VAT, GST and Sales Tax in Vietnam

Summary

Name of the tax Value-added tax (VAT)
Date introduced 1-Jan-99
Trading bloc membership None
Administered by Ministry of Finance (http://www.mof.gov.vn)
VAT rates
Standard 10%
Reduced 5%
Other Zero-rated and exempt
VAT number format 9999999 (7 digits)
VAT return periods Monthly or quarterly
Thresholds
Registration None
Recovery of VAT by non-established businesses No (except under certain circumstances)

Scope of the tax

VAT applies to goods and services used for production, business and consumption in Vietnam, including goods and services pur­chased from foreign suppliers, except for those specifically identified as not subject to VAT.

VAT on imported goods is payable by the importer within the same time limit for declaring and paying import duty.

Who is liable

Organizations and individuals that produce and trade in taxable goods and services in Vietnam or who import taxable goods and services from overseas (referred to in this chapter as “business­es”) are liable to pay VAT. Businesses for these purposes include the following:

  • Business organizations with business registrations issued under Vietnamese laws
  • Economic organizations of political, social, and professional organizations and units of the people’s armed forces
  • Enterprises with foreign-owned capital incorporated under Vietnamese laws and foreign corporations and individuals con­ducting business in Vietnam that have not established a legal entity in Vietnam
  • Individuals, family households, partnerships and other forms of businesses conducting production, trading or import activities in Vietnam
  • Organizations and individuals conducting production and busi­ness in Vietnam and purchasing services (including services attached to goods) from foreign organizations without a perma­nent establishment in Vietnam or foreign individuals who are nonresidents of Vietnam

Group registration. Not applicable.

Non-established businesses (foreign contractors). Foreign con­tractors that have a permanent establishment in Vietnam, that conduct business in Vietnam for more than 183 days and that adopt the Vietnamese Accounting Standards/Hybrid Method (VAS/Hybrid Method) pay VAT in accordance with the tax credit method and pay their tax liabilities directly to the tax office. Otherwise, they must pay VAT on a withholding basis.

If services are supplied by nonresidents, VAT is payable only through the withholding mechanism.

The tax authority will issue a tax number for each foreign con­tractor (FC) when they register directly with the tax authority. Otherwise, the Vietnamese party will be responsible for register­ing and declaring the tax liability for the FCs on their behalf.

Tax representatives. Not applicable.

Reverse charge. Not applicable.

Digital economy. Not applicable.

Registration procedures. For newly established businesses that have completed incorporation procedures and received an incor­poration license, the incorporation number shown on the license serves as the tax registration number. No separate registration procedures are required. Local business registration office/ authority shall internally inform local tax office where a newly established business is located.

When a newly established business has an office, factory, branch or outlet engaging in direct sales in another province different from the locality of the headquarter, such office, factory, branch or outlet must separately pay VAT to the local tax office where it is located, except for certain cases in which the head office can declare and pay VAT. However, there is no need to register with the local tax office of such office, factory, branch or outlet. When the headquarter sets up an office, factory, branch or outlet in another province, it shall need to update its tax registration infor­mation with a local business registration office/authority in the locality where its office, factory, branch or outlet is located. This registration office/authority shall internally inform the local tax office the number of this newly licensed office, factory, branch or outlet, which is also the tax number.

Other businesses (e.g., foreign contractors having a permanent establishment in Vietnam) must register for tax purposes within 10 working days from the date on which contract award agree­ments are signed. This registration requires the regulated form (i.e., Form 04-DK-TCT), a copy of contractor license (or the equivalent issued by competent authority) and a copy of the acknowledgment/confirmation of the registration of the project office establishment (or the equivalent issued by the competent authority). Within three working days of receiving the sufficient dossier, the tax authority will issue the tax code for the taxpayer.

Currently, there is no process for registering for a tax code online.

No VAT registration threshold applies, and no exemption from registration is provided.

Late-registration penalties. Failure to comply with registration requirements (if applicable) may result in a fine. The penalty for late registration ranges from VND400,000 to VND2 million, depending on the length of the delay.

Deregistration. When the organization/individuals end their busi­ness in Vietnam, they need to proceed with the closure of the tax code after clearance of current tax liabilities (Article 16, Section 3, Circular 95/2016/TT-BTC).

VAT rates

The following are the VAT rates in Vietnam:

  • Standard rate: 10%
  • Reduced rate: 5%
  • Zero rate (0%)

The standard rate of 10% applies to goods and services that are not specifically included in the list of goods and services subject to the 0% or 5% rates or the list of goods exempt from VAT.

The 5% rate applies to the supply of essential goods and services.

Examples of items taxable at 5% rate

  • Water (except for bottled water)
  • Medicine and medical equipment (except for medicine includ­ed in medical service package)
  • Teaching tools
  • Agricultural products
  • Residential housing for sale or lease

The zero rate applies to exported goods and services, construc­tion, and installation carried out overseas or within export pro­cessing zones, as well as aviation, marine and international transportation services. Exported goods and services include goods and services sold to overseas organizations or individuals and consumed outside Vietnam, as well as goods and services supplied to organizations or individuals in non-tariff areas.

In certain cases, tax declaration and payment are not required.

Examples of cases where tax declaration and payment are not required

  • Organizations and individuals that receive revenues from com­pensation (including compensation for land and land-attached assets upon land recovery under decisions of competent state agencies), bonus, support, transfer of the emission right, and other financial revenues (except for compensation/cash sup­ports received for the purpose of performing service of repair, warranty, sales promotion or advertising to supporters, in which case VAT declaration and payment are required)
  • Services provided by foreign organizations that do not have a permanent establishment in Vietnam, limited to the following: repair of vehicles, machinery and equipment (including sup­plies and spare parts); advertising and marketing; investment and trade promotion; goods sale and service provision broker­age; training; and sharing of charges for international post or telecommunications services provided outside Vietnam between Vietnamese and foreign partners, and lease of communication and transmission lines and foreign satellite frequency bands in accordance with law
  • Assets sold by nonbusiness individuals or organizations (which do not have to pay VAT when selling their assets)
  • Organizations and individuals that transfer investment projects on production or trading of goods or services liable to VAT to enterprises and cooperatives
  • Assets used for capital contributions

Some goods and services are exempt from VAT, which generally means the supplier has no right to deduct input tax.

Examples of exempt supplies of goods and services

  • Raw agricultural products
  • Livestock
  • Aircraft, oil rigs and ships that are not yet locally produced and that are leased from overseas
  • Land-use rights
  • Credit activities, credit guarantees, financial leases and finan­cial derivative services
  • Capital transfers
  • Securities transfers
  • Life insurance services
  • Health services, veterinary medicine services, including medi­cal examination and treatment services for humans and animals
  • Care services for elderly people and disabled people
  • Education and vocational training
  • Publication of newspapers, magazines and certain kinds of books
  • Public transportation by bus and electric car
  • Reinsurance services
  • Technology transfers
  • Public sewage services
  • Foreign-currency trading
  • Debt transfers
  • Credit card issuance
  • Factoring
  • Fertilizers
  • Exported natural resources that are not processed or cover 51% into other products inclusive of energy cost

Option to tax for exempt supplies. Not applicable.

Foreign contractors. Foreign contractors that supply goods and services to Vietnam are subject to the following deemed VAT rates:

  • Trading goods (separate value from service in the contract): exempt
  • Services: 5%
  • Construction and installation with supply of materials and equipment: 3%
  • Construction and installation without supply of materials and equipment, or if supply of materials and equipment is subcon­tracted: 5%
  • Supply of machinery and equipment with installation, training, operation and trial operation services, if the value of each activ­ity is not calculated separately in the contract: 3%
  • Transport and production: 3%
  • Other business: 2%

VAT is withheld at source by the Vietnamese party to the contract, unless the foreign contractor has registered for tax.

Time of supply

For goods, the time of supply for VAT purposes (the tax point) is when the ownership or use rights of the goods are transferred, regardless of whether the payment is made. For services, the tax point is when the service is completely performed or when the invoice for the service is issued, regardless in both cases of whether the purchaser makes payment.

Installment sales. For installment sales, VAT becomes due when the purchaser possesses the right to use the goods.

Imported goods. For imported goods, VAT becomes due at the time of registration of the customs declarations.

Recovery of VAT by registered persons

Businesses may claim input VAT paid on goods or services used for the production or trading of goods or services that are subject to VAT. Businesses recover input tax by offsetting it against out­put tax (VAT on sales).

To be entitled to VAT credit, a document evidencing payment made through a bank is required except for the case where the purchase value is less than VND20 million. Bank payments must be made from the bank account of the buyer(s) to the bank account of the supplier(s), and both of these bank accounts have to be regis­tered/notified to the local tax office through standard forms.

In general, a valid tax invoice must be retained to support claims for input tax credits. The tax invoice must state the pretax price, the VAT and the total amount payable.

The basis for determining the amount of deductible input VAT is the amount of VAT stated on the following:

  • Valid tax invoice for the goods or services
  • Documentation evidencing VAT payment at the stage of impor­tation
  • Documentation evidencing VAT payment on behalf of a foreign party

If a business establishment discovers that it has not deducted an amount of VAT in its declaration because the tax invoice or receipt of the tax payment was omitted, it may make an addi­tional declaration requesting the credit. However, any additional VAT credit declaration must be made before the tax authority issues a decision about any tax inspections carried out at the premises.

Nondeductible input tax. Businesses may not claim input VAT paid on goods or services used for producing or trading nontax­able goods or services. They also cannot claim the input VAT of the unrelated expenses or incorrect payment method as regula­tions.

Examples of items for which input tax is nondeductible

  • Food and beverage expenses for employees (i.e., snack, soft drink, moon cake, etc.)
  • House rental fees for employees who have signed labor con­tracts with the company. In cases in which these expatriates are assigned to work in Vietnam by the foreign parent company but remain employees of the foreign parent company during their secondment period in Vietnam (i.e., they receive salaries and other benefits from the foreign parent company), and the Vietnamese entity and the foreign parent company enter into a written agreement that states that the Vietnamese entity shall bear all accommodation fees for these expatriates during their secondment period in Vietnam, input VAT of these accommo­dation fees is creditable.
  • Expenses paid in cash with the value of more than VND20 million

Examples of items for which input tax is deductible (if related to a taxable business use)

  • Expenses paid for raw materials, offices supplies, transporta­tion, etc.

Partial exemption. Businesses that produce or trade taxable and nontaxable goods or services must maintain separate accounts for input tax paid on goods or services used for taxable and nontax­able goods or services. If no separate accounts are maintained, the deductible input VAT is calculated using a ratio based on the proportion of taxable turnover compared with total turnover.

Refunds. Businesses that pay VAT using the tax credit method are eligible for a refund of VAT in the following circumstances:

  • The business exports goods and services during a month or quarter and has a credit balance of input VAT of at least VND300 million at the end of that month. The refund is grant­ed monthly or quarterly.
  • An incorporated establishment is entitled to a refund if it is in the investment stage of a new project (except investment proj­ects that construct houses for sale or rent but without constitut­ing any fixed assets) and if it has accumulated input VAT of at least VND300 million that has not been credited against output VAT of its operating businesses. In the following events, a busi­ness shall not be eligible for a refund but can carry forward remaining deductible VAT on its investment project to the sub­sequent period:
    • The charter capital of the investment project of the business has not been fully contributed as registered as per the laws
    • An investment project is carried out by a business that undertakes conditional trade(s) but is not satisfying busi­ness conditions as per the Investment Law; in other words, such investment project is run by a business that engages conditional trade(s) but is not licensed thereto; by a busi­ness that engages in conditional trade(s) but is not quali­fied for this; by a business that engages in conditional trade(s) but is not permitted to perform this trade; or by a business that engages in but does not meet conditions to perform conditional trade(s) though not required by the laws on investment to be permitted or certified in writing
    • An investment project is carried out by a business that undertakes conditional trade(s) but fails to sustain business conditions during its operations; in other words, such investment projects are run by a business that engages in conditional trade(s) but has its relevant license(s) revoked during its operations; by a business whose certificate(s) of eligibility for conditional trade(s) is (are) revoked; by a business that has the written permission revoked by a com­petent authority for conditional trade(s); or by a business that fails conditions to undertake conditional trade(s) as per the laws on investment. In this event, the business shall be ineligible for the refund of VAT upon the revocation of one of the said documents or upon being exposed by com­petent government authorities as having failed to meet the conditions for conditional trades
    • The value of natural resources and/or minerals plus the energy cost of an investment project for extraction of natu­ral resources and minerals that has been licensed since 1 July 2016 or an investment project for production of goods makes up 51% of its prime cost or above
  • The business establishment that uses the deduction method shall receive a refund of the surplus VAT or the VAT that is not completely deducted when there is a change of ownership, or when the enterprise is converted, merged, amalgamated, divid­ed, dissolved, bankrupt or shut down.
  • Foreigners and Vietnamese people residing abroad who have passports or entry papers issued by foreign competent authori­ties shall receive refunds of VAT paid on goods purchased in Vietnam and taken abroad.
  • VAT will be refunded when paid by programs/projects using nonrefundable ODA, nonrefundable aid or humanitarian aid.
  • A taxpayer eligible for diplomatic immunity who purchases goods and services in Vietnam shall receive a refund of the VAT stated on the VAT invoice or the receipt that indicates the VAT-inclusive price.
  • Refunds will be paid when a business establishment receives a decision on VAT refunds from the competent authorities and when VAT refunds are due according to international agree­ments to which the Socialist Republic of Vietnam is a signatory.

An application for a refund must be submitted to the tax authority (that is, to the tax department or to the general tax department in some special cases). Taxpayers may file an electronic claim online or file a physical claim directly or by post to the supervi­sory tax authority.

The notice detailing the outcome of the tax refund application shall be sent to the applicant within 6 working days (in the case of refund before examination) or within 40 days (in the case of examination before refund).

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

A VAT refund is allowed only for businesses using the tax credit method. A foreign contractor that has no legal presence in Vietnam but conducts business or derives income from activities in Vietnam may recover VAT if it adopts the VAS/Hybrid Method and it satis­fies certain bookkeeping and tax registration requirements. To be eligible for VAT recovery, a foreign contractor must meet all of the following conditions:

  • It has a permanent establishment in Vietnam or is a resident of Vietnam
  • It conducts business in Vietnam under the contractor’s or sub­contractor’s contract for 183 days or more beginning on the date on which the contract takes effect
  • It adopts the VAS/Hybrid Method

Foreign contractors that do not apply the VAS/Hybrid Method may not recover input VAT unless a specific international agree­ment entered into by Vietnam provides otherwise.

Invoicing

Invoices and credit notes. A taxable person must provide an invoice for all taxable supplies made, including exports. There are the four categories of invoices:

  • Invoices of exports for exporting transactions (i.e., the com­mercial invoice is required instead of VAT invoice)
  • VAT invoices for domestic transactions of taxpayers applying the tax credit method
  • Sales invoices for domestic transactions of taxpayers applying the direct method
  • Others, including receipts, tickets and other vouchers

The invoices can be presented in the following three forms:

  • Self-printed invoice: wholly printed by the taxpayer’s printers
  • Invoice printed by order: produced by printing house by order of taxpayer or tax authorities for provision or sale to taxpayer
  • Electronic invoice: must be created, issued and processed on computers of issuer under the law on e-transactions

Business entities can use different forms of invoices. However, the use of electronic invoices is encouraged.

The tax authorities may sell only blank invoices to a few speci­fied persons such as nonbusiness organizations, individuals and households that generate sale revenue.

A valid invoice is necessary to support a claim for input tax deduction.

Export documentation. Exports of goods and services are zero-rated. Proof of export is required. The required documents to claim a refund of input VAT include contracts for the sale of goods, legitimate invoices, customs declarations and proof of payment through a bank by foreign parties.

Foreign-currency invoices. If an invoice is issued in a foreign cur­rency, all values that are required on the invoice must be con­verted into Vietnamese dong, using an acceptable exchange rate.

Electronic invoices. An e-invoice is legally valid when it satisfies the following conditions:

  • The criteria for evaluating the information integrity of an e-invoice are its completeness and intactness, with exceptions made for changes in appearance arising from the exchange, storage or display of an e-invoice.
  • The information contained in an e-invoice can be accessed and used in complete form when necessary.

VAT returns and payment

Returns and payment. Businesses are generally required to file a monthly tax return and remit the monthly VAT payable to the tax office by the 20th day of the following month. Exceptions are taxpayers that make quarterly declarations (permitted for busi­nesses whose revenue in the previous year is VND50 billion or lower). Newly established entities must file VAT on a quarterly basis. After 12 months of operation as of the following calendar year, if eligible for quarterly VAT declarations for satisfaction of the condition on revenue of goods/services of the prior full cal­endar year, the entity can request permission of the local tax authority to continue declaring VAT quarterly. In case the entity is eligible for paying VAT on a quarterly basis but would like to change to the monthly VAT declaration, it is required to notify the local tax office under a statutory Form No. 07/GTGT within the deadline of the first month of the year it commences the monthly VAT declarations at the latest. The method of VAT declaration must be fixed for three years.

Any excess input VAT paid may be credited in the following period or refunded if the business is eligible for a refund (see Section F).

A business that imports goods subject to VAT must file a customs declaration and remit VAT payable on each occasion when goods are imported. The time limit for notices and payments of VAT with respect to imported goods is the same as the time limit applicable to notices and payments of import duties.

VAT liabilities must be paid in Vietnamese dong.

Special schemes. Not applicable.

Electronic filing and archiving. A taxpayer doing business in a locality with online access shall make declaration, pay tax and make transactions with the tax authority as prescribed by the laws on electronic transactions. Different online systems (i.e., both online and offline software such as Tax Online, iHTKK) have been deployed across Vietnam to facilitate electronic filing.

Annual returns. Not applicable.

Penalties

Interest is imposed for late payment of VAT at the progressive rate of 0.03% per day from 1 July 2016.

Penalties may also apply to a range of other offenses, including late tax registration and filing, making false statements and obstructing a VAT officer. In some cases, penalties may include imprisonment for offenses committed knowingly or recklessly.