Which businesses are exempt from the VAT? 

Under the 2014 Amendments to the Law on VAT, the following are not subject to the Value Added Tax: salt products; financial, banking, and securities services; products for export; goods and services provided by household and individual businesses.

Also, the updated Law has made amendments on non-taxable subject including health insurance, other insurances related to humans, other agricultural insurances, insurance for boats, ships, and other equipment necessary for fisheries.

On the other hand, public waste collection and water drainage services in streets and residential areas are no longer exempt from the VAT as of 2014. 

Taxable Price

The Law on Amendments to the Law on VAT has made amendments on which goods are subject to environmental protection tax, or both environmental protection tax and excise tax.

This Law has also annulled the regulations on hiring foreign machinery, equipment or means of transport which cannot be domestically manufactured for sublease.

Taxable prices of imported goods are imported prices at the border gate plus import tax (if any), plus excise tax (if any), plus environmental protection tax (if any).

Tax Rate

The updated Law supplemented the definition of the goods and services subject to 0% VAT rate.

The tax rate of 5% is applicable to sale, lease, and hire purchase of social housing and has taken effect since July 1st, 2013.

The 10% VAT on the sale, lease, and hire purchase of commercial housing, which is finished apartments smaller than 70 m2 that are sold at below 15 million VND/m2, shall be reduced by 50% from July 01, 2013 until the end of June 30, 2014.

Tax Calculation Methods

On the method of calculating taxes, the updated law has amended and supplemented the tax deduction method and the method of direct calculation on VAT, including:

• Detailed regulations on the amount of output VAT, which is equal to the total VAT on sold goods and services, and is written on the VAT invoice applied for business establishments using tax deduction method; and supplementing provisions on deduction of input VAT;
• Detailed regulations on the amount of VAT payable in accordance with the method of direct calculation on value added, which is equal to the value added multiplied by VAT rate applied when trading and crafting of gold, silver, and gems; detailed regulations on the application of VAT according to direct calculation on value added, which equals to the percentage multiplied by revenue.

Tax Refunds

The update law has amended and supplemented that:

• When the input VAT of a business establishment using the deduction method is not completely deducted in the month or in the quarter, it shall be deducted in the next period; if the input VAT is not completely deducted after at least 12 months or 4 quarters from the month or the quarter in which the un-deducted VAT arises, the business establishment shall receive a tax refund.
• When the un-deducted input VAT on exported goods and services reaches 300 million VND and above, the VAT shall be refunded by the month or quarter.
• Refunds of VAT are applicable to programs/projects using non-refundable ODA, non-refundable aid, or humanitarian aid.
• Foreigners and Vietnamese people residing abroad shall receive refunds of tax on goods purchased in Vietnam and brought abroad.