Chapter 2. Vat

VALUE ADDED TAX
LOGO
CONTENT
1 OVERVIEW OF VAT
2 MAIN CONTENT OF VAT LAW
IN VIETNAM
1. OVERVIEW
 Definition
 VAT levies on added values of goods and

services arising in the process from
production, circulation to consumption.
Added values
Unit: VND
Input + Labor => Product => Consumers

materials expenses X
70,000 30,000 100,000 130,000

SONY TV
Sony => National => Regional => Pico => Consu

Factory agent agent mers
3 6 8 10 13 mil.
Added 3 2 2 3
value
VAT 0,3 0,2 0,2 0,3

1. OVERVIEW
 Characteristics
 Indirect tax
 Often regressive in comparison with
income
 Multi-stage consumption tax
 Highly economic neutrality
Legal documents
 Vietnam Law 13-2008: Law on Value Added Tax

 Vietnam Law 31-2013: Amended Law on Value Added Tax
 Vietnam Decree 209-2013: Decree on Value Added Tax
 Vietnam Circular 219-2013: Circular on Value Added Tax
 Vietnam Law 71-2014: Amended Law on several tax laws
 Vietnam Decree 91-2014 – guidances on Law 71-2014
 Vietnam Circular 151-2014 – guidances on Decree 91-2014
 Vietnam Circular 119-2014
 Vietnam Circular 26-2015
 Vietnam Decree 12-2015: amendments on Circular 78-
2014, 119-2014, 151-2014.
Legal documents – cont.
 Vietnam Decree 12/2015/ND-CP

 Vietnam Circular 92/2015 – guidances on Decree
12/2015/ND-CP
 Vietnam Law 106/2016/QH13
 Vietnam Decree 100/2016/ND-CP – guidances on Law
106/2016
2. MAIN CONTENT OF VAT LAW IN VIETNAM
2.1. SCOPE OF APPLICATION
2.2. TAX CALCULATION BASES
2.3. TAX CALCULATION METHODS
2.4. INVOICES & DOCUMENTS
2.5. TAX DECLARATION, SUBMISSION AND REFUND

2.1. SCOPE OF APPLICATION
 Taxable objects
 Non-taxable objects
 Taxpayers
Taxable objects
 Goods and services used for production,

trading and consumption in Vietnam
(including those purchased from
overseas organizations and individuals),
except non-taxable objects
Non-taxable objects
 goods and services that are (26 groups)
(1) Essential
(2) Used for social and philanthropical
purposes
(3) Of encouraged industries (e.g.
Cultivation or livestock industry)
(4) Difficult to determine the added values
(5) Imported goods which acctually are not
used for production, trading and
consumption in Vietnam.
Non-taxable objects
 Circular 219-2013: 26 groups E.g.

(1) Products from farming, breeding and
aquaculture that are produced, catched and sold
by the producers or imported; and are not
processed into other products (unprocessed) or
have only been preprocessed.
Eg. Group 1
Taxable or Non-taxable?
1. Dried fish sold by the farmers

2. Dried fish sold in BigC
3. Dried fish imported by BigC
Non-taxable objects
(7) Insurance services

(8) Finance, banking and securities
services
(16) Public transport by bus and tram within
a province, a city or routes adjecent to the
city as prescibed by the Ministry of
Transport.
Non-taxable objects
(9) Medical services and Veterinary services
(13)Education and vacational traning as

prescribed by law
+ Preschool – High school: revenues from meal
and student transport
+ College & University: revenues from boarding
school services; revenues from training
(including examinations and issuance of
qualifications)
Non-taxable objects
(17) Goods that cannot be manufactured in

Vietnam and must be imported, including:
 Imported machinery, equipment, parts
and supplies directly serving scientific
research and techonological development
 Imported machinery, equipment, parts
and specialized vehicles and supplies
serving petroleum exploration and
extraction
 Airplanes (including engines), oil rigs and
ships
Eg. Group 17
Enterprise A which has a department for scientific

research and technology developement, imported a
technological equipment. Is the equipment subject
to VAT:
a/ The equipment can be manufactured in Vietnam

b/ The equipment cannot be manufactured in
Vietnam
Non-taxable objects
(20) Goods forwarded through Vietnam’s teritory:

 Goods temporarily imported;
 Goods temporarily exported;
 Raw materials imported for manufacturing or
export processing under contracts with foreign
partners;
 Goods and services traded between a
foreign party and a free trade zone or
among free trade zones.
(23) Exported natural resources that are not
processed into other products.
Taxpayers
Organizations,
Individuals
Manufacture Import VAT-

and trade taxable
VAT-taxable goods and
goods and services from
services in abroad
Vietnam
Taxable or non-taxable?
1. Farmers sell sliced beef to Vinmart.

2. Vinmart sells vegetables to Vietnamese consumers.
3. Farmers sell spicy dried beef to Vietnamese consumers.
4. Farmers import apples from Spain.
5. Vinmart imports oranges from China.
6. Vietcombank provides lending services in Vietnam.
7. Agribank provides cash withdrawal services in Vietnam.
8. Prudential provides life insurance services in Vietnam
9. DHL provies express delivery services in Hanoi
10. A company provide transportation service for employees
of Vingroup in Hanoi.
11. Bach Mai hospital provides healthcare services

12. Bach Mai hospital sells drugs to its patients.
13. Banking Academy provides traditional educational services.
14. Banking Academy provides joint-program educational
services with CityUniversity of Seatle.
15. Banking Academy provides restaurant service to teachers
and students.
16. A transportation company buys an oil vessel from Vinashin.
17. Vietnam Airlines buys an Airbus 380 from Airbus.
18. Jetstar buys a secondhand Boeing 747 from Vietnam
Airlines.
20. Banking Academy buys 10 laptops from Trananh for using

in a scientific research project.
21. IBM Vietnam imported 1000 laptops from USA for later re-
export to China.
22. BigC sells Hanoi beers to a company in a free trade zone.
23. BigC buys children toys from a company in a free trade
zone.
24. A company in a free trade zone in Vietnam exports children
toys to China.
25. A company in a free trade zone in Vietnam imports steel
from Germany.
26. PetroVietnam exports crude oil to Cambodia.
27. Petrolimex Vietnam sells gasoline in domestic market.
28. Petrolimex Vietnam exports gasoline to China.
2.2. TAX CALCULATION BASIS
 Taxable prices
 Tax rates
TAXABLE PRICES
Rule: Taxable prices are VAT-exclusive prices

a) Domestically produced goods and services
VAT-
Taxable
exculsive
prices
prices
 Including surcharges excluded from the selling

prices that are received by the business entity.
 If the seller offers a discount, the taxable price is
the discounted price – written on the invoice.
Taxable prices are VAT-exclusive prices
a) Domestically-produced goods &

services – particular cases
 Taxable prices of goods and services
subject to Excise tax and(or) Environmental
protection tax; are the prices inclusive of
Excise tax and (or) Environmental protection
tax, and exclusive of VAT.

 Taxable prices of goods and services used

as gifts or donations are the taxable prices
of the same kinds or equivalent goods and
services at the time of using as gifts or
donations.
Eg. Gifts & donation
Enterprise B is a manufacturer of cars. The selling

price of one car is 500 mil VND; the production cost
is 300 mil VND. Calculate the VAT taxable price in
the following transactions:
a/ The enterprise use 2 of its cars as gifts to its

business partners.
b/ The enterprise use 2 of its cars to exchange for
100 TVs from company C.

 Goods internally circulated as supplies or

semi-finished products serving the operation
of a manufacturing or business
establishment are exempt from VAT.
E.g. Goods for internal use
1. Unit A is a manufacturer of electric fans. Unit A

installs 50 of these fans in its workshops to serve
its business operation.
2. Facility B has a weaving workshop and a

tailoring workshop. Facility B delivers finished
thread from the weaving workshop to the tailoring
workshop to proceed the manufacture.

 If a commodity is paid for by installments,

the taxable price is the original price
exclusive of VAT and interest.

 Taxable prices of goods and services used
for sales promotion in accordance with trade
laws are zero (0).
- Free gifts: Taxable prices = 0
- Reduced prices: Taxable prices = reduced
prices
- Vouchers: VAT is not levied on vouchers
Example
+ A Lenovo laptop bought from FPTshop

worth 10 mil. VND (VAT-exclusive).
+ Calculate the taxable price in the following
cases of promotion:
1. Free USB: 500,000 VND
2. 10% price discount for students
3. A Voucher worths 500,000 VND

 Taxable prices of goods and services using
special receipts on which the selling prices
are VAT-inclusive, such as stamps, bus
tickets, lottery tickets:
Selling
price
VAT
taxable
price
1 + tax
rate(%)
VD
b) Imported goods
Special
Import
Taxable Import excise EPT(if
tax (if
price price tax (if any)
any)
any)
VD
Eg. 1.
A 4-seat car is imported by ABC ltd. The

import price is VND 200 mil, import tax is
200 mil, Excise tax is 200 mil.
What is the VAT taxable price of this car?
Back
VAT TAX RATES
 0%: exported goods and services
 5%: Essential goods and services directly

used for production and consumption.
 10%: Ordinary goods and services

0% tax rate
Applicable objects
 Exported goods and services

 Construction and installation overseas and in
free trade zones
 International transport
 Exported goods and services that are not
subject to VAT
0% tax rate
Condition for application of 0% tax –

exported goods and services
1) A sale contract, export processing contract or
export entrustment contract.
2) A custom declaration form.
3) Bank transfer receipts for payment for exported
goods and services.
0% tax rate
0% tax is not applied to:

 Oversea reinsurance; technology transfer; transfer of
intellectual property right to abroad; capital transfer,
securities investment overseas; outbbound postal and
telecom services.
 Exported natural resouces that are not processed into
other products.
 Goods and services provided for individuals that do
not register to do business in free trade zones.
0% tax rate
0% tax is not applied to:

 Oil and gas purchased from domestic market and
sold to automobiles in the free trade zones
 Automobiles sold to the entities in free trade
zones
 Services provided for the entities in free trade
zones but the locations of consumption are
outside the free trade zones.
 Imported cigarrettes, alcohol and beer for
exporting later.
5% tax rate
Particular cases:
 Clean water serving manufacture and everyday
life (except for bottled water)
 The farming, breeding, aquaculture products that
are unprocessed or preprocessed at trading
stage.
 Medical equipments
 Teaching aids
Which tax rates?
1. Cigarettes exported by Vinataba

2. Garments sold for a company in a free trade zone.
3. Exported electronic devices
Which tax rates?
4. Cars sold to non-incorporated entities in a free trade

zone
5. Exported fresh apples
6. Exported cigarrettes, which were previously imported
from China
Which tax rates?
7. Imported bottled water

8. Goods sold to foreign travellers in Vietnam
9. Loans to a Vietnamese company for carrying out
investment projects in Lao.
2.3. TAX CALCULATION METHODS
 Credit-invoice method
 Direct method basing on value
added
CREDIT-INVOICE METHOD
Applied by
Taxpayers that adhere to the accounting and
invoicing practice according to accounting and
invoicing laws, including:
 Any taxpayer that earns at least 1bil VND in
annual revenue; except for business
individuals and households.
 Any taxpayer voluntarily applies credit-
invoice method; except for business
individuals and households.
E.g
Who can apply the credit-invoice method to calculate

VAT payable?
1. Company A that has annual revenue of 10 billion VND.

2. Company B that has annual revenue of 500 million
VND.
3. An individual owns a clothes shop that has annual
revenue of 1 billion VND.
4. Three friends sharing ownership of an English center
that has annual revenue of 800 million VND.
 Calculating formula
VAT Output Deductible

payable VAT input VAT
Output VAT
 The total VAT on sold goods and services written on
the VAT invoices
Taxable
Output prices of VAT tax
VAT goods & rates
services
 VAT invoices: VAT-exclusive price, VAT, selling

price.
VD
Eg. 2
ABC ltd. sold 10 computers at 100 mil VND

(VAT-exclusive price)
Calculate the output VAT, given the VAT tax
rate of 10%.
Back
Output VAT
 If the VAT invoice only has the selling price (except
for special invoices) => the VAT shall be levied on
the selling price
Eg.
ABC ltd. sold 10 computers using VAT invoices; on the
VAT invoices, only the final selling price is written
which is 110 million VND.
- Calculate the output VAT, given the VAT tax rate of
10%
Output VAT
 Special VAT invoices: the selling price is VAT-
inclusive
Selling
Output price/ Tax
VAT (1 +tax rate
rate)
Output VAT
 Incorrect tax rates
+ Tax rate on the invoice > rate prescribed by VAT

laws => taxpayer must pay tax at the rate written on
the invoice.
+ Tax rate on the invoice < rate prescribed by VAT
laws => taxpayer must pay tax at the rate prescribed
by VAT laws
Incorrect tax rates
Tax rate written on the VAT 5% 10%

invoice
Tax rate according to regulation 10% 5%
Correction ? ?
Incorrect tax rates
Tax rate written on the VAT 5% 10%

invoice
Tax rate according to regulation 10% 5%
Correction 10% 10%

Input VAT
is the total of:
 Total VAT on VAT invoices for purchase of goods
and services (including fixed assets) serving
manufacture or sale of taxable goods and services.
 VAT on receipts for payment of tax on imported

goods and services or payment of VAT on behalf of
a foreign organization.
Principles for input VAT deduction
 Deduction according to using purposes

 Principle of total deduction
 Principle of invoices
P.1: Deduction according to using purposes
Deductible input VAT is input VAT on

goods and services serving manufacture
or sale of goods and services subject to
VAT.
- Including non-refundable input VAT on
damaged goods.
Notes:
 The taxpayer must separate the deductible input

VAT from non-deductible one.
 Otherwise, input VAT shall be deducted according
to the ratio of taxable revenue to the total revenue
from selling goods and services.
(VAT Taxable
revenue +
Deductible revenue
Total revenue Input VAT
input VAT exempted for
declaring and
paying VAT)
VD
Eg. 3
A tea producer incurs two activities

+ Grow & sell fresh tea leaves with the
revenue of 100 mil VND
+ Produce & sell tea boxes with the revenue
of 300 mil VND
The total input VAT is 20 mil VND.
Calculate the Deductible input VAT.
Back
Notes: (cont.)
 If the value of a fixed asset that is a car no bigger

than 9-seater cars (except for those that are
used for cargo transport, passenger transport,
tourism or hotel services) exceeds 1.6 bil VND
(VAT-exclusive), the VAT on the proportion
beyond 1.6 bil VND must not be deducted.
Eg. 4
Calculate the deductible input VAT:

-A ltd. bought a 4-seaters Toyota Camry
worth 2.4 bil VND to use for company
directors.
-B corp. bought a 16-seaters Sprinter
worth 2 bil VND to use for employee
transportation.
-A travel company bought a 9-seaters car
worth 1.8 bil VND to use for business.
Back
Notes: (cont.)
 Input VAT on goods and services forming fixed

assets such as canteen, recreation room, locker
room, parking lot, restroom, water tank serving
workers at the work place; housing and medical
facility for workers in industrial parks shall be
deducted in full.
P.2: Principle of total deduction
 VAT shall be declared and deducted in the

period during which it is incurred, whether
the products are used or still in storage.
Eg. 4
Enterprise A bought 10 computers to use for

business in June 2018. However, the 10
computers are not installed and used until
October 2018.
Which month the input VAT of 10 computers

is deducted?
Deduct in June 2018 => may forget to
deduct in June => deduct in the following
months => deadline
P.2: Principle of total deduction
Notes: Adjustment of deduction
If the taxpayer finds that the input VAT is incorrectly

declared, an adjustment may be made within 10
years from the inadequate submission deadline but
before the tax authority or a competent authority
announces the decision on tax document
examination.
(Law 38/2019/QH14 on Tax administration)

P.3: Principle of invoices
Only input VAT on legitimate VAT invoices or

receipts for payment of VAT on imported
goods is deductible.
VAT invoices must not be deducted

 The VAT invoice is not legitimate, such as VAT is
not written (except for special invoices);
 The name, address or tax code of the buyer on the
invoice is incorrect.
 The VAT invoice or the receipt for VAT payment is
fake; the invoice is changed or fictitious (made
without actual sale)
 The invoice does not refect the actual value of
goods and services.
Condition: Non-cash payments
The payments of inputs qualified for

deductible input VAT must be non-cash
payment; except for the purchases of goods
and services that cost below 20 mil VND
inclusive of VAT.
Some special cases
 Input VAT of goods (whether purchased externally

or produced by the taxpayer) used as gifts, used for
sale promotions or advertising serving the
manufacture or sale of taxable goods may be
deducted.
 Non-refundable input VAT on damaged goods is
deductible.
Incorrect tax rates on input invoices
 Input VAT rate > rate prescribed by VAT

laws => VAT shall be deducted at the rate
prescribed by tax laws.
 Input VAT rate < rate prescribed by VAT
laws => VAT shall be deducted at the rate
written on the invoice.
Eg. 5
Revenue of tea producer A (VAT-exclusive)

includes:
 Domestically produce and sell fresh tea leaves: 100
mil VND
 Export fresh tea leaves: 200 mil VND
 Domestic retail of tea boxes: 250 mil VND
 Export tea boxes: 450 mil VND
Input VAT gathered on legitimate invoices: 20 mil VND
VAT tax rate on tea boxes is 10%
Calculate the VAT payable of A.
DIRECT METHOD BASING ON VALUE ADDED
Applied by
 Trading, fashioning of gold, silver and gemstones
 The operational companies and cooperatives that earn
less than 1 bil VND in annual revenue; except for those
that voluntarily apply credit-invoice method.
 Business household and business people.
 The foreign entity doing business in Vietnam without
following the Law on Investment; the organizations that
fail to adhere to accounting and invoicing practice.
 The business organizations other than companies and
cooperatives, except for those that voluntarily apply
credit-invoice method.
Calculating VAT payable

 Trading, fashioning of gold, silver and
gemstones
VAT tax
VAT Value
rate
payable added
(10%)
Calculating VAT payable

 Other cases
VAT
Rate (%) Revenue
payable
Direct VAT rates
Business lines Rate
From goods distribution or goods supply 1%
From service or construction exclusive of building materials 5%
Manufacturing, transport, services associated with goods, 3%

construction inclusive of building materials
Other lines of business 2%
E.g.
Which method that the following entities use to calculate VAT

payables
1. FPT corp. (adhered to accounting and invoicing laws) that has
annual revenue of 10 billion VND.
2. Hoa Phat jsc. (adhered to accounting and invoicing laws) that has
annual revenue of 500 million VND.
3. An individual owns a clothes shop that has annual revenue of 1
billion VND.
4. Three friends sharing ownership of an English center that has
annual revenue of 800 million VND.
5. Bao Tin Minh Chau (adhered to accounting and invoicing laws) that
has annual revenue of 20 bil. VND from trading gold, silver and
gemstones.
E.g.
Which method that the following entities use to calculate

VAT payables
6. An individual that owns a gold and silver shop with the annual
revenue of 2 bil. VND
7. Company A (fails to adhere to accounting and invoicing laws)
that has 10 bil. VND in annual revenue from providing
transportation services.
8. Company B (adhered to accounting and invoicing laws) that
has 30 bil. VND in annual revenue from providing construction
services and 10 bil. VND from trading gold, silver and gemstones.
 VAT invoices – used by taxpayers that declare

value-added tax by the credit-invoice method in the
following cases:
-Selling goods and providing services in Vietnam;

-Providing international transportation services;
-Exporting goods to the free trade zones and other

cases considered export;
 Sales invoices are used by:
 Entities that declare and calculate VAT using direct

method when selling goods and providing services
in Vietnam or exporting them to free trade zones,
and other cases considered exports.
 Entities in free trade zones when selling goods and

providing servicesin Vietnam and selling goods and
providing services for other entities in the free trade
zone
 Other invoices: stamps; tickets; cards; receipts fro

insurance premium, etc.
 Air freight receipts; receipts for international

transport charges, receipts for banking service
charges.
 Invoices are not required for goods or services with

a total payment of under VND 200,000, unless the
buyer so requests. At the end of the day, the
business establishment shall make a general
invoice.
E.g. Invoices
Which types of invoices that taxpayers have to use

in the following cases:
1. Company A, who declare VAT using credit-invoice
method, selling goods in Vietnam and exporting goods to
other countries.
2. Company B, who declare VAT using credit-invoice
method, selling goods to both domestic entities and entities
in free trade zone.
3. Company C, who declares VAT using direct method,
selling goods to both domestic entities and entities in free
trade zone.
 Tax declaration
The business entities make and send to the tax

office
-Tax declaration form
-Other prescribed documents
* VAT declaration is monthly; except for taxpayers with

total annual revenue of no more than 20 bil VND, the
tax declaration is quarterly.
Tax declaration form submission deadline
 Monthly VAT declaration: the 20th day of the

next month.
 Quarterly VAT declaration: the 30th day of the
next quarter.
 Tax submission: via bank transfer or in

cash.
TAX REFUND
 If input VAT is not completely deducted in the

current month (or quarter), the taxpayer that pays
VAT using credit-invoice method may deduct it from
the tax incurred in the next period.
Tax refund on exported goods & services
 In the month (quarter), if input VAT on

exported goods and services that remains
after deduction is 300 mil VND or above,
VAT shall be refund.
 If the input VAT is below 300 mil VND, it
shall be aggregated with that in the next
month (quarter).
www.themegallery.com
LOGO
The significance of tax refund
 Help to solve funding difficulty of businesses.

 Encourage businesses to expand investments.
 Encourage export activities.
 Consistent with international practices.
Time for determining VAT
Goods Services Import

goods
• When the • When the When the customs

ownership service declaration is
• or provision is registered
• The right to use completed
goods is • Or
transferred to • When the
the buyer invoice is made
Whether the payment is made or not

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VALUE ADDED TAX

2 MAIN CONTENT OF VAT LAW

 VAT levies on added values of goods and

Input + Labor => Product => Consumers

70,000 30,000 100,000 130,000

Sony => National => Regional => Pico => Consu

VAT 0,3 0,2 0,2 0,3

 Vietnam Law 13-2008: Law on Value Added Tax

 Vietnam Decree 12/2015/ND-CP

2.1. SCOPE OF APPLICATION

2.2. TAX CALCULATION BASES

2.3. TAX CALCULATION METHODS

2.4. INVOICES & DOCUMENTS

2.5. TAX DECLARATION, SUBMISSION AND REFUND

 Goods and services used for production,

 goods and services that are (26 groups)

 Circular 219-2013: 26 groups E.g.

1. Dried fish sold by the farmers

(7) Insurance services

(9) Medical services and Veterinary services

(13)Education and vacational traning as

(17) Goods that cannot be manufactured in

Enterprise A which has a department for scientific

a/ The equipment can be manufactured in Vietnam

(20) Goods forwarded through Vietnam’s teritory:

Manufacture Import VAT-

1. Farmers sell sliced beef to Vinmart.

11. Bach Mai hospital provides healthcare services

20. Banking Academy buys 10 laptops from Trananh for using

Rule: Taxable prices are VAT-exclusive prices

 Including surcharges excluded from the selling

a) Domestically-produced goods &

a) Domestically-produced goods &

 Taxable prices of goods and services used

Enterprise B is a manufacturer of cars. The selling

a/ The enterprise use 2 of its cars as gifts to its

a) Domestically-produced goods &

 Goods internally circulated as supplies or

1. Unit A is a manufacturer of electric fans. Unit A

2. Facility B has a weaving workshop and a

a) Domestically-produced goods &

 If a commodity is paid for by installments,

a) Domestically-produced goods &

+ A Lenovo laptop bought from FPTshop

a) Domestically-produced goods &

A 4-seat car is imported by ABC ltd. The

 0%: exported goods and services

 5%: Essential goods and services directly

 10%: Ordinary goods and services

 Exported goods and services

Condition for application of 0% tax –

0% tax is not applied to:

0% tax is not applied to:

1. Cigarettes exported by Vinataba

4. Cars sold to non-incorporated entities in a free trade

7. Imported bottled water

Who can apply the credit-invoice method to calculate

1. Company A that has annual revenue of 10 billion VND.

VAT Output Deductible

 VAT invoices: VAT-exclusive price, VAT, selling