Value-added tax (VAT)
VAT applies to goods and services used for production, trading, and consumption in Vietnam (including goods and services purchased from non-residents), with certain exemptions. Depending on the category of goods or services, the VAT rates are as follows:
- A 0% rate applies to exported goods/services, including goods/services sold to overseas/non-tariff areas and consumed outside Vietnam/in the non-tariff areas, goods processed for export or in-country export (subject to conditions), goods sold to duty free shops, certain exported services, construction and installation carried out for export processing enterprises, aviation, marine, and international transportation services.
- A 5% rate applies generally to areas of the economy concerned with the provision of essential goods and services. These include clean water, teaching aids, books, unprocessed foodstuffs, medicine and medical equipment, husbandry feed, various agricultural products and services, technical/scientific services, rubber latex, sugar and its by-products, social housing, and certain cultural, artistic, and sport services/products.
- The 10% 'standard' rate applies to activities not specified as not subject to VAT, exempt, or subject to the 0% or 5% rate.
On 28 January 2022, the government released Decree 15/2022, providing a 2% VAT reduction for goods and services that are currently subject to 10% VAT (with certain exceptions) for the period from 1 February 2022 to 31 December 2022. No extension of the VAT reduction has been announced for 2023.
Goods or services where VAT declaration and payment are not required
A separate category includes supplies not subject to output VAT, but where related input VAT can, nevertheless, be credited. This category includes the following:
- Compensation, bonus, subsidies, except those provided in exchange for certain services.
- Transfers of emission rights and various financial revenues.
- Certain services rendered by a foreign organisation, which does not have a PE in Vietnam where the services are rendered outside of Vietnam, including repairs to means of transport, machinery, or equipment, advertising, marketing, promotion of overseas investment and trade, brokerage activities for the sale of overseas goods and services, training, and certain international telecommunication services.
- Transfer of investment projects with certain conditions.
- Sale of agricultural products that have not been processed into other products or have only been through preliminary processing.
- Capital contributions in kind.
- Collections of compensation/indemnities by insurance companies from third parties.
- Collections on behalf of other parties that are not related to the provision of goods/services (e.g. if company A purchases goods/services from company B but pays to company C, and, subsequently, company C pays to company B, then the payment from company C to company B is not subject to VAT).
- Commissions earned by (i) agents selling services, including postal, telecommunications, lottery, airlines/bus/ship/train tickets, at prices determined by principals; and (ii) agents for international transportation, airlines, and shipping services entitled to 0% VAT; or (iii) insurance agents.
- Commissions from the sale of exempt goods/services.
- Goods exported and then re-imported back to Vietnam due to sales returns by overseas customers.
Exempt goods and services
There are stipulated categories of VAT exemptions, including certain agricultural products; goods/services provided by individuals having annual revenue of 100 million Vietnamese dong (VND) or below; imported or leased drilling rigs, airplanes and ships of a type that cannot be produced in Vietnam; transfer of land use rights (LUR) (detailed guidance is provided to specific cases); various financial services; various securities activities including fund management; capital assignments; foreign currency trading; debt factoring; certain types of insurance; medical services and elderly/disabled people care service; education, printing/publishing, public transportation, export of unprocessed natural resources, etc.
When a supply cannot be readily classified based on the tax tariff, VAT must be calculated based on the highest rate applicable for the particular range of goods that the business supplies.
Taxpayers must file VAT returns on a monthly basis by the 20th day of the subsequent month or on a quarterly basis by the last day of the first month of the following quarter (for companies with prior year annual revenue of VND 50 billion or less).
From 1 July 2022 onwards, all businesses, economic organisations, business households, and individuals paying tax under the declaration method must use e-invoices (except for certain cases).
Customs duties generally comprise import duty and import VAT. Most goods imported into Vietnam are subject to import duty and import VAT, except they qualify the conditions for exemption, such as goods imported for the production of subsequently exported goods under toll manufacturing or contract manufacturing arrangements, goods imported to form fixed assets of incentivised investment projects (in this case import VAT is not exempted), etc.
In addition to import duty and import VAT, there are also export duty, import special sales tax (SST), environment protection tax (EPT), anti-dumping tax, anti-subsidy tax, and safeguard tax, which are applied to only a limited number of goods. Anti-dumping tax, anti-subsidy tax, and safeguard tax are all considered as supplemental import duties applicable to the imported goods under certain scenarios.
Import duty is computed on an ad valorem basis (i.e. multiplying the imported good’s dutiable value by the corresponding import duty rate).
Import duty rates are classified into three categories: ordinary rates, preferential rates, and special preferential rates.
Preferential rates are applicable to imported goods from countries that have most-favoured-nation (MFN, also known as normal trade relations) status with Vietnam. The MFN rates are in line with Vietnam’s World Trade Organization (WTO) commitments and are applicable to goods imported from other WTO member countries.
Special preferential rates are applicable to imported goods from countries that have a special preferential trade agreement (or free trade agreement [FTA]) with Vietnam. Currently, effective FTAs to which Vietnam is a party include:
- The FTA between ASEAN member states.
- The FTA between ASEAN member states and Japan.
- The FTA between ASEAN member states and China.
- The FTA between ASEAN member states and Hong Kong.
- The FTA between ASEAN member states and India.
- The FTA between ASEAN member states and Korea.
- The FTA between ASEAN member states and Australia and New Zealand.
- The FTA between ASEAN member states and Australia, China, Japan, Korea, and New Zealand (i.e. the RCEP).
- The FTA between Vietnam and Japan.
- The FTA between Vietnam and Korea.
- The FTA between Vietnam and Chile.
- The FTA between Vietnam and the Eurasian Economic Union (Vietnam and the Customs Union of Russia, Armenia, Belarus, Kazakhstan, and Kyrgyzstan).
- The CPTPP pact or TPP-11 (i.e. the Comprehensive and Progressive Trans-Pacific Partnership agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam).
- The FTA between Vietnam and the European Union (EU) (i.e. the EVFTA).
- The FTA between Vietnam and the United Kingdom (UK) (i.e. the UKVFTA).
- The FTAs with the European Free Trade Association (Vietnam and Iceland, Liechtenstein, Norway, and Switzerland).
- The FTA between Vietnam and Asia-Pacific nations (i.e. Regional Comprehensive Economic Partnership - RCEP) of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, and Thailand).
In addition, negotiations on the FTA with the European Free Trade Association (Vietnam and Iceland, Liechtenstein, Norway, and Switzerland) and with Israel are in progress.
To be eligible for preferential rates or special preferential rates, the imported goods must be accompanied by an appropriate Certificate of Origin. When goods are sourced from non-preferential treatment/non-favoured countries, the ordinary rate (being the MFN rate with a 50% surcharge) is imposed.
Import VAT is applied to imported goods at a rate most commonly of 10%.
Export duties are charged only on a few items, basically certain natural resources. Rates range from 0% to 40%.
Special sales tax (SST)
SST is a form of excise tax that applies to selected goods and services. Goods that are manufactured and/or imported into Vietnam and subject to SST include cigars/cigarettes, spirits, wine and beer, automobiles, motorcycles, air conditioners, airplanes, petrol, etc. For goods, SST is charged at the production or importation stage. Imported goods (except for various types of petrol) are subject to SST at both the import and selling stages. The SST paid at importation will be creditable against SST paid at the selling stage.
The SST rates range from 7% for petrol to 75% for cigars/cigarettes.
The National Assembly ratified a new law amending and supplementing a number of provisions under certain laws, including the Law on SST. Accordingly, SST rates applicable to electric cars will be significantly reduced over the next five years, effective from 1 March 2022.
In February 2023, the Ministry of Finance released a proposal to revise the SST law for public comments. The SST law amendment is proposed to be discussed and approved in the National Assembly meeting in May 2024. The draft SST law proposes certain changes, include, inter alia, extend the scope of application, revise SST rates for certain items, align with specialized regulations to reduce confusion during implementation of SST law, revisit the current guidance on SST refunds in certain cases.
Foreign investors generally pay rental fees for land use rights. The range of rates is wide depending upon the location, infrastructure, and the industrial sector in which the business is operating.
In addition, owners of houses and apartments have to pay land tax under the law on non-agricultural land use. The tax is charged on the specific land area used based on the prescribed price per square meter at progressive tax rates ranging from 0.03% to 0.15%.
Certain assets, including houses, land, automobiles and motorcycles, etc., that are subject to registration of ownership are subject to stamp duty. The stamp duty rates vary depending on the asset transferred.
Please see the Other taxes section in the Individual tax summary.
Corporate - Green Taxes and Green Incentives Landscape
On 17 November 2020, the National Assembly issued the new Law on Environment 72/2020/QH14, which took effect from 1 January 2022, setting out a comprehensive guidance on environmental protection matters.
Environmental or green taxes include taxes on energy, transport, pollution and resources. Energy taxes are taxes on energy products and electricity used for transport, such as petrol and diesel, and for other purposes, such as fuel oils, natural gas, coal and electricity used in heating. While Vietnam does not have green taxes, Vietnam also developed different types of taxes to tackle environmental matters.
Below are some common types of green taxes.
Natural Resource Taxes (NRT)
NRT is payable by industries exploiting Vietnam’s natural resources, including petroleum, minerals, natural gas, forest products, natural seafood, natural bird’s nests, and natural water. Natural water used for agriculture, forestry, fisheries, salt industries, and sea water for cooling purposes may be exempt from NRT, provided that certain conditions are satisfied. The tax rates vary depending on the natural resource being exploited, ranging from 1% to 40%, and are applied to the production output at a specified taxable value per unit. Various methods are available for the calculation of the taxable value of the resources, including cases where the commercial value of the resources cannot be determined. Crude oil, natural gas, and coal gas are taxed at progressive tax rates depending on the daily average production output.
Environment Protection Taxes (EPT)
EPT is an indirect tax that is applicable to the production and importation of certain goods deemed detrimental to the environment, the most significant of which are petroleum and coal. The tax is calculated as an absolute amount on the quantity of the goods.
Since 1 January 2019, the tax rates vary among the goods applied from VND500/kg for restricted use chemicals to VND50,000/kg for plastic bags while the tax rate applicable for petroleum was VND4,000/litre.
Carbon Emission Quota
In the new Law on Environment, the Government introduced the concept of carbon trading plan and an intention to impose a cap on carbon emission, i.e. carbon emission quota to all manufacturing companies which emit carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3). Enterprises that are in the list of sectors producing greenhouse gas need to be inspected. Accordingly, these enterprises must build a plan to reduce their greenhouse gas emissions based on the quota provided, and they can also exchange, trade quota and carbon offsets.
Green incentives are financial benefits to encourage projects and investments that reduce environmental harm. They include environmental cash grants for such projects and tax incentives that reduce tax liabilities to stimulate investments that mitigate environmental impact.
Apart from the tax incentives, in-scope projects shall be granted with other incentive schemes, such as: land related benefits, e.g. priority in the allocation of land, reduction of land rental; preferential financial schemes; exemption and reduction of environmental protection taxes and fees; subsidies to environmental-friendly products and services.