VAT tax Vietnam is one of the important taxes that help balance the state budget and plays a big role in the construction and development of the country. So, what is VAT? Who is subject to VAT? What is the basis for calculating value-added tax?

What is VAT tax Vietnam?

VAT (value-added tax) is an indirect tax and is charged on the added value of goods and services arising from the process of production, circulation, and consumption and is remitted to the State budget at the rate of consumption of goods and services.

VAT originates from France; the country first enacted the Law on Value Added Tax in the world in 1954. Value Added Tax in French is Taxe sur la valeur ajoutée (TVA), in English, it is Value Added Tax (VAT); and translated into Vietnamese as value-added tax.

Currently, VAT has been widely applied in all countries around the world (about 130 countries). In Vietnam, at the 11th session of the 9th National Assembly, the Law on Value Added Tax was passed and took effect on January 1, 1999.

This is a sales tax levied on each stage of production and circulation of goods, from raw materials to finished products and finally to consumption. Therefore, we also call it sales tax with a deduction of the tax paid in the previous period. VAT is added to the selling price of goods and services and is borne by consumers when purchasing goods and using services.

Objects subject to VAT tax Vietnam

Objects subject to value-added tax are goods and services used for production, business, and consumption in Vietnam, except for those not subject to tax under the provisions of the Law on Value-Added Tax and legal documents guiding the implementation.

Objects not subject to value-added tax:

• Products of cultivation (including afforestation products), livestock, and aquaculture products that have not been processed into other products or are only normally preliminarily processed by individuals and organizations for self-production and sale.
• Products are livestock breeds, and plant varieties, including breeding eggs, breeding animals, seedlings, seeds, semen, embryos, and genetic materials.
• Irrigation and drainage; plowing and harrowing the land; dredging canals and ditches in the field to serve agricultural production; agricultural product harvesting services.
• Salt products are produced from seawater, natural rock salt, refined salt, and iodized salt with the main ingredient being sodium chloride (NaCl).
• State-owned housing sold by the State to tenants.
• Land use right Transfer.
• Life insurance, health insurance, learner insurance, and other insurance services related to people; livestock insurance, crop insurance, and other agricultural insurance services; insurance for ships, boats, equipment, and other necessary services in direct service of fishing; reinsurance.
• Financial services, banking, securities trading
• Postal services, public telecommunications, and universal internet are under government programs.
• …….

Bases for calculation of value-added tax (VAT tax Vietnam)

The basis for calculating the value-added tax is the taxable price and tax rate.

Taxable price

• For goods and services sold by production and business establishments, the selling price is exclusive of value-added tax;
• For goods and services subject to special consumption tax, the selling price is the selling price with special consumption tax but not yet with value-added tax; for goods subject to environmental protection tax, it is the selling price with environmental protection tax included but not yet with value-added tax; for goods subject to excise tax and environmental protection tax, the selling price is the selling price inclusive of excise tax and environmental protection tax but not including value-added tax;
• For imported goods, it is the import price at the border gate plus import tax (if any), plus excise tax (if any), and plus environmental protection tax (if any). Import prices at border gates are determined according to regulations on taxable prices of imported goods;
• For goods and services used for exchange, internal consumption, or donation, the taxable value of goods and services of the same or equivalent type at the time of arising of these activities;
• For property leasing activities, it is the rental amount excluding value-added tax.
• For goods sold by installment or deferred payment method, the price is calculated according to the one-time sale price excluding value-added tax of such goods, excluding installment interest, interest on deferred payment;
• For goods processing, the processing price is exclusive of value-added tax;
• For construction and installation activities, it is the value of the work, work item, or part of the handover work, excluding value-added tax. In the case of construction and installation excluding bidding for raw materials, machinery, and equipment, the taxable price is the value of construction and installation excluding the value of raw materials, machinery, and equipment;
• For real estate business, it is the selling price of real estate without value added tax, minus the price of land use right transfer or land rent payable to the state budget;
• For activities of the agency, brokerage on the purchase and sale of goods and services, commissions are commissions earned from these activities excluding value-added tax;
• For goods and services for which payment vouchers are used, where the payment price is the value-added tax price, the taxable price is determined according to the following formula: Price without value-added tax = payment price / 1 + tax rate of goods and services (%)

Tax rate

Tax rate 0%

Applicable to goods and services for export, international transportation, and goods and services not subject to VAT; except for the following cases:

• Transfer of technology, transfer of intellectual property rights abroad
• Overseas reinsurance service
• Credit granting service
• Capital transfer
• Derivative financial services
• Postal and telecommunications services
• Export products are exploited natural resources and minerals that have not been processed into other products

The tax rate of 5% applies to the following goods and services:

• Clean water for production and daily life
• Fertilizer; ore for fertilizer production; pesticides and growth stimulants for livestock and plants
• Animal feed, poultry, and other pet food
• Services of digging and embanking, dredging canals, ditches, ponds, and lakes in service of agricultural production; cultivating, caring for, and preventing pests and diseases for plants; preliminary processing and preservation of agricultural products
• Unprocessed crops, livestock, and aquatic products
• Preliminarily processed rubber latex; preliminarily processed turpentine; nets, ropes, and yarn for knitting fishing nets
• Fresh food; unprocessed forest products
• Road; by-products in sugar production, including molasses, bagasse, and sludge
• Products made of jute, sedge, bamboo, leaves, straw, coconut shell, coconut skull, water hyacinth; other handicraft products produced with raw materials used from agriculture; primary cotton; newsprint
• Specialized machinery and equipment for agricultural production
• Medical equipment, instruments, cotton, medical tampons; preventive and curative drugs; pharmaceutical chemical products, and medicinal materials are raw materials for the production of curative and preventive drugs
• Materials used for teaching and learning.
• Cultural activities, exhibitions, physical training, and sports; performing arts, film production; import, distribution, and screening of movies
• Children’s toys; books of all kinds
• Scientific and technological services according to the provisions of the Law on Science and Technology.

10% tax rate

• Applicable to goods and services not mentioned above.

You can read the previous article here: Business Opportunities in Vietnam: Prospects

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