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.