Overview On Value Added Tax In Vietnam

In Vietnam, Value-Added Tax (VAT) is currently applied at three main rates: 0%, 5%, and 10%, depending on the nature of the goods and services. The 0% rate applies to exported goods and services, international transportation, and duty-free sales, aiming to promote cross-border trade. The preferential 5% rate applies to essential goods and services that support social welfare, such as clean water for domestic use, pharmaceuticals, medical equipment, books, agricultural products, and services in education and culture. The standard 10% rate is applicable to most other goods and services consumed domestically.

Notably, to support post-pandemic economic recovery and stimulate domestic consumption, the Vietnamese government has implemented a temporary VAT reduction from 10% to 8% for many regular goods and services, effective from July 1, 2025, through December 31, 2026. However, this reduction does not apply to specific sectors such as finance and banking, insurance, real estate, telecommunications, mining, metal production, and goods subject to special consumption tax (e.g., alcohol, tobacco).

Understanding the applicable VAT rates and the corresponding goods and services is essential for businesses to issue invoices accurately, file taxes in compliance with regulations, and effectively take advantage of current tax relief policies.

In Vietnam, the 0% Value-Added Tax (VAT) rate is applied to exported goods and services, as well as certain international transactions, with the aim of promoting cross-border trade and ensuring tax neutrality for exporting businesses. Specifically, eligible goods include exports to foreign markets, goods exported under entrusted export contracts, processed goods for export, and goods sold to duty-free shops. As for services, the 0% VAT rate applies to those provided to foreign organizations or individuals that are not consumed within Vietnam—such as legal consulting, accounting, auditing, software development, advertising, design, or research and development for overseas use. Additionally, international transportation of passengers and cargo by sea or air, construction and installation services provided to foreign customers outside Vietnam’s territory, and certain services offered to export processing enterprises (EPEs) may also qualify for the 0% rate if specific conditions are met.

However, to benefit from this preferential VAT treatment, businesses must fulfill strict documentation requirements. These include valid export contracts, customs declarations, compliant VAT invoices, bank payment receipts (cash payments are not accepted), and proof that the services were consumed outside of Vietnam. Notably, some services—such as warehouse leasing, hotel accommodation, conference hosting, entertainment within Vietnam, or the transfer of technology—are not eligible for the 0% rate even when provided to foreign clients. Therefore, businesses must carefully review the relevant VAT regulations to ensure compliance and eligibility for the zero-rated VAT incentive.

In Vietnam, although the standard Value-Added Tax (VAT) rate is 10%, certain goods and services are exempt from VAT due to social, policy-related, or technical reasons. Common VAT exemptions include unprocessed agricultural products to support farming and food security; healthcare and educational services to ensure equal access to essential services; financial and banking services due to the complexity of calculating input VAT; land use right transfers which are already subject to other land-related taxes; public postal and telecommunications services to promote universal communication infrastructure; non-profit cultural and artistic activities serving public interest; and goods or services funded by non-refundable foreign aid. These exemptions help reduce cost burdens on citizens, encourage the growth of critical sectors, and align with international tax practices. 

In Vietnam, Value-Added Tax (VAT) is calculated using two main methods: the credit method and the direct method. The credit method is applied to businesses and organizations that meet accounting and invoicing requirements. Under this method, the VAT payable is determined by subtracting input VAT (on purchases) from output VAT (on sales). This method is widely used by medium and large enterprises with proper accounting systems. In contrast, the direct method applies primarily to individual business households or small enterprises that do not meet the conditions for input VAT deduction. With this approach, VAT is calculated directly as a percentage of revenue, and the rate varies depending on the business sector (e.g., food services, retail sales). Each method has its own advantages and is applied based on the nature and scale of the taxpayer's operations. 

In Vietnam, businesses are required to file Value-Added Tax (VAT) returns on a monthly or quarterly basis, depending on their annual revenue. Specifically, enterprises with revenue of VND 50 billion or more in the previous year must file VAT monthly, while those below this threshold may opt for quarterly filing. The deadline for monthly VAT returns is the 20th day of the following month, and for quarterly returns, it is the 30th day of the month following the quarter’s end. Required documentation includes the VAT return form (Form 01/GTGT), sales and purchase invoice lists (if using the credit method), and supporting documents such as VAT invoices, contracts, warehouse release slips, and bank payment records (if applicable). Accurate and timely filing is a legal obligation, and failure to comply may result in administrative penalties from the tax authorities. 

In Vietnam, businesses may claim Value-Added Tax (VAT) refunds under specific conditions, provided that all legal requirements are met. A common case is when a company using the credit method has accumulated input VAT that has not been fully credited over a continuous period of 12 months or 4 quarters, making them eligible to request a refund. Additionally, companies that export goods or services may claim VAT refunds on uncredited input VAT used for export activities, provided they can supply valid supporting documents such as export contracts, customs declarations, and bank payment receipts. Other eligible cases include investment projects in the pre-revenue stage and VAT refund entitlements under international treaties. However, to qualify for a VAT refund, the business must have no tax violations within the past two consecutive years, must maintain proper invoices and supporting documents, and fulfill all tax declaration and payment obligations. The tax authorities will review the application and issue a refund decision within the legally prescribed timeframe 

In Vietnam, the Value-Added Tax (VAT) refund process follows a structured procedure set by the tax authorities. First, the business must prepare a complete VAT refund application dossier, which includes: the VAT return form, detailed appendices, a list of uncredited input invoices, bank payment evidence, export contracts (if applicable), customs declarations, and other supporting documents proving eligibility for the refund. This dossier can be submitted via the Vietnam General Department of Taxation’s electronic portal or directly at the relevant tax office.

Upon receipt, the tax authority classifies the application into one of two categories: refund-first, audit-later (for low-risk, compliant taxpayers) or audit-first, refund-later (for high-risk cases). For the refund-first approach, the refund is usually processed within 6 working days after receiving a valid application. For the audit-first approach, the timeframe may extend up to 40 working days. Once approved, the refund amount is transferred to the business’s registered bank account.

In Vietnam, the duration for receiving a Value-Added Tax (VAT) refund depends on the taxpayer’s compliance level and the applicable refund procedure. For businesses classified as low-risk and fully compliant, which qualify for the “refund first – audit later” method, the tax authority typically processes the refund within 6 working days from the date of receiving a complete and valid application. In contrast, for higher-risk cases or those subject to the “audit first – refund later” approach, the process may take up to 40 working days, as it involves a pre-refund inspection by the tax authority. In certain complex situations—such as inter-agency verification or incomplete documentation—the process may take longer. To ensure a timely refund, businesses are advised to prepare thorough documentation and strictly follow tax filing and payment procedures. 

In Vietnam, exported goods and services are subject to a 0% VAT rate, which is designed to promote exports and ensure tax neutrality for businesses. This means that exporters do not have to charge output VAT on their exports but are still entitled to deduct or claim a refund for input VAT incurred on related purchases. However, to qualify for the 0% rate, companies must meet several legal requirements, including having a valid export contract, customs declaration, VAT invoice, proof of payment via a bank, and, for services, evidence that the service is consumed outside of Vietnam. It is important to note that certain services provided to foreign clients but consumed within Vietnam do not qualify for the 0% VAT rate and are instead taxed at the standard rates. Adhering strictly to these conditions enables businesses to optimize cash flow, reduce tax risks, and enhance competitiveness in international markets. 

Recently, Vietnam has implemented several significant reforms to its Value-Added Tax (VAT) system. Most notably, the government has extended the VAT reduction from 10% to 8% until December 31, 2026 for most goods and services, as part of ongoing efforts to support post-pandemic economic recovery. In addition, the amended VAT Law of 2024 (effective from July 1, 2025) introduces a range of new regulations, including: expanding the taxpayer base to cover foreign suppliers via digital platforms; revising the list of goods and services subject to 5% and 10% VAT rates; requiring non-cash payments for invoices over VND 5 million to be eligible for input VAT deduction; and tightening VAT refund conditions. Moreover, the annual revenue threshold for VAT exemption for small business households will be doubled, from VND 100 million to VND 200 million, starting January 1, 2026. These changes reflect Vietnam’s commitment to balancing business support with strengthened tax administration, aligned with principles of modernization, transparency, and digital transformation. 

Vietnam’s Value-Added Tax (VAT) system shares many similarities with those of other Southeast Asian countries, but also features some notable differences in tax rates, scope of application, and administrative mechanisms. Like its regional peers, Vietnam adopts a VAT structure with three main categories: standard rate, preferential rate, and exemptions. The standard VAT rate in Vietnam is 10%, which is comparable to Thailand’s temporary 7%, Indonesia’s 11%, and slightly lower than the Philippines’ 12%. Vietnam also applies a 0% rate for exported goods and services and a 5% rate for essential goods, similar to Malaysia and Cambodia.

One major distinction lies in Vietnam’s relatively complex VAT credit and refund procedures, which require extensive and detailed documentation, whereas countries like Singapore and Malaysia offer more streamlined processes, especially for foreign investors. Additionally, Vietnam’s VAT registration threshold is relatively low, meaning many small business households are still subject to VAT obligations, unlike in countries with higher exemption thresholds. Vietnam is also actively modernizing its tax administration—adopting electronic invoicing and online filing systems—similar to digitalization trends in Indonesia and Singapore. Overall, Vietnam’s VAT system is gradually aligning with international standards, though further reforms are needed to improve transparency, efficiency, and ease of compliance for businesses.