Vietnam: Regulations on VAT calculations

1. VAT credit method

According to Article 10 of the Law on VAT 2008 of Vietnam, VAT credit method is prescribed as follows:

- The payable value-added tax amount according to the tax credit method is the output value-added tax amount minus the creditable input value-added tax amount;

- The output value-added tax amount is the total amount of value-added tax on sold goods and services indicated in the added-value invoice;

- The creditable input value-added tax amount is the total value-added tax amount indicated in the added-value invoice on goods or service purchase and the document proving the payment of value-added tax on imported goods, and must satisfy the conditions specified in Article 12 of this Law.

The tax credit method applies to business establishments which fully observe regulations on accounting, invoices and documents as prescribed by the law on accounting, invoices and documents, and register to pay tax according to the tax credit method.

2. Method of calculation of tax based directly on added value

According to Article 11 of the Law on VAT 2008 of Vietnam, method of calculation of tax based directly on added value is prescribed as follows:

- The payable value-added tax amount according to the method of calculation of tax based directly on added value is the added value of sold goods or services multiplied by the value-added tax rate;

- The added value is the selling price of goods or services minus the purchase price of such goods or services.

The method of calculation of tax based directly on added value applies to the following cases:

- Business establishments and foreign business organizations and individuals without Vietnam-based resident establishments but having incomes generated in Vietnam that fail to fully observe regulations on accounting, invoices and documents;

- Gold, silver and gem trading activities.

View more details at the Law on VAT 2008 of Vietnam, effective from January 01, 2009.

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