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.
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.
- 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 was 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.
However, on 19 October 2020, the Government issued Decree 123/2020 (Decree 123) guiding invoices and documents, which extends the deadline for compulsory implementation of e-invoices from 1 November 2020 until 1 July 2022.
Decree 123 will take effect from 1 July 2022, but taxpayers that meet the technology infrastructure requirements are encouraged to implement e-invoices and e-documents as regulated in this Decree before the deadline of 1 July 2022.
E-invoices with a verification code
'High tax risk enterprises' are required to use e-invoices with a verification code continuously for 12 months. High risk enterprises are defined as those that 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).
- Non-compliance with certain tax declaration requirements.
- Change of business location more than two times within 12 months without any notification or any tax declaration at the new location.
- Enterprises that have been penalised 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 a verification code.
The requirements for data transmission to the tax authorities and the use of e-invoices with a verification code under Clause 12, Article 5 of Decree 12/2015 is abolished.
E-invoices without a verification code
Industries where enterprises are allowed to use e-invoices without a verification code of the tax authorities will be determined based on the economic sectors as regulated.
Enterprises using e-invoice without a verification code must transfer e-invoice data to the tax authorities, either directly or via an authorised 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 a verification code), enterprises must register and obtain approval from the tax authorities via the web portal of the General Department of Taxes (GDT).
Timing of implementing e-invoices
The compulsory use of e-invoices is extended to 1 July 2022. During the transition period up to 31 June 2022, the current invoicing regulations (i.e. Decree 51/2010, Decree 04/2014 amending Decree 51/2010 and Decree 119/2018) still apply and enterprises can continue to use current invoices until receipt of a notification from the tax authorities.
Customs duties generally comprise import duty and import VAT. Most goods imported into Vietnam are subject to import duty except and import VAT 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 SST, 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, 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) with Vietnam. Currently, effective free trade agreements (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 Vietnam and Japan;
- The FTA between Vietnam and Korea;
- The FTA between Vietnam and Chile;
- The trade agreement between Vietnam and Cambodia;
- The trade agreement between Vietnam and Laos;
- The FTA between Vietnam and Eurasian Economic Union (Vietnam and the Customs Union of Russia, Armenia, Belarus, Kazakhstan, 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, Peru, New Zealand, Singapore and Vietnam);
- The FTA between Vietnam and EU (i.e. the EVFTA).
In addition, Vietnam has just finalized the negotiation for the Vietnam - UK FTA (the UKVFTA) and the Regional Comprehensive Economic Partnership (RCEP). Negotiation for FTAs with the European Free Trade Association (Vietnam and Iceland, Liechtenstein, Norway, and Switzerland) and with Israel is being processed.
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 (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|
A draft law has been proposed, which would, inter alia, bring new supplies/products within the scope of SST and amend applicable rates.
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.
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 for at least three months.
Prior to 1 December 2018, Social insurance (SI) contributions were applicable to Vietnamese individuals only. Effective from 1 December 2018, SI contribution is also applicable to foreign individuals working in Vietnam, holding a work permit, and employed under Vietnam labour contracts with an indefinite term or a definite term of one year or more.
The income subject to SI/HI/UI contribution comprises 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 2019, the basic salary is VND 1,490,000 per month. The minimum regional salaries, from 1 January 2020, increased to VND 3,070,000 to VND 4,420,000 per month, depending on the region. Minimum salaries are subject to review annually.
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.
Salary/wage subject to SI contribution is capped at 20 times the minimum salary stipulated by the Government from time to time.
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 minimum salary stipulated by the Government from time to time.
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 allowances.
The UI contributions are capped at 20 times the minimum regional salary stipulated by the Government from time to time.
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'.
In November 2020, the National Assembly has approved the new Law on environmental protection, which will take effect from 1 January 2022. There is no specific change to the above EPT rates stated under this new Law.