Cases applying tax rate of 5% in Vietnam

Cases applying tax rate of 5% in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is VAT?

According to Article 2 of the Law on Value Added Tax 2008, Value-added tax is a tax imposed on the added value of goods or services arising in the process from production, circulation to consumption.

2. Cases applying tax rate of 5% in Vietnam

Cases applying tax rate of 5% in Vietnam according to Article 10 of Circular 219/2013/TT-BTC (amended in Circular 26/2015/TT-BTC) are as follows:

- Clean water serving manufacture and everyday life, except for bottled water and other soft drinks subject to 10% tax.

- Fertilizers; ores used for fertilizer manufacture; pesticides and Growth stimulants for plants and animals, including:

+ Organic and inorganic fertilizers such as phosphate fertilizers, nitrogenous fertilizer (urea), NPK fertilizer, mixed urea, potash; biofertilizers and other fertilizers;

+ Ores used for manufacture of fertilizers such as apatite ore, humus used for manufacture of biofertilizers;

+ Pesticides those in the List of pesticides complied by the Ministry of Agriculture and Rural Development of Vietnam and other pesticides;

+ Growth stimulants for plants and animals.

- 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.

- 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 Circular 219/2013/TT-BTC).

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 Circular 219/2013/TT-BTC.

- The farming, breeding, aquaculture products that are unprocessed or preprocessed (defined in Clause 1 Article 4 of Circular 219/2013/TT-BTC), except for the cases in Clause 5 Article 5 of Circular 219/2013/TT-BTC.

The unprocessed farming products mentioned in this Clause include unhusked rice, husked rice, corn, potatoes, cassava, and wheat.

- Latex and resin that have undergone insufficient processing; fishing nets and fibers for making fishing nets regardless of materials.

- Fresh foods for business, unprocessed forestry products for business, except for wood, bamboo sprouts, and the products enumerated in Clause 1 Article 4 of Circular 219/2013/TT-BTC.

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 filleted, then seasoned with sugar, salt, solpitol, then packaged and frozen. The seasoned triggerfish is subject to 10% VAT.

- Sugar; by-products during the sugar manufacture process including molasses, bagasse.

- 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.

- Agricultural machinery and equipment including tractors, transplanters, seeders, threshers, harvests, combined harvester, and pesticide sprayers.

- Medical equipment include radiographic equipment, equipment and instruments for surgery and treatment; ambulances; instruments for blood pressure measurement, cardiography, blood infusion, syringes; birth control equipment, and other medical equipment certified by the Ministry of Health.

Cotton wool, bandages, gauze pads, and medical tampons; medicines including finished medicines and raw materials, except for functional foods; vaccines; bioproducts, distilled water to mix with injectable medicines or intravenous fluids; chemicals used for testing and sterilization; caps, clothing, facemasks, gloves, boots, medical towels, breast implants and skin fillers (not including cosmetics).

- Teaching aids include models, pictures, boards, chalks, rulers, compasses, other equipment and instruments for teaching, research, and scientific experimentation.

- Artistic activities, exhibitions, sports; art performances; cinematography; importing, distributing, and showing films.

+ Revenues from activities, exhibitions, sports do not include the revenues from goods sale, lease on yards or exhibition booths.

+ Art performances and art performance organization services must be licensed by competent authorities.

+ Cinematography; importing, distributing, and showing films

- Children’s toys; books other than those that are not subject to VAT mentioned in Clause 15 Article 4 of Circular 219/2013/TT-BTC.

- 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.

- 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.

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