Understanding VAT Rates in Vietnam

VAT in Vietnam is applied to goods and services, with rates of 0%, 5%, and 10% depending on the product category. A temporary reduction to 8% is enacted until December 31, 2026, except in certain sectors. Exemptions include agricultural products, items with low annual revenue, and specific services. Businesses must properly manage VAT rates to avoid penalties, file declarations monthly or quarterly, and may qualify for VAT refunds on excess input VAT. Common mistakes include misapplication of rates and documentation errors.

VAT is levied on goods and services for production, trading, or consumption in Vietnam, including those purchased from non-residents, with certain exemptions. Rates vary by jurisdiction.

• 0% VAT applies to exported goods/services, including transfers overseas or to non-tariff areas, consumption outside Vietnam/non-tariff areas, sales to duty-free shops, goods produced for export, international transportation, and exported services.
• 5% VAT applies to essential sectors: raw foodstuffs, clean water, medicine, medical equipment, teaching aids/books, husbandry and technical services, sports services/products, and social housing.
• 10% VAT (standard rate) applies to all other goods/services not exempt, not subject to VAT, or not at 0% or 5%.

When supplies cannot be classified by tax tariff, VAT is calculated at the highest rate applicable to the business's range of goods.

Temporary 8% VAT Rate

As economic stimulus, the standard 10% rate is temporarily reduced to 8% for most eligible goods/services until December 31, 2026. Excluded sectors include telecommunications, finance, banking, securities, insurance, real estate, metals, mining (except coal), chemicals, refined petroleum, IT products/services, and goods subject to special consumption tax.

Businesses must apply rates correctly for pricing, invoicing, reporting, and planning; misapplication risks penalties or return adjustments.

For mixed-rate sales, invoices must specify each rate separately or use separate invoices. Eligible reductions must be declared on Form 01.

Exempt Goods/Services (Not Subject to VAT)

Exempt items include: agricultural products; imported/leased drilling rigs, aircraft, ships not producible in Vietnam; goods/services by individuals with annual revenue ≤ VND 100 million; fund management, land use rights transfer, debt factoring, medical/elderly care, foreign currency trading, public transport, teaching/training, exported raw natural resources.

Additional non-VAT supplies (no output VAT charged, but input VAT creditable): emission rights/financial derivatives transfer; investment transfer; services by foreign organizations without Vietnam permanent establishment; unprocessed/preliminarily processed raw agricultural sales; capital contributions; insurance compensations/indemnities; collections unrelated to goods/services provision; agent commissions for specified-price sales, international transportation/insurance, or exempt goods; reimported exported goods (e.g., returns).

Historical Reductions (2022–2024)

• Decree 15/2022/NĐ-CP (Jan 28, 2022) and Decree 41/2022/NĐ-CP (Jun 20, 2022): Reduced 10% to 8% from Feb 1–Dec 31, 2022.
• Decree 44/2023/ND-CP (Jun 30, 2023): Reduced to 8% from Jul 1–Dec 31, 2023.
• Resolution (Nov 29, 2023): Extended to 8% from Jan 1–Jun 30, 2024.

This supported post-pandemic recovery, applying across importation, production, processing, and sales (with exclusions as above).

Declaration and Payment

Organizations/individuals producing/trading VATable goods/services must register for VAT; branches may register/declare separately.

Deadlines: Monthly by 20th of next month; quarterly by last day of first month of next quarter (for ≤ VND 50 billion prior-year revenue).

Decree 34/2022 (May 28, 2022) extended 2022 VAT/land rental payments for eligible small/micro businesses, prioritized industries (agriculture/forestry/fisheries, construction, transportation/warehousing, employment/travel services): 6 months for Mar–May/Q1; 5 months for Jun/Q2; 4/3 months for Jul/Aug.

VAT Refund Basics

Under the credit method, excess input VAT over output may qualify for refunds, especially for exporters or investment projects. Requires compliant invoices, detailed records, and timely filing; aids cash flow and compliance.

Common Mistakes to Avoid

• Incorrect rate application (e.g., confusing 8%/10%, misclassifying 5%/0%/exempt).
• Documentation errors (missing/mismatched/non-compliant e-invoices), risking rejected refunds/audits.
• Late filing/payment, incurring fines/interest.
• Misclassifying exempt/zero-rated supplies, distorting calculations/reporting.
• Insufficient staff training/internal controls.

Proactive monitoring ensures compliance, accuracy, and avoids penalties.