Regulatory updates - Vietnam

On November 26, 2024, Vietnam’s National Assembly passed a new Value Added Tax (VAT) Law, Law 48/2024/QH15, which will come into effect on July 1, 2025. The new VAT Law will replace the existing VAT Law No. 13/2008/QH12 and its amendments.

The new VAT Law introduces significant changes and simplifies the regulatory framework by consolidating the provisions from previous decrees and amendments.

What are the main changes?

• Widened taxpayer definition:The new VAT law includes obligations for foreign suppliers without a permanent establishment in Vietnam, e.g., foreign suppliers engaging in e-commerce with both organizations and individuals, and foreign organizations operating on digital platforms.
• Time of Determining VAT Liability: The timing of VAT liability is now explicitly regulated in the law. VAT obligations are triggered:
  • for goods at the time of the transfer of the ownership or the right to use the goods;
  • for services, when the provision of services is completed; or
  • at the time when an invoice is issued, regardless of whether payment has been received (applicable to both goods and services).
• Increased VAT exemption threshold: The VAT exemption threshold for businesses, households, and individuals will be increased from lower than 100 million (ca. 3.820 EUR) VND to lower than 200 million VND (ca. 7.640 EUR).

Reclassified VAT Rates

Some items have been reclassified, for example:

• 0% rate - The rate will apply to the export of goods and services provided for consumption outside of Vietnam, goods and services provided directly to organizations within tax-free zones including an additional requirement of directly serving export production activities.
• 5% rate - This rate will apply to specialized machinery and equipment used for agricultural production, animal feed, and fertilizers; offshore fishing vessels are reclassified and will be subject to the 5% VAT (previously exempt from VAT).
• 10% rate - Services supplied through e-commerce or digital platforms by foreign suppliers without a permanent establishment in Vietnam, such as film production, import, and distribution (previously subject to the 5% rate).

Furthermore, it should be noted that more detailed and specific not-subject-to-VAT rules will apply to some goods and services, such as plant and forest products, plant breeding materials, life insurance, health insurance, agricultural insurance services, insurance of ships and boats, insurance of oil and gas works, and equipment.

Finally, it’s worth highlighting that to continue boosting consumption and support production, Resolution No. 174/2024/QH15 extends the reduced VAT rate from 10% to 8% for certain goods and services, specified in Resolution No. 43/2022/QH15, until the end of June 2025.

Resolution 101/2023/QH15 allows the Vietnamese Government to manage the VAT reduction in a timely manner and guarantee that there will be no negative impact on the State budget collection and overpayment.

From 1 July to 31 December 2023, Decree No. 44/2023/ND-CP will be in effect. Goods and services currently subject to the 10% VAT rate will be subject to the reduced rate of 8%. However, the reduced VAT rate of 8% will not apply to the supply of certain goods and services, including:

• Telecommunications, IT services;
• Finance and banking services, securities, insurance;
• Real estate business;
• Metal production and manufacture of prefabricated metal products;
• Mining industry (excluding coal mining), production of coke (“than cốc”), refined petroleum, production of chemicals and chemical products; and
• Goods and services that are subject to special sales tax.

The General Customs Department issued the official letter No. 3431/TCHQ-TXNK on 30 June 2023. This letter guides the implementation of the reduction of VAT at the rate of 8% for imported goods.

As we wrote in our previous news, the Vietnamese government will impose mandatory e-invoicing on 1 July 2022. Currently, the Ministry of Finance has issued Circular 78/2021/TT-BTC guiding the implementation of electronic invoices and documents.

Along with the Circular, the General Department of Taxation (GDT) has announced a roadmap for e-invoicing implementation in 2 following phases:

• November 2021 to March 2022: 6 provinces and cities, incl. Hanoi, Ho Chi Minh City, Quang Ninh, Hai Phong, Phu Tho and Binh Dinh;
• April 2022 to July 2022: countrywide deployment.

To deploy e-invoicing, the Tax Departments of provinces would review and classify taxpayers into enterprises, economic organizations, business households, and individuals. Local e-invoice service providers will be reviewed and notified about the implementation by the tax administrations to ensure that the infrastructures and solutions fulfil the requirements.

The Tax Department of Ho Chi Minh City would also announce a hotline to regularly monitor and handle problems during the preparation and initial implementation.

The GDT encourages organizations and individuals to adopt e-invoicing as early as possible. As of 1 July 2022, electronic invoices will replace paper ones. All enterprises, business households and individuals, except for special cases, will have to issue invoices electronically.

On 19 October 2020, the Vietnamese government issued Decree 123/2020/ND-CP, deferring the 1 November 2020 deadline for mandatory e-invoicing and annulling certain articles of the previously announced Decree 119/2018. The new entry into force date for mandatory “clearance type” e-invoicing in Vietnam is 1 July 2022.

Companies may continue to use any pre-printed, self-printed or electronic invoices that they purchased from the GDT (General Department of Taxation) before 19 October 2020. These invoices, with or without the GDT authentication code, will remain valid until 30 June 2022.

Exceptions to the new timeline

The following scenarios require businesses to implement e-invoicing before the official deadline of 1 July 2022:

• Businesses established between 19 October 2020 and 30 June 2022, if they have received a notice from the GDT;
• If an established business has run out of GDT allocated paper invoices, the GDT may decide to require the business to switch to e-invoicing. Businesses without technological capabilities to do so may be awarded pre-printed invoices under the condition that it sends invoice data and VAT return submission to the tax authority using Form No. 03 / DL-HDĐT, published in the appendix of Decree 123/2020.

Two e-invoicing processes remain the same

The two types of e-invoicing processes have not been altered in the new decree: one using e-invoices with GDT tax verification codes and one without. Various factors determine which process businesses must adhere to:1. E-invoices with GDT verification codesE-invoices with tax verification codes are eligible for tax declarations and will be mandatory for:

• Self-employed individuals;
• Businesses operating in agriculture, forestry, fishery and construction with an annual turnover greater than VND 3 billion (EUR 116 000), and with more than 10 employees;
• Individuals and companies in the trade and service industry with an annual revenue of at least VND 10 billion (EUR 380 000);
• “High tax risk enterprises” must submit e-invoices with verification codes for 12 consecutive months, after which the business will be reassessed. A high tax risk enterprise is defined as having equity of less than VND 15 billion and meeting a condition, for example:
  • The registered business address has changed twice or more within a 12-month period without the business making a prescribed declaration or failing to declare and pay tax at the new registration place according to regulations;
  • Enterprises which have been penalised for breaches in invoice rules in the last year

   

2. E-invoices without GDT verification codesIndustries not listed above can issue e-invoices without verification codes that are not eligible for tax declarations. The e-invoice data elements must still be sent to tax authorities, either directly or through an authorised e-invoicing service provider.

GDT XML e-invoice format and eSignature

There are also no changes in the required e-invoice format. Businesses should use the GDT XML format, consisting of two components: the component containing e-invoice business data and the component containing mandatory electronic signature data. For e-invoices with tax authority codes, there are additional components containing data related to tax agency data.

Advantages of e-invoice adoption

The government is generally encouraging businesses to switch to e-invoicing before the 1 July 2022 timeline. Several incentives have been created, including relieving businesses from reporting data separately on invoices issued under the new standards.