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, and 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.
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.
- Sales of assets by non-business organisations or individuals not registered for VAT.
- Transfer of investment projects.
- 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, aeroplanes, 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 30th day of the subsequent quarter (for companies with prior year annual revenue of VND 50 billion or less).
The Government has released an official Decree on e-invoicing in September 2018, which became effective since 1 November 2018 (“Decree 119”). In addition, Circular 68/2019/TT-BTC guiding the implementation of Decree 119 on e-invoicing has been officially released (“Circular 68”) in October 2019 and took effect from 14 November 2019. Decree 119 and Circular 68 make e-invoices compulsory for all enterprises from 1 November 2020.
E-invoices with verification code
“High tax risk enterprises” are required to use e-invoices with verification code continuously for 12 months. High risk enterprises are defined as those which have equity of less than VND 15 billion and have certain features, for example:
- Sales of goods or provision of services to related parties (a definition thereof is included); or
- Non-compliance with certain tax declaration requirements; or
- Change of business location more than 2 times within 12 months without any notification or any tax declaration at the new location; or
- Enterprises which have been penalized for breaches of the invoice regulations in the last year.
The “high tax risk enterprise” status will then be re-assessed after 12 months for possible approval for using e-invoices without verification code.
E-invoices without verification code
Industries where enterprises are allowed to use e-invoices without verification code of the tax authorities will be determined based on the economic sectors as regulated.
Enterprises using e-invoice without verification code must transfer e-invoice data to the tax authorities, either directly or via an authorized e-invoicing service provider. If the enterprises transfer data directly to the tax authorities’ portal, certain technical conditions for connection with the tax authorities’ portal must be satisfied.
Before using e-invoices (either with or without verification code), enterprises must register and obtain approval from the tax authorities via the web portal of the GDT.
Timing of introduction of e-invoicing
E-invoices are compulsory effective 1 November 2020. During the transition period up to 31 October 2020, the current invoicing regulations still apply and enterprises can continue invoicing thereunder until receipt of a notification from the tax authorities.
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 accordance with Vietnam’s World Trade Organization (WTO) commitments and are applicable to goods imported from other member countries of the WTO.
Special preferential rates are applicable to imported goods from countries which have a special preferential trade agreement with Vietnam. Currently effective free trade agreements (“FTA”) to which Vietnam is a party include FTAs, between ASEAN member states, between ASEAN member states and Japan, China, Hong Kong, India, Korea, Australia - New Zealand, Vietnam and Japan, Chile, Korea, Cambodia, Laos, FTA between Vietnam and Eurasian Economic Union (Vietnam and the Customs Union of Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan) and the CPTPP pact (i.e. the Comprehensive and Progressive Trans-Pacific Partnership agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam).
Vietnam has signed the FTA with the EU (i.e. the EVFTA) and it is pending for ratification process from both sides before being effective. In addition, Vietnam is negotiating other agreements including the Regional Comprehensive Economic Partnership (RCEP) and the FTAs with European Free Trade Association (Vietnam and Iceland, Liechtenstein, Norway, Switzerland), and with Israel.
Import duty exemptions are provided for encouraged projects and goods imported in certain circumstances.
Export duties are charged only on a few items, basically certain natural resources. Rates range from 0% to 40%. In case the customs values of the exported goods cannot be determined using the transaction value method, they will be determined by the customs authority using, sequentially, the following customs valuation bases: the transaction prices of identical and similar exported goods in customs’ pricing database, the selling prices of identical and similar goods in the local market with certain adjustments, or the selling prices of the exported goods collected, classified, and adjusted by the customs authority.
Other kinds of taxes potentially imposed on imports
In addition to import duty, SST, EPT, and import VAT, there are other kinds of taxes that may be applied to imported goods, subject to certain conditions. These taxes include anti-dumping tax, anti-subsidy tax, and safeguard tax, which are all considered as the supplemental import duties applicable to the imported goods under certain scenarios.
Special sales tax (SST)
SST is a form of excise tax that applies to selected goods and services (see below). 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 are as follows:
|Products/services||SST rate (%)|
|With ABV ≥ 20°:||65|
|With ABV < 20°:||35|
|Automobiles having less than 24 seats||10 to 150|
|Motorcycle with cylinder capacity above 125cm3||20|
|Petrol||7 to 10|
|Air-conditioners (not more than 90,000 BTU)||10|
|Casinos, jackpot games||35|
|Entertainment with betting||30|
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 metre 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.
Social insurance (SI) and Unemployment insurance (UI) contributions are applicable to Vietnamese individuals only. Health insurance (HI) contributions are required for Vietnamese and foreign individuals that are employed under Vietnam labour contracts. Effective from 1 January 2018, SI contribution is also applicable to foreign individuals working in Vietnam under employment contracts with an indefinite term or a definite term of one year or more.
Accordingly, from 1 January 2019, the salary subject to SI/HI/UI contribution comprises the salary, certain allowances, and other regular payments according to labour law, but this is capped at 20 times the basic salary for SI/HI contributions and 20 times the minimum regional salaries for UI contribution. Effective from 1 July 2020, the basic salary is increase from VND 1,390,000 to VND 1,490,000 per month. In addition, from 1 January 2020, the minimum regional salaries varies from VND 3,070,000 to VND 4,420,000 per month. These minimum salaries are subject to change each year.
Social insurance (SI) contributions
The level of compulsory SI contribution for Vietnamese employees is 25.5% of total salary, of which 17.5% is the employers’ obligation and the remaining 8% is the employees’ obligation. SI contribution for foreign employees is 3.5% of total salary and some allowances. It is the employers’ obligation to cover sickness and maternity leave fund and occupational diseases and accident fund. It does not cover the retirement and death fund, which will be started for contribution from January 2022. The employees’ obligation is not required until January 2022.
Health insurance (HI) contributions
Compulsory HI contributions are applicable to both Vietnamese individuals and expatriates, except those transferred from their mother companies abroad to subsidiary firms in Vietnam (i.e. assignees).
HI contribution rates are 4.5% of total salary and some allowances, with two-thirds contributed by the employer and one-third by the employee.
Salary/wage subject to HI contribution is capped at 20 times the basic salary.
Unemployment insurance (UI) contributions
Compulsory UI contributions are applicable to Vietnamese individuals only. Expatriates are exempt. The employer and employee contributions are 1% each on total salary and some allowance. The UI contributions are capped at 20 times the minimum regional salary.
Natural resources tax (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 tax (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 are as follows:
|Goods||Unit||Tax range (VND)|
|Petrol, diesel, grease, etc.||litre/kg||1,000 to 4,000|
|Coal||ton||15,000 to 30,000|
|Plastic bags *||kg||50,000|
|Restricted use chemicals||kg||500 to 1,000|
* Excludes plastic bags used for packaging or that are 'environmentally friendly'.