate of 5%
10% tax shall be levied on the goods and services below:
1. Clean water serving manufacture and everyday life, except for bottled water and other soft drinks subject to 10% tax.
2. Ores used for fertilizer manufacture; pesticides and growth stimulants for plants and animals, including:
b) Ores used for manufacture of fertilizers such as apatite ore used for manufacture of phosphate fertilizers, humus used as biofertilizers;
b) Pesticides include plant protection drugs on the List of plant protection drugs issued by those in the List of pesticides compiled by the Ministry of Agriculture and Rural Development and other pesticides;
c) Growth stimulants for plants and animals.
3. Feeds for livestock, poultry, and other animals according to the laws on animal feeds, including processed and unprocessed feeds such as bran, press cakes, fish meal, bone meal, shrimp meal, and other feeds for livestock, poultry, and other animals.
4. Dredging channels, canals, ponds, and lakes serving agriculture; plant cultivation; preprocessing and preservation of agricultural products (except for dredging in-field trenches mentioned in Clause 3 Article 4 of this Circular).
Preprocessing and preservation of agricultural products include drying, husking, threshing, cutting, grinding, putting into cold storage, salting, and other usual means of preservation mentioned in Clause 1 Article 4 of this Circular.
5. The farming, breeding, aquaculture products that are unprocessed or preprocessed (defined in Clause 1 Article 4 of this Circular), except for the cases in Clause 5 Article 5 of this Circular.
The unprocessed farming products mentioned in this Clause include unhusked rice, husked rice, corn, potatoes, cassava, and wheat.
6. Latex and resin that have undergone insufficient processing; fishing nets and fibers for making fishing nets regardless of materials.
7. Fresh foods for business, unprocessed forestry products for business, except for wood, bamboo sprouts, and the products enumerated in Clause 1 Article 4 of this Circular.
Fresh foods include the foods that have not been cooked or processed into other products, or have only been cleaned, unhusked, cut, frozen, or dried in a way that they are still fresh foods such as meat of livestock and poultry, shrimps, crabs, fish, and other aquaculture products. 10% tax shall be levied on seasoned foods.
Unprocessed forestry products include the products from natural forests such as rattan, bamboo, mushrooms, roots, leaves, flowers, herbs, resin, and other forestry products.
Example 49: Company A produces seasoned triggerfish under the following procedure: fresh triggerfish are caught and fileted, then seasoned with sugar, salt, solpadol, then packaged and frozen. The seasoned triggerfish is subject to 10% VAT.
8. Sugar; by-products during the sugar manufacture process including molasses, bagasse.
9. Products made of jute, rattan, bamboo, leaves, straws, coconut shells, hyacinth, and other handicrafts made of recycled materials from agriculture; preprocessed cotton; newspaper printing paper.
10. Agricultural machinery and equipment including tractors, transplanters, seeders, threshers, harvests, combined harvester, and pesticide sprayers.
11. Medical equipment and tools including medical machines and equipment: screening, scanning and imaging equipment for medical examination and treatment; specialized equipment for surgery, treatment, emergency medical service vehicle; measuring instrument for measuring blood pressure, cardiac activities, pulse, blood transfusion instrument; syringes; contraception equipment; medical equipment requiring import permit, circulation registration certificate or notice on receipt of standard declaration according to regulations and law on medical or according to list of medical equipment under specialized management of Minister of Health with commodity code identified according to list of Vietnamese import and export commodities attached to Circular No. 14/2018/TT-BYT dated May 15, 2018 of Minister of Health and amending documents (if any).
Medical cotton, bandages and first-aid; medical prevention and treatment medicine including final medicine products, pharmaceutical starting materials, except functional food; vaccine; medical biologicals, distilled water for diluting injectable medicines, intravenous fluids; hat, clothes, facemasks, surgical gloves, gloves, leg cover, shoe cover, towels, specialized medical gloves, breast implants and dermal fillers (excluding cosmetics); chemicals for experiment and sterilization in medical.
12. Teaching aids include models, pictures, boards, chalks, rulers, compasses, other equipment and instruments for teaching, research, and scientific experimentation.
13. Artistic activities, exhibitions, sports; art performances; cinematography; importing, distributing, and showing films.
a) Revenues from activities, exhibitions, sports do not include the revenues from goods sale, lease on yards or exhibition booths.
b) Art performances and art performance organization services must be licensed by competent authorities.
c) Cinematography; importing, distributing, and showing films
14. Children’s toys; books other than those that are not subject to VAT mentioned in Clause 15 Article 4 of this Circular.
15. Scientific and technological services, which mean the activities that serve or assist in scientific research and technology development; the activities related to intellectual property; transfer of technologies, technical regulations and standards related to measurement, product quality, goods, nuclear and radiation safety, and atomic energy; consultancy, training, dissemination, and application of scientific and technological achievements to socio-economic fields under contracts for scientific and technological services defined in the Law on Science and technology, not including online games and Internet-based entertainments.
16. Sale, lease, and lease-option of social housing according to the Law on Housing. Social housing means the housing invested by the state or the organizations and individuals from various economic sectors, which satisfy the criteria for housing in terms of selling prices, rents, and eligible buyers according to housing laws.
Thus, the goods and services mentioned above will be subject to the value added tax rate of 5%.
Which goods and services will be subject to the value added tax rate of 10%?
Pursuant to Article 11 of Circular 219/2013/TT-BTC of Vietnam stipulating as follows:
Tax rate of 10%
10% tax shall be levied on the goods and services that are not mentioned in Article 4, Article 9 and Article 10 of this Circular.
The rates of VAT mentioned in Article 10 and Article 11 shall be uniformly applied to each type of goods and services, whether they are imported, manufactured, processed, or traded.
Example 50: 10% tax is levied on apparel. That means the tax rate is always 10% whether such apparel is imported, manufactured, processed, or traded.
VAT on the products made of recycled wastes and scrap is the same as VAT on the wastes and scrap when they are sold.
If a taxpayer sells various goods and services that are subject to various rates of VAT, they must be sorted by VAT rates. Otherwise, the highest rate of VAT among which shall apply.
If the rate of VAT in the preferential import tariff schedule is found not conformable with this Circular, this Circular shall apply. If different rates of VAT are applied to the same kind of goods that are imported or manufactured in Vietnam, the local tax authority and customs authority must send a report to the Ministry of Finance for guidance.
Thus, the value added tax rate of 10% will be applied to goods and services that are not subject to value added tax, subject to the tax rate of 5% and the tax rate of 0%.
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