On 26 November 2024, the 2024 Law on Value-Added Tax (VAT), which replaces the 2008 version, was passed by the National Assembly. Below are some key points businesses should note in preparation for the new law taking effect on 01 July 2025.
1. Change in the calculation of Taxable Price for Imported Goods
Taxable prices of imports are dutiable values (values on which import duty is charged) as prescribed by regulations of law on export and import duties plus (+) import duty plus (+) extra import duties as prescribed by law (if any), plus (+) excise duty (if any) plus (+) environment protection tax (if any).
Impact: The method for calculating VAT on imported goods under the 2024 VAT Law fundamentally changes the approach. Previously, VAT was calculated based on the customs gate price plus taxes. Now, the taxable priceis based on the dutiable values (defined by the Law on export and import duties), plus the relevant taxes as listed above. This aligns VAT calculations with the regulations in the Export and Import Duties Law, ensuring greater transparency and ease of implementation for businesses.
2. Adjustment of VAT Rates for Certain Goods and Services
The new law also adjusts the VAT rates for some goods and services. Details of the changes are as follows:
- 5% VAT rate: Fertilizers and fishing vessels operating in marine waters are added to this category. These were previously non-taxable, but will now be subject to a 5% VAT.
- 10% VAT rate: Unprocessed forest products, sugar and sugar by-products, specialized equipment for teaching, research, and scientific experiments, and equipment for cultural, sports, film production, importation, distribution, and screening — these items previously had a 5% VAT, but will now be subject to a 10% VAT.
Impact: directly affect product pricing, VAT deductions (shifting from non-taxable to taxable goods), and business operations in the relevant sectors.
3. Additional Regulation on Taxable Value for Promotional Goods and Services
Article 7 of the 2024 VAT Law introduces a new provision regarding the taxable value of goods and services used for promotional purposes, in accordance with commercial law. For such promotional goods and services, the taxable value is set at zero (0).
Impact: This is a positive change in the 2024 VAT Law (not present in the 2008 version) and aligns with the practical realities of many businesses. If promotional activities comply with the Commercial Law, the taxable value of those goods or services will be zero, which will help facilitate trade promotion efforts and stimulate domestic consumption.
4. Addition of new categories eligible for 0% VAT Rate
The new law adds several groups of goods and services eligible for a 0% VAT rate, including:
- International transportation,
- Construction and installation projects located overseas or in free trade zones,
- Goods sold in airport isolation areas and duty-free shops,
- Export services such as leasing of transportation vehicles for use abroad,
- Aviation and maritime services provided directly to international transportation operations or through agents
Impact: These changes are consistent with international practices and support the actual operations of businesses involved in international transport, free trade zones, and export services. It may have a positive impact on product and service pricing and improve the business environment in these sectors. However, businesses should follow input VAT deduction procedures as per regulations to benefit from the 0% VAT rate.
5. Requirements for deduction of input VAT
An additional important point in the new VAT Law states that for purchases of goods and services should have documentary evidence of non-cash payment for input VAT deduction. This new point replaced the previous point in the VAT Law 2008 which did not require goods and services purchased with the value of less than VND 20 million to have documentary evidences for VAT deduction.
Additionally, for exported goods and services, the following documents are added to the list of acceptable proof for input VAT deduction: packing slips, bills of lading, and cargo insurance documents (if applicable). Certain exceptional cases, as stipulated by the Government, may still qualify for VAT deduction without these documents.
Impact: Under the current regulations, single purchases under 20 million VND do not require non-cash payment documentation for VAT deduction, and there is no detailed rule about documents accepted for VAT deduction on exports. However, starting from 1 July 2025, all purchases, regardless of value, must be accompanied by non-cash payment documentation to be eligible for input VAT deduction. Businesses will need to carefully manage payment methods and documentation to ensure compliance and retain their right to deduct input VAT.
6. New point on VAT Refund
Article 15 of the 2024 VAT Law adds a new scenario in which businesses may be eligible for a VAT refund: A business establishment that only manufactures products or provides services subject to 5% VAT and has a residual input VAT of VND 300 million or more for at least 12 consecutive months (or 4 consecutive quarters) will be eligible for VAT refund.
Impact: This new point makes it easier for certain businesses to access VAT refunds. Companies should ensure they meet the criteria in order to benefit from this provision under the new VAT Law.
Need more information about VAT regulations? Send your questions via the link below, and we will contact you for further consultation:
