Adjustments to VAT-Exempt Items

Article 5 of the 2024 VAT Law adjusts the regulations on VAT-exempt items in Article 5 of the 2008 VAT Law (amended by Law No. 31/2013/QH13 and Law No. 106/2016/QH13) as follows:

  • Removal of some VAT-exempt items:
    • Certain items currently exempt are removed, including:
      • Fertilizers; specialized machinery and equipment for agricultural production; offshore fishing vessels;
      • Securities depository; market organization services of stock exchanges or securities trading centers; other securities business activities…
  • Exported products that are processed exploited resources and minerals are only exempt from VAT if they are on a list specified by the Government. Previously, exported goods processed from resources and minerals with a total value of resources and minerals plus energy costs accounting for 51% or more of the product’s cost were VAT-exempt.
  • Imported goods donated or sponsored for disaster prevention, epidemic control, and war relief, as regulated by the Government, are added as VAT-exempt items.

Amendments to Taxable Price for Imported Goods

Currently, Article 7 of the 2008 VAT Law stipulates that the taxable price for imported goods is the import price at the border gate plus import tax (if any), plus special consumption tax (if any), and plus environmental protection tax (if any). The import price at the border gate is determined according to regulations on taxable prices for imported goods.

In Article 7 of the 2024 VAT Law, the taxable price for imported goods is amended to be the import tax calculation value according to the law on export and import taxes plus import tax plus additional import taxes as prescribed by law (if any), plus special consumption tax (if any), and plus environmental protection tax (if any).

Specific Guidance on Incorrect or Missing Input VAT Declarations

Previously, if a business discovered errors or omissions in the declared and deducted input VAT, the 2008 VAT Law only instructed taxpayers to make supplementary declarations and deductions before the tax authority announced a tax inspection or examination decision at the taxpayer’s headquarters.

According to the new regulations in point d, clause 1, Article 14 of the 2024 VAT Law, if a business discovers errors or omissions in the declared and deducted input VAT, they can declare the tax before the tax authority or competent authority announces a tax inspection or examination decision, as follows:

  • Declare in the period of occurrence if the supplementary declaration increases the payable tax or decreases the refundable tax; the taxpayer must pay the increased payable tax or have the corresponding refunded tax recovered and pay late payment interest to the state budget (if any).
  • Declare in the period of discovery if the supplementary declaration decreases the payable tax or only increases or decreases the remaining deductible VAT carried forward to the next month or quarter.

Adjustments to Tax Rates for Certain Goods and Services

Article 9 of the VAT Law adjusts the tax rates for certain goods and services as follows:

  • Addition of some items subject to a 0% tax rate:
    • International transportation;
    • Construction and installation works abroad or in non-tariff zones;
    • Goods sold in isolation areas to individuals (foreigners or Vietnamese) who have completed departure procedures; goods sold in duty-free shops;
    • Exported services include: Vehicle rental services used outside the territory of Vietnam; Services of the aviation and maritime sectors provided directly to international transport or through agents.
  • Products previously exempt now subject to 5% tax:
    • Fertilizers;
    • Vessels exploiting aquatic products in sea areas.
  • Products with a 5% tax rate now subject to 10%:
    • Unprocessed forest products;
    • Sugar; by-products in sugar production, including molasses, bagasse, mud;
    • Specialized equipment and tools for teaching, research, and scientific experiments;
    • Cultural, exhibition, sports activities; art performances; film production; film import, distribution, and screening.

Changes to Input VAT Deduction Conditions

  • Purchases of goods and services under 20 million VND must have non-cash payment documents: Previously, goods and services purchased in single transactions valued at less than 20 million VND did not require non-cash payment documents for VAT deduction according to clause 2, Article 12 of the VAT Law. However, according to Article 14 of the new Law, all purchased goods and services must have non-cash payment documents, except for certain special cases as prescribed by the Government.
  • Addition of some deductible input VAT documents: According to clause 2, Article 13 of the 2024 VAT Law, for exported goods and services, packing slips, bills of lading, and cargo insurance documents (if any) are deductible for input VAT, except for certain special cases as prescribed by the Government. This was not previously stipulated.

Addition of Refund Cases

Article 14 of the 2024 VAT Law adds the following refund case:

Businesses that only produce goods and provide services subject to a 5% VAT rate are entitled to a VAT refund if they have undeducted input VAT of 300 million VND or more after 12 months or 4 quarters.

Increasing the Taxable Revenue Threshold for Business Households and Individuals

Clause 25, Article 5 of the 2024 VAT Law stipulates that goods and services of production and business households and individuals with annual revenue from 200 million VND or less are VAT-exempt.

Regarding the effective date, Article 18 of the 2024 VAT Law clarifies that the revenue threshold for VAT exemption for production and business households and individuals in clause 25, Article 5 of this Law takes effect from January 1, 2026.

Currently, according to Circular 40/2021/TT-BTC guiding the 2008 VAT Law, business households and individuals with revenue from production and business activities in a calendar year of 100 million VND or more must pay VAT.

Thus, the VAT Law has raised the VAT taxable revenue threshold for business households and individuals from 100 to 200 million VND. From January 1, 2026, production and business households and individuals with annual revenue of 200 million VND or more will have to pay VAT.

 

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