Goods and services that are not subject to value added tax (VAT) in Vietnam

Hello, Lawnet would like to answer as follows:

Goods and services that are not subject to value added tax (VAT) in Vietnam

According to Article 4 of Circular 219/2013/TT-BTC amended by Article 1 of Circular 26/2015/TT-BTC, Goods and services that are not subject to VAT in Vietnam include:

(1) Products from farming (including agro-forestry 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.

(2) Breeds of livestock, plant varieties, including eggs, breeds, seeds, stems, tubers, semen, embryos, genetic materials that are raised, imported, and traded. The breeds of livestock and plant varieties that are not subject to VAT are the products of the importers and traders that have the certificates of registration of animal breed or plant variety trading issued by regulatory bodies. The animal breeds and plant varieties that apply quality standards of the state must satisfy the requirements imposed by the state.

(3) Irrigation services, plowing services, dredging channels, dredging in-field trenches serving agricultural production; harvesting services.

(4) Salt derived from seawater, rock salt, pure salt, refined salt, iodized salt composed primarily of sodium chloride (NaCl).

(5) State-owned houses sold to tenants.

(6) Transfer of right to use land (hereinafter referred to as land tenure).

(7) Life insurance, health insurance, learner’s insurance, other insurance services related to humans; insurance for livestock, plants and other agriculture insurance services; insurance for ships and instruments for fishing; reinsurance.

(8) The finance, banking, and securities services below:

- Credit extension includes:

+ Loan;

+ Discounted transfer of negotiable instruments and other valuable papers;

+ Bank guarantee;

+ Finance lease;

+ Issuance of credit cards.

Where a credit institution collects fees for issuance of credit cards, the fees collected from the clients that are part of the credit extension process (card issuance fee) according to the regulations on granting loan of the credit institution such as fee for early repayment, penalties for late repayment, fee for debt restructuring, fee for loan management, and other fees that are part of the credit extension process are not subject to VAT.

+ Domestic and international factoring for the banks allow to process international payments;

+ Revenue from liquidation of collateral by a credit institution or law enforcement authority or by the borrowers themselves with authority of the loaner to repay secured loans, particularly:

+ Collateral that may be sold is assets of a secured transaction registered with a competent authority in accordance with regulations of law on registration of secured transactions.

+ Collateral shall be settled in accordance with regulations of law on secured transactions.

- Information provision services provided by the units and organizations affiliated to the State bank for credit institutions to use for credit extension in accordance with the Law on the State bank.

- Other forms of credit extension prescribed by law

- Separate loans that are not a business and irregularly given by taxpayers that are not credit institutions.

- Securities services include: brokerage, proprietary trading, issuance guarantee, investment consultancy, depository, securities investment fund management, securities company management, securities investment portfolio management, market organization services of Stock Exchanges or Securities trading centers, services related to the securities registered and deposited at Vietnam Securities Depository, granting loans for margin trading, advance payment for securities and other types of securities trading prescribed by securities laws.

Information provision, auctions of shares of issuers, technical support for online transactions of Stock Exchanges.

- Capital transfer includes the transfer of part of or the whole capital invested in another business organization (regardless of the creation of a new legal entity), securities transfer, transfer of the right to contribute capital, and other forms of capital transfer prescribed by law, including business acquisition in which the acquirer inherits all rights and obligations of the acquired company.

- Selling debts;

- Foreign currency trading;

- Derivative financial services include: forward contracts, futures contracts, call option, put option, other derivative financial services prescribed by law;

- Selling collateral put up by the organizations 100% charter capital of which is owned by the government to settle bad debts of Vietnamese credit institutions.

(9) Medical services, veterinary services, including examination, treatment, and prevention of diseases for human and animals, birth control services, convalescence and rehabilitation services for patients, patient transport services, sickbed and sickroom rental services; testing, radiography services; blood and blood products for patients. 

If medicines are included in the service package (according to regulations of the Ministry of Health), the revenue from medicines in the package is also not subject to VAT.

(10) Public postal and telecommunications services, and public Internet services provided by the government, postal and telecommunications services from abroad (inbound).

(11) Maintenance of zoos, flower gardens, parks, street greeneries, public lighting, funeral services. The services mentioned in this Clause do not depend on the source of payment. In particular:

- Maintenance of zoos, flower gardens, parks, street greeneries, and state-owned forests include management, tree planting and cultivation, protection of animals in the parks, zoos, public areas, national forests and national parks;

- Public lighting includes lighting on the streets, in alleys, neighborhoods, flower gardens, and parks. Revenue from public lighting is not taxable;

- Funeral services provided by the business establishments licensed to provide funeral services include funeral parlor and car rental service, burial service, cremation service, grave move service, and grave care service.

(12) Maintenance, repairs, and construction funded by the people (including contributions and sponsorships), humanitarian aid for cultural and artistic works, public works, infrastructure, and housing for beneficiaries of incentive policies.

When a source of funding other than people’s contribution or humanitarian aid is used that does not exceed 50% of the total investment in the work, the value of the whole work is not subject to tax.

When a source of funding other than people’s contribution or humanitarian aid is used that exceeds 50% of the total investment in the work, the value of the whole work is subject to VAT.

Beneficiaries of incentive policies include the contributors, beneficiaries of social protection that receive benefits from government budget; members of poor households, and other cases.

(13) Education and vocational training as prescribed by law, including foreign language training, artistic training, sports training, nursing, children’s nursing, and training of other professions in order to raise extend education, improve professional knowledge and skills.

The revenues from meal, student transport collected by educational institutions from preschool to high school are not subject to tax.

Revenues from boarding school services; revenues from training (including the examinations and issuance of qualifications are part of the training course) are not subject to VAT. If the training institution only organizes the examinations and issues qualifications that are part of the training course without running the course, the examinations and issuance of qualifications are also not subject to tax. The examinations and issuance of qualifications beyond the training course are subject to VAT.

(14) Audio and video broadcasting funded by government budget.

(15) Publishing, importing newspapers, magazines, specialist newsletters, political books, textbooks, teaching materials, law books, scientific books, books using languages of ethnic minorities, propagation pictures, including those in the form of audio and video discs/tapes, electronic data; money and money printing.

(16) Public transport by bus and tram within a province, a city or the routes adjacent to the city as prescribed by the Ministry of Transport.

(17) Goods that cannot be manufactured in Vietnam and must be imported, including:

- Imported machinery, equipment, parts, and supplies serving scientific research and technological development;

- Imported machinery, equipment, parts, specialized vehicles and supplies serving petroleum exploration and extraction;

- Airplanes (including engines), oil rigs, and ships that cannot be manufactured in Vietnam and are imported as fixed assets or leased from a foreign party to serve manufacturing, trading, or to sublease.

The importer must present the documents about customs procedure, customs supervision and inspection, export tax, import tax, and administration of tax on exported and imported goods prescribed by the Ministry of Finance to the customs.

The Ministry of Planning and Investment shall compile a list of machinery, equipment, parts, supplies serving scientific research and technology development that can be manufactured in Vietnam, a list of machinery, equipment, parts, and specialized vehicles serving petroleum exploration and extraction that can be manufactured in Vietnam, and a list of airplanes, oil rigs, and ships that can be manufactured in Vietnam as the basis for identifying those that cannot be manufactured in Vietnam and need importing.

(18) Weapons and specialized vehicles serving national defense and security.

- The weapons and specialized vehicles serving national defense and security enumerated in the list compiled by the Ministry of Finance in cooperation with the Ministry of National Defense and the Ministry of Public Security.

The weapons and specialized vehicles serving national defense and security that are not subject to VAT must be finished products, or parts, packages used for assembling finished products. If the weapons and specialized vehicles must be repaired, the repair services provided by the companies affiliated to the Ministry of National Defense and the Ministry of Public Security are not subject to VAT.

- Imported weapons, and specialized vehicles (including supplies, machinery, equipment, parts) serving national defense and security that are exempt from import tax according to the Law on Export and import tax, or imported within annual quota imposed by the Prime Minister.

The procedure and documentation for imported weapons and vehicles are not subject to VAT during importation according to regulations of the Ministry of Finance on customs procedure, customs supervision and inspection, export tax, import tax, and administration of tax on exported and imported goods.

(19) Imported goods, goods/services sold to other organizations and individuals as humanitarian aid or non-refundable aid in the following cases:

- Goods imported as humanitarian aid or non-refundable aid must be certified by the Ministry of Finance or Services of Finance;

- Gifts for regulatory bodies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations, and the army prescribed by the laws on gifts;

- Gifts for individuals in Vietnam prescribed by the laws on gifts;

- Belongings of foreign entities provided with diplomatic immunity prescribed by the laws on diplomatic immunity; belongings brought to Vietnam by Vietnamese people residing abroad;

- Belongings in luggage within tax-free allowance;

The limit on tax-free imported goods is specified in the Law on Export and import tax and its guiding documents.

Imported goods of the entities provided with diplomatic immunity are not subject to VAT. Any entity granted diplomatic immunity that purchases goods/services in Vietnam at VAT-inclusive prices may claim a refund according to Clause 7 Article 18 of this Circular.

Instructions on VAT refund for diplomatic missions, consular offices, and representative offices of international organizations in Vietnam are provided by the Ministry of Finance.

- Goods and the goods/services sold to other organizations and individuals as humanitarian aid or non-refundable aid for Vietnam.

In order to be exempt from VAT, the international organization and or foreigner that buys goods/services in Vietnam as humanitarian aid and non-refundable aid must send a note to the seller, which specifies their name, the quantity or value of purchased goods, and bears certification of the aid by the Ministry of Finance and Services of Finance.

When selling goods, the seller must issue an invoice specifying that the goods are sold at VAT-exclusive prices to a foreign entity as non-refundable aid or humanitarian aid, keep the aforesaid note as an evidence when declaring tax. Any foreign entity or international organization that purchases goods/services in Vietnam as non-refundable aid or humanitarian aid at VAT-inclusive prices may claim a refund according to Clause 6 Article 18 of this Circular.

(20) The goods forwarded through Vietnam’s territory; goods temporarily imported or temporarily exported, raw materials imported for manufacturing or export processing under contracts with foreign partners

The goods and services traded between a foreign party and a free trade zone, or among free trade zones.

Free trade zones include: export-processing zones, export processing companies, tax-suspension warehouses, bonded warehouses, special economic zones, commercial - industrial zones, and other economic zones established and provided with similar tax incentives as free trade zones according to Decisions of the Prime Minister. The transactions between a free trade zone and an external party are considered export/import.

The procedures and documents for considering VAT exemption must comply with instructions of the Ministry of Finance on customs procedure, customs supervision and inspection, export tax, and import tax.

(21) Technology transfers according to the Law on Technology transfers; intellectual property right transfers according to the Law on Intellectual property. If a contract of technology transfer or intellectual property right transfer is associated with a transfer of machinery/equipment, only the value of transferred technology or intellectual property right is not subject to VAT. If such value cannot be separated, VAT shall be imposed on the total value of the transferred technology or intellectual property right and machinery/equipment.

Computer software including software products and software services as prescribed by law.

(22) Imported gold in the form of bullions, pieces, and other forms that are not fashioned into jewelry or other items.

Gold in the form of bullions, pieces, and other forms of unfashioned gold shall be identified in accordance with the laws on gold trading.

(23) Export products are resources and minerals that have not been processed into other products or have been processed into other products, but the total value of resources and minerals, plus energy costs, accounts for 51% or more of the production cost of products processed from resources and minerals. Export products are goods processed from resources and minerals with a total value of resources and minerals, plus energy costs, accounting for 51% or more of the production cost of products processed from resources and minerals.

- Resources and minerals are domestic resources and minerals, including: metallic minerals; non-metallic minerals; crude oil; natural gas; coal.

- Enterprises producing products as resources and minerals (including direct extraction or products purchased for processing) with a total value of resources and minerals plus energy costs accounting for 51% or more of the production cost of products processed from resources and minerals, when exporting, are not subject to VAT.

In the event that the enterprise does not export but sells to another enterprise for export, the enterprise purchasing these goods for export must declare VAT like the same type of products produced and directly exported by the enterprise and must pay export tax as prescribed.

(24) Prosthetic body parts, including those permanently implanted into the human body; crutches, wheelchairs, and other special instruments serving the disabled.

(25) Goods/services provided by any business household or businessperson that earns an annual revenue of ≤ 100 million VND.

(26) The goods and services below:

- Duty-free goods at duty-free shops prescribed by the Prime Minister.

- Goods in national reserve sold by national reserve authorities.

- Charged activities of the state according to the laws on fees and charged.

- Bomb and mine clearance carried out by the army at the constructions funded by government budget.

Key word: tax | VAT | value added tax | in Vietnam | Vietnam |

Please Login to be able to download