Value-Added Tax (VAT) plays a crucial role in regulating the economy, contributing to State revenue, and also supporting economic development during various periods. Currently, this matter is governed by the VAT Law 2008, amended and supplemented by laws in 2013, 2016, and other legal documents (hereinafter referred to as “the prevail VAT Laws”).
On November 26, 2024, at the 8th session of the XV National Assembly of the Socialist Republic of Vietnam, the Value-Added Tax Law 2024 was passed, will take effect from July 1, 2025, this law shall bring significant changes, especially in the tax calculation methods for goods, services and tax deduction provisions. These amendments are expected not only to enhance fairness in tax collection but also to facilitate enterprises and social development.
Below are some key updates in the Value-Added Tax Law 2024 (hereinafter referred to as the “VAT Law 2024”), along with objective and clear analyses of these changes compared to the prevail VAT Laws and their impact on enterprises and the market economy.
1. Notable changes in regulations on taxpayers
Foreign service providers, without a permanent establishment in Vietnam, engaged in e-commerce and digital platform activities in Vietnam, as well as digital platform management organizations responsible for tax deduction, payment on behalf of them and e-commerce platforms with payment functions, are classified as taxpayers. Besides, organizations and individuals, using oil and gas exploration and exploitation services from foreign entities, have also been added to the taxpayers list.
These new provisions aim to strengthen tax management in the digital economy, ensure comprehensive tax collection from both cross-border and domestic transactions. However, they will require e-commerce platforms and organizations to invest additionally in advanced management systems, causing increase of compliance burdens, especially in the growing complexity and diversity of e-commerce transactions.
2. Adjustments on subjects exempted from VAT
The VAT Law 2024 brings substantial changes to the list of goods and services exempted from and subject to VAT.
Products exempted from VAT previously, such as fertilizers, specialized machinery and equipment for agricultural production, offshore fishing vessels, and public services like zoos, flower gardens, parks, street greenery, public lighting maintenance services, shall be subject to VAT.
The VAT Law 2024 also expands the scope of goods and services exempted from VAT, in detail as follows:
- Healthcare and veterinary services are essential to social well-being, included in VAT-exemption detailed list, such as: medical examinations, treatments, disease prevention, family planning services, health rehabilitation, hospital beds in medical facilities, testing, imaging services; nutrition-based medical services for the elderly and disabled. Especially, drug-related revenue from medical service packages, approved by the Ministry of Health, is also exempted from VAT.
- Maintenance, repair construction activities funded at least 50% of expenses by community contributions or humanitarian aid, aiming to reduce costs and encourage community investments.
- Inland waterways transport vehicles which regulated in passenger transport vehicles list.
- Goods and services, provided by households or individual businesses with annual revenue not exceeding VND 200 million, are exempted in order to reduce financial burdens and administrative procedures for small businesses.
- Assets sale of non-business organizations or individuals, shall be exempted from VAT, aligning with the non-commercial nature of such transactions.
- National reserve goods sold by national reserves State agencies and regulated fees, charges in order to minimize costs and avoid double taxation.
- Imported goods under following specific circumstances:
+ Gifts for State agencies, political organizations, social organizations, or individuals;
+ Goods and movable assets of foreign organizations or individuals eligible to diplomatic privileges standards;
+ Goods imported as humanitarian aid for disasters and diseases relief or provided for border residents;
+ Cultural artifacts, imported national treasures.
- Goods imported for financial leasing in duty-free zones to support economic activities in these special areas.
- Artificial products for export production purposes, including implantable devices for long-term use in the human body.
These exemptions demonstrate that the State policies prioritizing in healthcare, humanitarian efforts, cultural preservation, and economic development in border regions, at the same time, creating a more favorable environment for economic and social activities.
3. Adjustments on taxable prices
Article 7 of the VAT Law 2024 supplements regulations on taxable prices for casino operations, gaming with prizes, and betting services. The taxable price is defined as the revenue collected from such activities, after subtracting unused amounts and winning prizes paid to customers (if any). Also, this taxable price includes special consumption tax but excludes VAT. This provision shall help to clarify the method to determine a reasonable taxable price for this specific business sector with complex revenue.
The VAT Law 2024 also supplements Item m, Clause 1, Article 7, stipulating taxable price applied for specific production, manufacturing activities, such as: electricity produced by the Vietnam Electricity Corporation, transportation, cargo handling, traveling services in the form of tourism, pawn services, book sales with list prices on its covers, printing activities, and certain agency services. These taxable prices are specified as sale price without VAT, the Government shall issue detailed regulations on VAT determination method for each activities.
The supplementation of these regulations aims to create a clear legal framework suitable to the characteristics of each business sector. Regarding to enterprises, regulations on simplifying the process of taxable prices clarification, are expected to reduce disputes related to VAT determination method.
Another change is the taxable price regulation for promotional products. Previously, promotional products could be subject to VAT, creating burdens for businesses in paying taxes on gifts, promotional gifts. However, the VAT Law 2024 specifies that the taxable price for promotional goods and services (in compliance with commercial promotion laws) is set at zero (0). This change reduces costs for businesses and encourages creative promotional strategies to attract customers.
4. Adjustments on VAT rates for specific goods and services
a) 0% VAT rate applied to following goods and services:
According to the VAT Law 2024, exported goods, sold from Vietnam to foreign organizations or individuals and consumed outside Vietnam, eligible to 0% VAT rate if conditions are met.
However, exceptions have been expanded, including items as imported tobacco, alcohol, and beer for export, fuel sold to duty-free zones, and cars sold to entities within such zones.
b) 5% VAT rate applied to following goods and services:
The VAT Law 2024 brings notable changes to the list of goods and services subject to the 5% VAT rate, focusing on essential goods, amending, supplementing, removing certain objects as follows:
|
No. |
Supplemented objects |
Removed objects |
|
1 |
a) Clean water for production and living purposes excluding bottled water and other soft drinks. |
g) Fresh foods; unprocessed forestry products (excluding timber, bamboo shoots) |
|
2 |
b) Fertilizers, ores for fertilizer production, plant protection drugs, and livestock growth stimulants in accordance with regulations of laws |
h) Sugar and by-products in sugar production (e.g., molasses, bagasse, mud) |
|
3 |
d) Unprocessed crops, planted forests (excluding woods, bamboo shoots) livestock, aquaculture, catching or just under preliminary processing, excepting products specified in Clause 1, Article 5 of the VAT Law 2024. |
m) ...specialized teaching, research, or scientific experiment equipment |
|
4 |
dd) Crumb rubber, crepe rubber, rubber sheets; nets, rods and threadsfor making fishing nets; |
n) Cultural, exhibition, sports activities, art performances, film production, import, and distribution |
|
5 |
k) Art activities as traditional and folk performances; |
The VAT Law 2024 will take effect from July 1, 2025, except for:
- The case regulated under Article 2 of the VAT Law 2024;
- Regulations on revenue rate of households, individuals as non-payable VAT objects under Clause 25 of Article 5, and Article 17 amending, supplementing Clause 1 of Article 3 of Personal Income Tax Law amended by the Laws No. 26/2012/QH13 and 71/2014/QH13, which take effect from January 1, 2026.
(To be continued…)
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