Value Added Tax Handbook: Everything You Need to Know About VAT Law in Vietnam

This article provides comprehensive information about value-added tax (VAT) in Vietnam. It covers the definition, taxable subjects, tax rates, calculation methods, and governing bodies. VAT is an indirect tax levied on the value added to goods and services at each stage of the supply chain. It is important for businesses, organizations, individual entrepreneurs, and consumers to understand VAT laws and fulfill their obligations accurately. VAT has benefits such as promoting efficient production, fair competition, and reducing the tax burden on low-income earners. The taxable subjects include businesses, organizations, individual entrepreneurs, and individuals importing goods. Certain goods and services are exempt from VAT. The general tax rate is 10%, but there are also rates of 0%, 5%, and 8% for specific goods and services. VAT is calculated by multiplying the taxable value by the VAT rate. The governing bodies responsible for VAT management include the General Department of Taxation Summary, learn thoroughly about value-added tax, VAT, in Vietnam, including its definition, taxable subjects, tax rates, calculation methods, governing bodies, and the latest regulations. This article provides valuable information for businesses, organizations, individual entrepreneurs, and consumers. By providing comprehensive and accurate information about VAT, this article will help you understand VAT law and your obligations better. Fulfill your VAT obligations accurately and completely. Avoid errors and violations in VAT filing. Save time and money related to VAT. 1. Concept. Value-added tax, VAT, is an indirect tax levied on the value added of goods and services arising from the production, circulation, and consumption processes. In other words, VAT is a tax levied on the additional value added to goods and services at each stage of the supply chain. Concepts of VAT. Indirect tax. The actual VAT taxpayer is the final consumer, but the VAT payer is the business, organization, or individual entrepreneur. Taxed on value added. VAT is only taxed on the additional value added to goods and services at each stage of the supply chain. Cumulative. VAT is accumulated at each stage of the supply chain, resulting in a higher final product price than the initial price. Control of VAT. VAT is an important source of revenue for the state budget, contributing to economic regulation and social equity. VAT encourages savings and discourages luxury consumption. VAT contributes to promoting efficient production and business operations. Benefits of VAT. Transparent and easy to manage tax system. Reduces the tax burden on low income earners. Encourages fair competition among businesses. 2. Taxable subjects. Goods and services used for production, business, and consumption in Vietnam. This includes all types of goods and services produced, imported, bought, and sold on the Vietnamese market, regardless of industry or business sector. More specifically, taxable subjects for VAT include. Businesses and organizations. Businesses. State-owned businesses, private businesses, foreign-invested businesses. Organizations. Cooperatives, associations, unions, funds. Individuals. Individual entrepreneurs. Business households. Individual entrepreneurs without business households. Individuals importing goods. VAT exemptions. Certain goods and services, export goods, education, health, and cultural services. Are specifically stipulated in the law on value-added tax and related guiding documents. 3. Tax rates. General tax rate of 10%. Applicable to most goods and services. Goods such as food, beverages, clothing, machinery, equipment. Services such as transportation, tourism, post, telecommunications. Produced, imported, bought, and sold on the Vietnamese market. VAT in the 0%, 5%, and 8% tax rate categories. Tax rate of 0%. Applicable to a number of special groups of goods and services, export goods, international transportation services, education, health, and cultural services. Specifically stipulated in appendix I attached to the 2008 law on value-added tax. Tax rate of 5%. Applicable to a number of essential goods and services, household water, textbooks, fertilizers, pesticides. Specifically stipulated in appendix II attached to the 2008 law on value-added tax. Tax rate of 8%. Applicable to a number of essential goods and services, food, foodstuffs, gasoline, oil, electricity, From July 1, 2023, to December 31, 2024, according to Decree No. 44-2023, N.D.C.P. dated June 30, 2023, of the government. 4. Calculation methods. VAT equals taxable value x VAT rate. In which, taxable value. The selling price of goods and services excluding VAT. VAT rate. The percentage applied to the taxable value to calculate the amount of VAT payable. Example. The selling price of a phone is 1 million Vietnamese Dongs. The VAT rate applicable to phones is 10%. So, the amount of VAT payable for this phone is. VAT equals 1 million Vietnamese Dongs times 10% equals 100,000 Vietnamese Dongs. In addition, you can also use online VAT calculators to calculate quickly and more accurately. 5. Governing bodies. General Department of Taxation, GDT. A state agency under the Ministry of Finance, performing the function of state management of taxes in accordance with the law. Responsible for advising the Minister of Finance on the issuance of legal documents on taxes. Guiding and directing the implementation of tax management nationwide. Specifically, the GDT has the following tasks related to VAT management. Issuing guiding documents on VAT management. Inspecting and supervising the fulfillment of VAT obligations of businesses, organizations, and individuals. Handling VAT violations. Supporting and answering questions of VAT payers. Department of Taxation of provinces and cities directly under the central government. A tax management agency under the GDT, performing the function of tax management in the province and city. Responsible for performing the tasks related to VAT management under the guidance of the GDT. Tax sub-departments of districts, towns, and cities under the province. A tax management agency under the Department of Taxation of the province and city directly under the central government. Performing the function of tax management in the district, town, and city. Responsible for performing the tasks related to VAT management under the guidance of the Department of Taxation of the province and city directly under the central government. Other agencies. Customs. Responsible for VAT management on imported goods. Banks. Responsible for collecting and paying VAT on behalf of taxpayers in accordance with regulations.