Scope and Rates
Generally, goods and services (including goods and services purchased from organizations and individuals overseas) used for the purposes of production, trading and consumption in Vietnam shall be subject to VAT, except for those specifically being exempted under the VAT regulations.
The prevailing standard rate of VAT is ten percent.
- Zero rate is applicable to exported goods or services including goods exported to foreign countries and non-tariff zones; exported services to foreign organizations and individuals without a permanent establishment; processing of goods for export; construction and installation in non-tariff zones; international transportation; some airline and marine services provided directly or indirectly via agents to overseas organizations, aircraft or sea-going vessels repair services to foreign organizations and individuals; on-the-spot exported goods
- 5 percent is applicable to the provision of certain essential goods and services including clean water; fertilizer; agricultural activities, products and equipments; fresh foodstuffs; semi-processed latex; sugar by-products; medical and education equipment; children toys, books, cultural, sport and athletic activities; scientific and technology services;
- There are26 categories of VAT exempt supplies including certain agricultural products; water supply and drainage; salt products; transfer of land use rights; life insurance, financial, medical, public postal, telecommunications, public hygiene services; construction work related to cultural work; education and vocational training; radio and television broadcasting; publication; public transportation; goods which cannot be produced in Vietnam, specialized arms ; imported goods for humanitarian purposes; technology transfers; gold bars; unprocessed minerals and natural resources, goods in transit via the territory of Vietnam, goods temporarily imported and re-exported etc.
- a number of cases for which VAT declaration and payment are not required including but not limited to: goods or services provided outside of Vietnam by Vietnamese VAT-registers; compensation, bonus and/or allowance receivable; proceeds from assignment of emission rights and other financial income (except for loan interest to non-credit institutions); services provided by foreign organizations (without permanent establishment in Vietnam) or non-resident individuals such as repair of transportation means, marketing and advertising services, and so on; sales of assets by organizations or individuals not conducting business and not VAT-registered in Vietnam.
Other indirect taxes include:
- special consumption tax
- import and export duties
- environment protection tax
VAT taxpayers shall be organizations and individuals producing and trading VAT taxable goods and services in Vietnam and importing VAT taxable goods or purchasing taxable services from overseas, comprising:
- business organizations
- economic organizations of political, socio-political, social, or socio-professional organizations and other organizations
- enterprises with foreign owned capital and foreign parties to business co-operation contracts;
- foreign organizations and individuals conducting business in Vietnam but which have not established a legal entity in Vietnam
- individuals, family households, independent groups of persons conducting business and other business entities conducting production, trading or import activities and
- organizations and individuals conducting production and business in Vietnam and purchasing services from foreign organizations without a permanent establishment in Vietnam or a foreign individual being a non-resident in Vietnam.
Any entity who fails to register within the stipulated deadlines (i.e. 10 working days from the required date) shall be subject to penalties:
- an warning or a fine of between VND 100,000 and 1,000,000, for submitting from 10 to 20 days later than stipulated deadlines or
- a fine of between VND 200,000 and 2,000,000 for submitting more than 20 days later than stipulated deadlines.
Under the Foreign Contractor Tax (“FCT”) regime, i.e. comprises of Corporate Income Tax and VAT, an overseas company is subject to VAT on the income arising from Vietnam. The company may (i) register a tax code and declare VAT on its own (certain conditions including permanent establishment must be met to adopt this VAT declaration method) or (ii) choose to pay VAT under deemed VAT withholding method. Please see the section “Are there any simplifications that could avoid the need for an overseas company register for VAT” below for further details.
The advantage when adopting the method (i) is that the overseas company may recover/claim VAT credit with regards to the input VAT they incurred from its purchase of goods and services in Vietnam.
Under the FCT regime, the overseas company can elect to pay VAT through the Vietnamese payer i.e. the deemed withholding tax method where the Vietnamese payer is required to register an FCT (comprising two components - VAT and Corporate Income Tax) code for the overseas company for the Vietnamese contracting party’s purpose of declaration and payment of FCT on behalf of the overseas company based on specific deemed tax rates. Under the deemed withholding tax method, the overseas company is not required to register for VAT in Vietnam.
An overseas company does not need to appoint a fiscal representative in Vietnam unless it registers a tax code and declare VAT on its own (certain conditions including permanent establishment must be met to adopt this VAT declaration method).
VAT grouping is applicable between a head office and its branches in specific cases, i.e. branches conducting business in the province or city where their head office is located, or branches conducting business outside the province or city where their head office is located but they do not directly sell goods and have no sale turnover. Grouping for related party or associated entities is not permitted.
Generally, VAT declaration is made on a monthly basis (except for certain specific cases) by the 20th day of the following month.
For foreign company paying VAT under deemed VAT withholding method, VAT shall be declared and withheld by the Vietnamese contracting party within 10 days from the date of making the payment.
- Form 01/KHBS – Explanation of additional declarations or modifications
If taxpayers detect errors in the VAT declaration already submitted to tax agencies which affect the payable tax amount, they may make additional declarations - Form 01/KHBS.
- Form 01-4A/GTGT - Allocation of the creditable VAT amount
Taxpayers that allocate the creditable VAT amount of the month according to the proportion of turnover of sold VAT-liable goods and services to the total turnover of goods and services sold in the month shall make allocation declaration according to Form 01-4A/GTGT.
- Form 01-4B/GTGT - Declaration of modifications to the creditable input VAT amount of the year
Taxpayers that recalculate the creditable VAT amount of the year based on the proportion of turnover of sold VAT-liable goods and services to the total turnover of goods and services sold in the year which is different from the total amount declared in the year shall make declaration of modification according to Form 01-4B/GTGT.
The average inter-bank foreign exchange rate announced by the State Bank of Vietnam at the date of invoice shall be applied. When the exchange rate between the collected foreign currency and Vietnam dong is unavailable, the cross exchange rate with another foreign currency announced by the State Bank of Vietnam shall be applied.
In principle, input VAT on goods and services is creditable if:
- the goods or services are used for VAT-able business activities
- having legitimate supporting documents including VAT invoices or VAT payment vouchers (in case of VAT withheld and paid on behalf of overseas companies, or in case of VAT paid at the importation stage)
- having payment vouchers via the bank in cases where the VAT inclusive price of purchased goods/ services is VND20 million or more.
Input VAT should be declared for creditability purpose within the month it arises (i.e. having VAT invoices). In case of omission of declaration of VAT invoices, relevant input VAT is still creditable as long as the declaration of such omitted VAT invoices is done within six (6) months from the month these VAT invoices.
For purpose of creditability of input VAT relevant to the production of exported goods/services, the following documents/conditions must be available/satisfied:
- export sales contract duly signed with foreign entities
- customs declarations for the exported goods which are certified by customs offices to be actually exported
- payment for exported goods/services must be received through bank transfer made from the importer’s bank account to exporter’s bank account in accordance with the mode of payment as agreed in the export sales contract and
- VAT or export invoices for exported goods/services.
Input VAT rather than that mentioned in the foregoing will not be creditable.
International Supplies of Goods and Services
The tax rate of zero percent shall apply to exported goods and services.
Exported goods shall comprise:
- goods exported to foreign countries
- goods sold into non-tariff zones; goods sold to duty-free shops
- cases deemed to be export:
- transitional processed goods in accordance with the commercial law regulating international purchases and sales of goods and agency for sale and purchase, processing and transit of goods involving foreign parties
- on-the-spot exported goods. Export goods for sale at fairs and exhibitions overseas
Export services include services provided directly to organizations and individuals overseas or in non-tariff zones, in which: organizations overseas means foreign organizations which do not have any permanent establishment in Vietnam and are not VAT taxpayers in Vietnam; and individuals overseas means foreigners who do not reside in Vietnam or Vietnamese residing overseas and who are outside Vietnam during provision of the services.
Other goods and services deemed as export services, specifically applied zero percent VAT, include:
- construction and installation operations of export processing enterprises
- international transportation
- aircraft and sea-going vessel repair services provided to foreign organizations or individuals and
- goods and services not subject to VAT upon export, except for certain cases not entitled to the tax rate of zero percent including automobiles sold to organizations and individuals in non-tariff zones, reinsurance services with insurer overseas, etc.
Depending on the type of imported goods, VAT rate of 5 percent or 10 percent will be applied. The importer needs to pay VAT to customs authorities at the same time they pay import duty.
Services or services accompanying VAT-liable goods under contracts by foreign companies for production, business and consumption in Vietnam shall be subject to VAT under the FCT regime. This is effectively a reverse charge at deemed VAT rates and administered and paid by the Vietnamese party.
Except for some cases for which VAT declaration and payment are not required (please see the section “Are there any reduced rates, zero rates, or exemptions?” above), a business is required to issue invoices for all of its sale transactions. Invoices may be:
- VAT invoices (for domestic sales of sellers who pay VAT under Credit Method, i.e. output VAT minus input VAT)
- sales invoices (for domestic sales of sellers who pay VAT under Deemed Method, i.e. deemed VAT rates on revenue)
- export invoices (for exported goods/services) and
- air freight receipts; international freight vouchers; banking service charge vouchers, etc. Their forms and contents comply with international practices and relevant laws.
- name of invoice type
- symbol of invoice number pattern and symbol of invoice
- names of copies of invoice
- serial number of invoice
- name, address and tax identification number of the seller
- name, address and tax identification number of the buyer
- name, unit of calculation, quantity and unit price of goods or service; total amount in figures and words
- signatures and full names of the buyer and seller, seal of the seller (if any), and date of making out the invoice
- name of the invoice printing organization (applicable for invoices printed on order)
- invoices shall be made in Vietnamese. For an invoice requiring foreign language words, those words shall be put in brackets ( ) to the right of or just below the Vietnamese words with a font size smaller than that of the Vietnamese words. Figures written on an invoice are natural numerals: 0, 1, 2. 3, 4, 5, 6, 7, 8 and 9. The digit representing thousands, millions, billions, trillions, million billions and billion billions must be followed by a dot (.)or comma (,).
E-invoice, a collection of e-data messages on goods sale or service provision created, made, sent, received, stored and managed under the Law on E-Transactions and its guiding documents, is an allowable form of invoices.
An establishment may operate self-invoicing in respect of supplies used under specific cases, including:
- promotion, advertising or samples for production and trading of goods and services: the invoice must specify the name and quantity of the goods, and that they are promotional, advertising or sample goods for which money is not receivable, and a diagonal line should be drawn across the lines for tax rate and VAT, i.e. VAT is not required to be calculated and paid
- gifts, donations, exchange, substitutes for employees’ salary or for internal consumption: the invoice must be the same as in the case selling goods and services to customers, i.e. VAT is required to be calculated and paid accordingly.
Only those who are allowed to sell goods/services in foreign currency as per prevailing regulations can issue VAT invoices in foreign currency.
Transfers of Business
Capital transfer comprising transfer of all or part of invested capital, including sale of an enterprise to another enterprise for the purpose of production or business, transfer of securities and other forms of capital transfer is VAT exempted.
Sales of assets are not treated as capital transfer and will be subject to VAT, and the applicable VAT rates will depend on the type of assets.
Options to Tax
Head Office and Branch transactions
For branches conducting business in the province or city where head offices are located, taxpayers shall make a common VAT declaration for both head office and their branches, except for the cases that the branches conduct independent accounting, or they conduct dependent accounting but have their own seals and bank accounts, directly sell goods or services and wish to make separate tax declaration and payment.
For branches conducting business outside province or city where head offices are located, the branches shall submit VAT declaration dossiers to tax authorities directly managing them. If these branches do not directly sell goods and have no sale turnover, they shall all make tax declaration at head offices. If the branches have production function and do not maintain cost accounting systems while their head office declares and pays VAT according to credit method, the taxpayers shall pay VAT at the rate of 2 percent (in respect of goods subject to the VAT rate of 10 percent) or the rate of 1 percent (in respect of goods subject to the VAT rate of 5 percent) of the sales at pre-VAT prices of products produced or products of the same type in the locality where the production establishment is located. The amount of VAT payable by the taxpayer for the dependent production establishment shall be deducted from the amount of VAT payable by the taxpayer at the locality in which the head office is located.
Under the Law on Tax administration, a taxpayer that commits one of the specific acts, including using unlawful invoices or invoices for accounting costs of goods or input materials in operations that give rise to tax liability, thereby reducing the payable tax amount or increasing the creditable or refundable tax amounts; using other unlawful vouchers or documents to incorrectly determine the payable or refundable tax amount; failing to record in accounting books revenues related to the determination of the payable tax amount; etc, which are considered as tax evasion or tax fraud shall fully pay the tax amount according to regulations and be imposed a fine of between one and three times the evaded tax amount.
There are no GAAPs in Vietnam.
For every act of tax-law violation, the violating individuals or organizations are liable to one of the following sanctioning forms:
- caution: is decided in writing and applied to first-time violations or second-time violations involving extenuating circumstances, for less serious violations of tax procedures
- fine: is specified for every act of tax-law violation as follows:
- fine with an absolute sum of money for acts of violating the tax procedures with the maximum fine level of VND 100 million
- a fine of 0.05 percent of the late paid tax amount each day, for acts of delayed payment of tax or fine and
- a fine of 10 percent of the outstanding tax amount, for acts of making false declarations which lead to lower payable tax amount or higher refunded tax amount.
How often do tax audits take place?
Under the Law on tax administration, tax audit shall be conducted:
- on a regular basis no more than once a year for enterprises with diversified business lines and a wide scope of business
- when there is a sign of tax law violation
- to settle complaints or denunciations or upon request of heads of tax administration agencies at all levels.
Are there audits done electronically in your country (e-audit)? If so, what system is in use?
Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?
Yes, formal rulings can be sought through the local/ provincial tax department. Any issue requiring an internal approval will be escalated to higher authorities to resolve.
Are rulings and decisions issued by the tax authorities publicly available in your country?
Official rulings and decisions issued by the tax authorities are publicly available on the website of the tax authorities: http://www.gdt.gov.vn
Machinery and equipment imported for form fixed assets of an encouraged investment project may be exempted from import VAT and import duties.