14 products that are not subject to value-added tax in Vietnam

14 products that are not subject to value-added tax in Vietnam (Image from the Internet)

According to the provisions of Article 3 of Decree 209/2013/ND-CP, supplemented by Clause 1, Article 3 of Decree 12/2015/ND-CP:

Products not subject to VAT are specified in Article 5 of the Law on Value-added tax, Clause 1 Article 1 of the Law on amendments to some Articles of the Law on Value-added tax and Clause 1 Article 1 of the Law on amendment of the Law on Value-added tax, the Law on special excise duty and the Law on Tax administration.

1. Products that have undergone insufficient working or processing specified in Clause 1 Article 5 of the Law on Value-added tax amended in Clause 1 Article 1 of the Law on amendment of the Law on Value-added tax, the Law on special excise duty and the Law on Tax administration are products that have only been cleaned, dried, shelled, deseeded, cut, salted, cooled or otherwise preserved with common methods.

1b. Fertilizers, feeds for livestock, poultry, fish, and other animals, whether or not processed, such as: mash, cake of various type, fish meal, bone meal, shrimp meal, and other feeds for livestock, poultry, fish, and other animals, animal feed additives (such as premix, active ingredients, and carriers).

The Ministry of Finance shall take charge and cooperate with the Ministry of Agriculture and Rural Development in providing guidance on feeds for livestock, poultry, fish, and other animals, and animal feed additives that are not subject to VAT as prescribed in this Clause.

1c. Offshore fishing ships; machinery and equipment serving agriculture, including: tractor; harrowing machine; milling machine; sowing machine; rootdozer; field leveling device; seeding machine; transplanter; sugarcane planting machine; rice-sowing machine; tiller, cultipacker, fertilizer spreader, pesticide sprayers; machine for harvesting rice, corn, sugarcane, coffee, cotton; machine for harvesting tubers, fruits, roots; tea-cutting machine, tea-picking machines; threshing machine; corn peeling machine; soybean crusher; peanut huller; coffee huller, equipment for preparing coffee, wet rice; dryer for agricultural products (rice, corn, coffee, pepper, cashew nut...), and aquaculture products; machine for collecting, loading sugarcane, straw on the field; machine for egg incubating and hatching ; forage harvester; straw, grass baler; milking machine, and other specialized machines.

The Ministry of Finance shall take charge and cooperate with the Ministry of Agriculture and Rural Development in providing guidance on agricultural machines that are not subject to VAT as prescribed in this Clause.

2. Services stated at Clause 8, Article 5 of the Law on Value-Added Tax and Clause 1 Article 1 of Law amending and supplementing a number of articles of Law on Value-Added Tax are specified as follows:

a) Credit extension services include:

- Loan grant;

- Discounted and rediscounted transfer of negotiable instruments and other valuable papers;

- Guarantee;

- finance lease;

- Credit card issuance;

- Domestic and international factoring;

- Selling collateral, including the case in which the borrower sells the collateral themselves with authorization of the loaner in order to repay secured loans. In case the owner of collateral defaults on the debt and has to transfer the collateral to the credit institution for settlement of the loan as prescribed by law, it is not required to issue a VAT invoice.

- Provision of credit information prescribed by the Law on State bank;

- Other types of credit extension prescribed by law.

b) Services of loan provision by tax payers not being credit institutions;

c) Securities trading covers: securities brokerage, securities dealing, securities issuance underwriting, securities investment consultancy, securities depository, management of securities investment funds, management of securities investment companies, management of securities investment portfolios, market organization services provided by stock exchanges or securities trading centers, services related to securities registered or deposited at the Vietnam securities depository Center, loan provision to perform depository transactions, advance payment of securities sale and other trading activities under the securities law.

d) Capital transfer covers the transfer of part or the whole of the invested capital amount, including the sale of enterprises to other enterprises for production and business; securities transfer; transfer of right to contribute capital and other forms of capital transfer under law.

dd) Debt sale

e) Trading in foreign currency.

g) Sale of collateral of debts of organizations in which state owns 100% of charter capital and are established by Government in order to handle bad debts of Vietnamese credit institutions.

3. Medical services specified in Clause 1 Article 1 of the Law on amendment of the Law on Value-added tax, the Law on special excise duty and the Law on Tax administration includes transport, testing, imaging, blood and blood products used for patients.

Care services for elderly people and disabled people specified in Clause 1 Article 1 of the Law on amendment of the Law on Value-added tax, the Law on special excise duty and the Law on Tax administration include medical and nutritional care, organization of cultural, sport and entertainment activities, physical therapy and rehabilitation for elderly people and disabled people.

4. Maintenance services of zoos, flower gardens, parks, street greeneries and public lighting; funeral services.

The Ministry of Finance shall guide specifically on non-taxable services specified at this Clause.

5. For the renovation, repair or construction of works specified in Clause 12, Article 5 of the Law on Value-Added Tax, which is funded with capital other than people's contributions (including contributed capital amount and financial supports of organizations and individuals) or humanitarian aid not exceeding 50% of the total capital used for those works, the whole value of the works is not subject to tax.

Social policy beneficiaries include: People with meritorious services under the law on people with meritorious services; social relief beneficiaries who enjoy state budget allowances; people classified as poor or living just above the poverty line; and other cases provided for by law.

6. Public transportation specified in Clause 16 Article 5 of the Law on Value-added tax includes intra-provincial, urban and extra-provincial suburban public transportation by bus and tram (including metro) according to traffic laws.

7. Aircraft specified in Clause 17, Article 5 of the Law on Value-Added Tax and Clause 1 Article 1 of Law on amending and supplementing a number of articles of Law on Value-Added Tax covers also aircraft engines.

The Ministry of Planning and Investment shall assume the prime responsibility for. and collaborate with concerned agencies in, promulgating a list of machinery, equipment, accessories and supplies which can be manufactured at home as a basis for differentiating them from those which cannot be manufactured at home and need to be imported for scientific research and technological development activities; a list of machinery, equipment, spare parts, special-purpose means of transport and supplies which can be manufactured at home as a basis for differentiating them from those which cannot be manufactured at home and need to be imported for prospecting, exploring and developing oil and gas fields; a list of aircraft, drilling platforms and ships which can be manufactured at home as a basis for differentiating them from those which cannot be manufactured at home and need to be imported for the formation of enterprises' fixed assets or hired from foreign parties for production and business activities or for lease and sublease.

8. Special-purpose weapons and military equipment for security and defense purposes mentioned in Clause 18, Article 5 of the Law on Value-Added Tax which are specified by presiding over, and reaching agreement among the Ministry of Defense, the Ministry of Public Security and the Ministry of Finance.

9. Imported goods provided for in Clause 19, Article 5 of the Law on Value-Added Tax are specified as follows:

a) Goods imported as humanitarian aid or nonrefundable aid must be approved by competent state agencies.

b) Gifts for state agencies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations or people's armed forces units must comply with the law on gifts.

c) Quotas of goods imported as gifts for individuals in Vietnam must comply with the law on gifts.

d) Belongings of foreign organizations and individuals within diplomatic immunity quotas; and personal effects within duty-free luggage quotas.

dd) Goods and services sold to foreign organizations or individuals or international organizations for use as humanitarian aid, and non-refundable aid to Vietnam.

10. In case of transfer of technologies or intellectual property rights specified in Clause 21, Article 5 of the Law on Value-Added Tax which is accompanied by machinery or equipment transfer, the value of transferred technologies or intellectual property rights is not subject to value-added tax. If this value cannot be separately determined, value-added tax shall be imposed on the total value of transferred technologies or intellectual property rights and accompanied machinery and equipment

11. Exports that are extracted natural resources having not been processed into other products.

Exports that are products mainly derived from natural resources and/or minerals whose total value plus energy cost makes up at least 51% of the prime cost, except for:

- Exports that are produced from natural resources and minerals directly extracted and processed into other products which are then used for producing the exports by traders or other facilities hired by the traders (through self-contained processing or establishment of workshops and processing plants in each stage) will be entitled to 0% VAT if the conditions prescribed in Point c Clause 2 Article 12 of Law on value added tax are satisfied.

- Exports that are produced from natural resources and minerals bought and processed into other products which are then used for producing the exports by traders or other facilities hired by the traders (through self-contained processing or establishment of workshops and processing plants in each stage) will be entitled to 0% VAT if the conditions prescribed in Point c Clause 2 Article 12 of Law on value added tax are satisfied.

- Exports that are produced from materials (other than natural resources and minerals that have been processed into other products) bought for processing by traders or other facilities hired by the traders will be entitled to 0% VAT if the conditions prescribed in Point c Clause 2 Article 12 of Law on value added tax are satisfied.

The natural resources and minerals prescribed in Clause 23 Article 5 of Law on value added tax are domestically obtained resources and minerals including metallic minerals, non-metallic minerals, crude oil, natural gas and coal gas.

Value of a processed natural resource or mineral means is determined as follows:
Value of a natural resources and mineral directly extracted is direct or indirect costs of extraction of such natural resource or mineral excluding costs of transport of such natural resource or mineral from place of extraction to place of processing. Value of a natural resource or mineral bought for processing is the actual purchase price excluding costs of transport of such natural resource or mineral from place of purchase to place of processing.

Energy costs include: Fuel, electrical energy and heat energy.

Value rate of a natural resource or mineral and energy cost calculated on the prime cost shall be determined according to the previous year’s statement and be applied stably in the exporting year. In the first exporting year, value rate of a natural resource or mineral and energy cost calculated on the prime cost shall be determined according to the investment plan and be applied stably in the exporting year. If there is no investment plan, the abovementioned rate will be determined according to reality.

The Ministry of Finance shall take charge and cooperate with relevant authorities in providing guidelines for determining the extracted natural resources and minerals that have not been processed into other products prescribed in this Clause

12. Goods and services of the business households or individuals with annual turnover of one hundred million VND or less than.

The Ministry of Finance shall guide the business enterprises and individuals, with annual turnover of one hundred million VND or less than, not liable to pay value-added tax as prescribed at this Clause.

Above is the content of regulations on products not subject to VAT. For more information, you can refer to Decree 209/2013/ND-CP.

Best regards!