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Home News Vietnam’s New Vat Law: What You Need To Know For Compliance

Vietnam’s New Vat Law: What You Need To Know For Compliance

by Celia

Vietnam’s new Value Added Tax (VAT) Law, which will take effect on July 1, 2025, introduces crucial updates to the country’s tax landscape. With the enactment of Law No. 48/2024/QH15, the previous VAT Law, along with its amendments, will be repealed. These changes will significantly impact businesses operating in Vietnam, particularly regarding tax rates, export activities, and invoicing practices. Here’s a breakdown of the essential points for businesses to consider in preparation for these shifts.

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Key Changes Under the New VAT Law:

0-Percent VAT Rate for Exports: The new law maintains the 0-percent VAT rate for goods and services sold to foreign entities and consumed outside Vietnam. However, to qualify for this rate, the goods must be physically exported and consumed outside the country.

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On-the-Spot Import and Export Changes: The new VAT law clarifies that goods sold to a foreign company but delivered to another Vietnamese company do not qualify for the 0-percent VAT rate under the “on-the-spot” import/export scheme. This change is particularly relevant for companies relying on this model, as the government also proposes abolishing the scheme altogether.

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New Guidelines for Exported Goods in Bonded Warehouses: A key point of uncertainty is the treatment of goods delivered to bonded warehouses. The goods purchased by foreign companies and then retrieved by Vietnamese companies may not qualify for the 0-percent VAT rate if they are consumed within Vietnam. Businesses should prepare for potential challenges when applying this model.

VAT Rate Increases for Foreign Suppliers: Effective July 2025, foreign suppliers without a permanent establishment in Vietnam will face an increase in VAT rates for digital and e-commerce activities. The rate will rise from 5 percent to 10 percent, impacting foreign businesses involved in these sectors.

Changes to VAT Invoicing and Compliance: Under the new law, foreign contractors must adhere to Vietnamese invoicing requirements. This includes issuing VAT invoices and ensuring they comply with local tax laws to enable customers to claim input VAT. Businesses are advised to stay updated on specific guidelines to avoid complications.

Threshold Changes for VAT Exemption: The annual revenue threshold for business individuals and households to qualify for VAT exemption has been raised from VND 100 million to VND 200 million, effective January 2026.

VAT Refunds for Investment Projects: The new VAT law allows VAT refunds for investment projects with accumulated input VAT of VND 300 million or more. Businesses involved in expansion projects should ensure they understand the new refund procedures to take full advantage of this provision.

Simplification of VAT Refund Procedures: For certain types of businesses, including those producing goods subject to a 5-percent VAT rate, refunds are allowed when input VAT reaches VND 300 million or more over 12 months. However, the new law eliminates VAT refunds for cases involving mergers or changes in ownership.

Action Points for Businesses: Businesses need to adjust their operations and tax strategies to align with the new VAT regulations. Companies that rely on export schemes or foreign transactions should review their practices to ensure compliance and mitigate potential risks. Moreover, with changes in VAT invoicing requirements and refunds, staying informed and consulting with tax experts is essential.

The new VAT law represents a significant shift, and it’s crucial for companies to adapt early to avoid penalties and make the most of the benefits under the new regime.

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