Article by Doan Thi Yen Luy – Tax Assistant Manager, Dezan Shira and Associates
Value Added Tax (VAT): What’s New and How to Stay Compliant
Vietnam has introduced sweeping changes to its Value Added Tax (VAT) regime through Law No. 48/2024/QH15, Decree No. 181/2025/ND-CP, and Circular No. 69/2025/TT-BTC. These reforms revise the VAT rates, redefine the scope of taxable goods and services, and tighten refund procedures. For businesses, the amendments present both new incentives and compliance challenges.
VAT rates and scope
Vietnam continues to apply three VAT rates (0, 5, and 10 percent), but the categories eligible for each have been redefined. Specifically:
- 0 percent rate: The rate remains focused on exports, but the scope is now more specific. Eligible transactions include goods sold abroad or into non-tariff zones and consumed within those zones, duty-free sales, and “on-spot” import-export transactions conducted under contracts with foreign parties. Exported services, including international transport, construction abroad, and digital content for foreign users and others, are also covered, provided they are consumed outside of Vietnam. However, exclusions apply to financial services, telecommunications, and reinsurance, while raw mineral exports remain ineligible;
- 5 percent rate: This rate mainly targets agriculture, healthcare, and culture sectors. Decree 181 clarifies these categories, which include fertilizers, pesticides, raw agricultural products, medical equipment, medicines, children’s books and toys, handicrafts, and traditional performing arts. Specialized agricultural machinery and offshore fishing vessels are also eligible; and
- 10 percent rate: This applies to all other goods and services not falling into the 0 percent, 5 percent, or VAT exemption categories. To support post-pandemic recovery, the government has extended a 2 percent reduction until the end of 2026, effectively lowering this rate to 8 percent for most items. Notably, e-commerce and digital services provided by foreign suppliers without a permanent establishment in Vietnam are subject to the full 10 percent from July 1, 2025.
VAT exemptions
Decree 181 also details categories exempt from VAT, including:
- Certain agricultural products;
- Financial services;
- Vocational training;
- Public transportation;
- Humanitarian aid;
- Press and cultural publications;
- Software products and software services;
- Specialized imported machinery for research and oil and gas exploration;
- Transactions within non-tariff zones; and
- Technology transfers.
Methods of VAT Calculation
Businesses with annual revenue above VND 1 billion (US$38,000) are required to apply the deduction method, calculating VAT as output tax minus input tax. Smaller businesses, household enterprises, non-resident individuals, and foreign suppliers without PE in Vietnam may apply the direct method, which imposes deemed rates ranging from 1 to 5 percent of revenue depending on the activity.
VAT refunds and administration
Refund procedures are a central focus of the amendments. Companies can now apply for VAT refunds during the investment stage if accumulated input VAT reaches VND 300 million (US$11,400). Exporters and businesses dealing solely in 5 percent VAT goods may also qualify for refunds once thresholds are met. However, refunds are no longer permitted for goods that are imported and subsequently re-exported.
Tax refund dossiers are subject to either a “refund first, audit later” approach – processed within six working days – or the stricter “audit first, refund later” model, which may take 40 days, but several months in practice. Common audit challenges include a lack of non-cash payment documentation, incorrect invoice declarations, and invalid or improperly used invoices.
Takeaways for investors
Vietnam’s revised VAT regime aims to balance state revenue with incentives for priority sectors, while closing loopholes on refund abuse. Investors should carefully review their supply chain transactions, maintain robust accounting records, and ensure compliance with new input VAT deduction and refund conditions.
For more information, visit Dezan Shira and Associates at https://www.dezshira.com/