Value Added Tax in Vietnam
Value-added tax is a tax imposed on the added value of goods or services arising from production, circulation to consumption.
Table of contents:
I. Legal Background:
- Law on Value-Added Tax No 13/2008/QH12 dated June 3, 2008
- Law on Amendments to Tax Laws No 71/2014/QH13 dated Nov 26, 2014
- Law on Amendment to the Law on Value – Added Tax No 31/2013/QH13 dated June 19, 2013
- Law on Amendments to some Articles of the law on Value-Added Tax, the law on Special Excise Duty, and the Law on Tax administration.
- Decree on Detailing and Guiding Implementation of a number of articles of law on Value-added Tax No 209/2013/ND-CP dated Dec 18, 2013
- Decree Elaboration And Guidelines For Some Articles Of The Law On Amendment Of The Law On Value-Added Tax, The Law On Special Excise Duty And The Law On Tax Administration No 100/2016/ND-CP dated July 01, 2016
- Decree On Amendments To Decrees On Taxes No 91/2014/ND-CP dated Oct 01, 2014
- Decree On Elaboration Of The Law On Amendments To Tax Laws And Amendments To Some Articles Of Decrees On Taxations No 12/2015/ND-CP Feb 12, 2015
- Decree Amendments To Decree No. 209/2013/ND-CP Dated December 18, 2013 Of The Government Of Vietnam Elaborating And Guiding The Implementation Of Certain Articles Of The Law On Value-Added Tax Amended By Decree No. 12/2015//ND-CP , Decree No. 100/2016//ND-CP, And Decree No. 146/2017//ND-CP No 49/2022/ND-CP dated July 29, 2022
II. 1. What is value-added Tax (VAT)?
Value-added tax is a tax imposed on the added value of goods or services arising from production, circulation to consumption.
II. 2. Taxpayers?
Payers of VAT are the organizations and individuals that manufacture, trade in taxable goods and services in Vietnam regardless of their lines and forms of business (hereinafter referred to as business establishments), the organizations and individuals that import goods or purchase services from abroad (hereinafter referred to as importers), including:
1. The business organizations established and registered under the Law on Enterprises, the Law on State Enterprises (now the Law on Enterprises), the Law on Cooperatives, and other business laws.
2. Business organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, the army, public service organizations, and other organizations;
3. Foreign-invested companies and the foreign participants under the Law on Foreign Investment in Vietnam (now the Law on Investment); the foreign organizations and individuals (hereinafter referred to as foreign entities) that do business in Vietnam without establishing a legal entity in Vietnam;
4. Individuals, households, independent groups of businesspeople, and other entities that engage in manufacturing, trading, or importation;
5. Any business organization or businessperson in Vietnam that purchases services (including services attached to goods) from a foreign organization that does not have a permanent establishment in Vietnam, or from a foreigner that is not a resident in Vietnam, the business organization or businessperson that purchase services is the taxpayer, except for the cases in which VAT is exempt in Clause 2 Article 5 of this Circular.
Regulations on permanent establishments and residents are introduced in the laws on corporate income tax and personal income tax.
6. Branches of export processing companies that are established to trade goods and do the tasks related to goods trading in Vietnam in accordance with the laws on industrial parks, export-processing zones, and economic zones.
Example 1: Sanko LLC. is an export processing company. Apart from manufacturing for exportation, Sanko LLC. is also licensed to import goods for sale or for exportation, and Sanko LLC. must establish a branch to do this task. This branch shall independently keep accounting records, declare and pay separate VAT on such task instead of including it in the VAT on manufacturing for exportation.
When importing goods for distribution (sale), the branch of Sanko LLC shall declare and pay VAT on the importation and on each sale (including exportation). Sanko LLC. shall use invoices, declare and pay VAT as prescribed.
II.3 Goods and Services that are not subject to VAT
1. Products from farming (including agroforestry products), breeding, and aquaculture that are produced, catched, 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 financial, banking, and securities services below:
a) Credit services include: loaning, discounting or rediscounting negotiable instruments and other valuable papers; guarantee; finance lease; domestic factoring; international factoring; other credit services according to law;
b) Loaning services provided by taxpayers that are not credit institutions;
c) Securities services include: securities brokerage; proprietary trading of securities; guaranteeing securities issuance; securities investment consultancy; securities depository; management of securities investment fund; management of securities investment portfolio; market organization services of Stock Exchanges or Securities trading centers; other securities services according to the laws on securities;
d) Capital transfers include transferring part or the whole invested capital, including selling an enterprise to another enterprise; other forms of capital transfers according to law.
đ) Selling debts;
e) Trading in foreign currencies;
g) Derivative financial services include swapping interest rates; forward contracts, futures contracts, foreign-exchange options; other derivative financial services according to law;
h) Selling collateral for loans taken by organizations of which 100% of charter capital is possessed by the State, which are established by the Government to settle bad debts of Vietnamese credit institutions.”
9. Health services, veterinary medicine services including medical examination and treatment services for human and animals; care services for elderly people and disabled people.
10. Public post and telecommunications and universal Internet services under the Governments programs.
11. Maintenance of zoos, parks, urban trees, public lighting; funeral services.
12. Renovation, repair and construction of cultural, artistic, public service and infrastructure works and residential houses for social policy beneficiaries, which are funded with peoples contributions or humanitarian aid.
13. Teaching and vocational training as provided for by law.
14. State budget-funded radio and television broadcasting.
15. Publishing, importing, issuing newspapers, magazines, academic journals, political books, text books, law books, science – technology books, books in ethnic languages, printing propagating pictures and banners, including audio, video tapes, discs, or computer files; money, money printing.
16. Mass transit by bus and tramcar.
17. Machinery, equipment, parts, and materials that cannot be produced at home and need to be imported to serve scientific research, technological development; machinery, equipment, parts, specialized vehicles, and materials that cannot be produced at home and need to be imported to serve petroleum exploration; airplanes, oil rigs, and ships that cannot be produced at home and must be imported to form fixed assets, or need to be hired from foreign partners to serve production, business, or to lease back.
18. Special-purpose weapons and military equipment for security and defense purposes.
19. Goods imported as humanitarian aid or non-refundable aid; gifts for state agencies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations or peoples armed forces units; donations or gifts for Vietnam-based individuals within the Government-prescribed quotas; belongings of foreign organizations and individuals within diplomatic immunity quotas; and personal effects within duty-free luggage quotas.
Goods and services sold to foreign organizations or individuals or international organizations for use as humanitarian aid, and non-refundable aid to Vietnam.
20. Goods transferred out of border gate or transited via the Vietnamese territory; goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials imported for the production or processing of goods for export under contracts signed with foreign parties; goods and services traded between foreign countries and non-tariff areas and between non-tariff areas.
21. Technology transfer under the Law on Technology Transfer; transfer of intellectual property rights under the Law on Intellectual Property; computer software.
22. Gold imported in the form of bars or ingots which have not yet been processed into fine-art articles, jewelries or other products.
23. Exports that are raw natural resources or minerals which have not been processed into other products; exports that are goods processed from natural resources or minerals where the total value of natural resources or minerals plus energy costs makes up at least 51% of the product price.
24. Artificial products used for the substitution of diseased peoples organs; crutches, wheelchairs and other tools used exclusively for the disabled.
25. Goods and services provided by business households and individuals that earn annual revenue of less than 100 million VND.
III. Tax Rate
III.1 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 entities in free trade zones, or sold to foreign customers as prescribed by law.
III.2 Tax rate of 5%
A 5% 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. Fertilizers; ores used for fertilizer manufacture; pesticides and Growth stimulants for plants and animals, including:
a) Organic and inorganic fertilizers such as phosphate fertilizers, nitrogenous fertilizer (urea), NPK fertilizer, mixed urea, potash; biofertilizers and other fertilizers;
b) Ores used for manufacture of fertilizers such as apatite ore, humus used for manufacture of biofertilizers;
c) Pesticides those in the List of pesticides complied by the Ministry of Agriculture and Rural Development and other pesticides;
d) 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 filleted, then seasoned with sugar, salt, solpitol, 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 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).
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.
III.3 Tax rate of 10%
Applies to goods and services subject to VAT other than goods and services subject to 0% and 5% tax.