Value-Added Tax Insight
Value-Added Tax (a.k.a VAT) is a kind of tax indirectly applying on goods and services (including goods and services purchased from organizations and individuals overseas) used for the purposes of production, trading and consumption in Vietnam.
DEFINITION
VAT taxpayers shall be organizations and individuals producing and trading VAT taxable goods and services in Vietnam, regardless of the business line, form or organization of business.
Input VAT | VAT occurred from the goods and services purchased to serve for business operation of a company, supported by VAT invoice issued from the vendors, along with relating agreement, contract (if any) of purchased goods or engaged services.
Output VAT | VAT occurred from the goods and services provided to customers, clients; support by VAT invoice issued from the company to its client, along with relating agreement, contract (if any) of sold goods or services.
VAT DECLARATION METHOD
Generally, VAT declaration in Vietnam follows deduction method:
VAT payables = Output VAT – Input VAT.
- If Output VAT > Input VAT, there will be VAT payables for this period
- If Output VAT < Input VAT, remaining input VAT after netting-off is carried forward to next period for VAT declaration.
VAT APPLICABLE RATES
In Vietnam, there are certain three (3) VAT rates: 0%, 5% and 10%; and VAT exemption. Please refer table below for specific goods and services being subject to each VAT rate
| VAT rate | Goods and Services |
| Exemption |
Water supply and drainage, Salt product, Transfer of land use right Certain financial and banking services Life insurance, health insurance etc. Software products and software related services Etc. |
| 0% |
Exported goods and services (to overseas party and consumed outside Vietnam, in non-tariff zone) International transportation Construction and installation in overseas or in non-tariff zones Etc. |
| 5% |
Clean water used for production and living consumption Fertilizer Feeds for cattle and poultry Cultivation products and husbandry, non-processing products of aquaculture and fishing Etc. |
| 10% (*) | 10% rate applies to all goods and services which are not subject to exemption, 0%, 5% as stated above |
(*) Note that from 1 Feb 2022 to 31 Dec 2022, VAT rate of 10% applied on goods and services is adjusted to 8% (except for certain goods and service such as: telecommunication, financial activities, banking service etc.)
VAT FILINGS
For newly established enterprise, VAT filings is under quarterly basis and adopted for whole calendar year. After 12-month period, the company will determine periodical filings for next year based on total revenue of previous year
- Total revenue of previous year (12-month period) is from VND 50 billion and above, VAT declaration is on monthly basis and apply for whole calendar year
- Total revenue of previous year (12-month period) is below VND 50 billion, VAT declaration continues on quarterly basis