(SB Law) VAT applies to the supply of goods and services for use in production, business or consumption in Vietnam. VAT is calculated on the sale/purchase price of the relevant goods or service before the addition of VAT.
The applicable VAT rates are 0%, 5% and 10%, of which the normal rate of 10% is applicable to most goods and services.
The tax rate of zero (0) per cent shall apply to exported goods and services, international transportation, and to goods and services which are not subject to VAT and which are exported, except for the following: technology transfers and intellectual property transfers to foreign countries; services being reinsurance offshore; credit services, assignment of capital and derivative financial services; post and telecommunications services; and export products being exploited natural resources and mined minerals which have not yet been processed
The tax rate of 5% shall apply to the following goods and services:
(a) Clean water for manufacturing and for living purposes.
(b) Fertilizers; ore used for production of fertilizers; pesticides and growth stimulants for animals and crops.
(c) Feed for cattle, poultry and other animals.
(d) Services of digging and ploughing, and dredging canals, ditches, ponds and lakes for agricultural production; planting, raising and pest control of crops; semi-processing and preserving agricultural products.
(e) Products of cultivation, husbandry and aquaculture which have not yet been processed, except for certain products.
(f) Semi-processed latex; semi-processed resin; and netting, cord and fibre used for weaving into fishing nets.
(g) Fresh food produce; and forestry products which have not yet been processed except for wood, bamboo shoots and the products prescribed in article 5.1 of Law on VAT.
(h) Sugar; and by-products obtained in manufacture of sugar comprising sugar-cane dregs, bagasse and sugar dregs.
(i) Products made from jute, sedge, bamboo, rattan, thatch, coconut fibre, coconut shell, water hyacinth, and other handmade products produced by using agricultural raw materials; semi-processed cotton; and newsprint.
(k) Specialized machinery and equipment for agricultural production including ploughs, harrows, sowing machines, seeding machines, rice plucking machines, reaping machines, combined reaping and threshing machines, harvesters for agricultural produce, and insecticide spraying machines and pumps.
(l) Medical equipment and instruments; medical sanitary cotton and bandages; preventive and curative medicines; and pharmaceutical products and pharmaceutical materials which are the raw materials for producing preventive and curative medicines.
(m) Teaching and study aids used for teaching and studying including various types of models, drawings, blackboards, chalk, rulers, compasses and various types of specialized equipment and tools for teaching, research and scientific experiments.
(n) Cultural activities; exhibitions; physical training and sports activities; artistic performances; film production; and importation, distribution and screening of films.
(o) Children’s games; books of all types, except for the books.
(p) Scientific and technological services as stipulated in the Law on Science and Technology.
Certain goods and services are exempt from VAT. Examples are unprocessed agricultural products sold by the producer, certain insurance services and certain imported equipment. The difference between being subject to VAT at 0% and being exempt from VAT is that, in the former case, the input VAT can be claimed from the tax authority.
VAT payments to, or refunds from the tax authority are the difference between output VAT and input VAT.
The following goods and services shall not be subject to value added tax:
- Products of cultivation, husbandry, aquaculture, seafood and fisheries which have not yet been processed into other products or which have only been subject to conventional preliminary treatment by organizations and individuals in the stages of production, catching, sale and import.
- Products being animal breeding stock and plant varieties including breeding eggs, young animals, seedlings, seeds, sperm, embryos and genetic materials.
- Water supply and drainage; ploughing and harrowing land; dredging canals and ditches inside fields for agricultural production; services being harvesting agricultural products.
- Salt products produced from seawater or natural salt mines; pure salt and iodine salt.
- State owned residential houses sold by the State to existing tenants.
- Transfer of land use rights.
- Life insurance, student insurance, insurance of domestic animals and plants varieties, crop insurance and re-insurance.
- Credit services; securities business activities; assignment of capital; and derivative financial services including interest rate swaps, forward contracts, futures contracts, options, foreign currency sales and other derivative financial services as stipulated by law.
- Medical health services and veterinary services including medical examination and treatment and disease prevention for humans and for animals.
- Public postal and telecommunications services and internet services globalized pursuant to the program of the Government.
- Public hygiene services and water drainage in urban streets and residential areas; maintenance of zoos, public gardens, parks, trees in streets and public lighting systems; and funeral services.
- Maintenance, repair and construction of cultural, artistic and public buildings and of infrastructure and welfare housing, funded by public contributions and humanitarian aid.
- Education and vocational training as stipulated by law.
- Radio and television broadcasting funded by the State Budget.
- Publication, importation and distribution of newspapers, magazines, specialized newsletters, political books, textbooks, teaching materials, law books, technical and scientific books, books printed in languages of ethnic minorities, propaganda pictures, photos and posters, including in the form of disks, tapes and electronic databases; and printing of money.
- Public passenger transportation by bus and electrical vehicles.
- Machinery, equipment and materials which are not yet able to be produced domestically and which are required to be imported for direct use in scientific research and technological development activities; machinery, equipment, replacement parts, specialized means of transportation and materials which are not yet able to be produced domestically and which are required to be imported to carry out prospecting, exploration and development of petroleum and natural gas fields; aircraft, drilling platforms and watercraft which are not yet able to be produced domestically and which are required to be imported to form fixed assets of enterprises or which are leased from foreign parties for use in production and business and in order to be sub-leased.
- Specialized arms and weaponry required for national defence and security.
- Imported goods in the following cases: humanitarian aid and non-refundable aid; gifts to State bodies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations and units of the people’s armed forces; donations and gifts to individuals in Vietnam at the level stipulated by the Government; personal effects of foreign organizations and individuals under diplomatic immunity regulations; and hand luggage within duty-free limits. Goods and services sold to international organizations and foreign individuals for humanitarian aid and non-refundable aid for Vietnam.
- Goods in border-gate transit or transit via the territory of Vietnam; goods temporarily imported and re-exported and goods temporarily exported and re-imported; raw materials imported for manufacture or processing of goods for export in accordance with manufacturing or processing for export contracts with foreign parties; goods and services purchased and sold as between foreign parties and non-tariff zones, and purchased and sold as between non-tariff zones.
- Technology transfers pursuant to the Law on Technology Transfer; intellectual property transfers pursuant to the Law on Intellectual Property; and computer software.
- Gold imported in bar and foil which has not yet been processed into fine art articles, jewellery and other products.
- Export products being exploited natural resources and [mined] minerals which have not yet been processed as stipulated in regulations of the Government. Artificial body parts for ill people; crutches, wheelchairs and other specialized apparatus used by disabled people.
- Goods and services of business individuals being people with an average monthly income lower than the minimum wage applicable to domestic organizations and enterprises.