1. What Is Value Added Tax (VAT) in Vietnam?
Value Added Tax (VAT) in Vietnam is an indirect tax levied on the added value of goods and services generated during the process of production, circulation, and consumption. Governed by the Law on Value Added Tax and Circular 219/2013/TT-BTC, VAT applies to commercial goods and services consumed within Vietnamese territory.
Why should you manage VAT?
For foreign-owned enterprises in Vietnam, managing VAT compliance is essential for daily financial stability. Proper VAT administration prevents severe statutory administrative penalties and ensures that eligible input VAT can be fully credited or refunded, protecting working capital.
2. Who Pays VAT in Vietnam?
Because VAT is an indirect consumption tax, the buyers or consumers will pay this tax, while the legal compliance obligation rests on the selling business.
- The Actual Taxpayer (End Consumer): The final purchaser or client who buys products or receives services. The buyer pays the VAT amount stated on the commercial invoice.
- The Tax Collector (Business Entity): The business entity or service provider selling the goods or services. The business collects VAT from buyers and pays the balance to the State Budget through electronic tax filing.
3. How to Calculate VAT in Vietnam
Under Vietnamese tax law, businesses calculate their VAT liability using one of two methods: the Tax Deduction Method or the Direct Method.
Method 1: The Tax Deduction Method (Credit Method)
The deduction method is the standard and most advantageous method for foreign-invested companies. It applies to enterprises maintaining full accounting records, books, and electronic invoices under Vietnamese Accounting Standards (VAS).
Formula: VAT Payable = Output VAT – Deductible Input VAT
In this formula:
Output VAT: The total VAT collected on taxable goods and services sold during the period, as shown on outgoing electronic VAT invoices.
Deductible Input VAT: The total VAT paid on purchases of goods, services, raw materials, and fixed assets used for taxable business operations, supported by valid input invoices.
To illustrate
In January, Company A purchases raw materials for 100,000,000 VND (with an input VAT of 10,000,000 VND at 10%).
In the same month, Company A sells finished goods for 150,000,000 VND (charging output VAT of 15,000,000 VND at 10%).
Net VAT Payable = 15,000,000 VND – 10,000,000 VND = 5,000,000 VND. Company A pays 5,000,000 VND to the State Treasury.
Method 2: The Direct Method on Revenue
The direct method applies primarily to small businesses with annual revenue under 1 billion VND (unless they register voluntarily for the deduction method), foreign contractors lacking full VAS accounting systems, and gold, silver, or gemstone trading enterprises.
Formula: VAT Payable = Revenue x Deemed Value-Added Rate (%)
Statutory deemed percentages by industry:
Goods Distribution: Distribution and supply of goods: 1%
Services & Labor: Services, construction without materials: 5%
Manufacturing & Transport: Manufacturing, transportation, services with supplied materials, and construction with materials: 3%
Other Commercial Activities: Other business lines: 2%
Deduction Method vs. Direct Method
| Feature | Tax Deduction Method (Credit) | Direct Method on Revenue |
|---|---|---|
| Eligibility | Enterprises with full VAS accounting books; mandatory for revenue > 1B VND or registered FIEs. | Enterprises with revenue < 1B VND; household businesses; foreign contractors without full VAS. |
| Formula | Output VAT minus Deductible Input VAT. | Gross Revenue multiplied by statutory percentage (1% to 5%). |
| Invoice Type Used | Electronic VAT Invoices with tax breakdown. | Electronic Sales Invoices without separate tax line. |
| Input Tax Credit | Yes: Fully deducts or refunds input VAT on capital purchases. | No: Input VAT paid on purchases cannot be credited or recovered. |
| Accounting Burden | Requires professional accounting staff and strict invoice compliance. | Simple bookkeeping, but leads to tax pyramiding on high-cost purchases. |
4. What are the VAT Rates in Vietnam?
Vietnam applies three main statutory VAT rates: 0%, 5%, and 10%.
In addition, the National Assembly and Government maintain targeted economic stimulus policies reducing the standard 10% rate to 8% for qualifying sectors till the end of 2026. After December 31st, 2026, the Government will issued new instruction.
| VAT Rate | Applicable Products & Services | Key Conditions & Notes |
|---|---|---|
| 0% | Exported goods and cross-border services, international transportation, and goods delivered into bonded or export processing zones (EPZs). | Requires signed export contracts, customs clearance declarations, and legitimate non-cash payment proofs. |
| 5% | Essential social goods: Clean water, agricultural inputs (seeds, feeds, fertilizers), basic food items, medical equipment, educational aids, and scientific books. | Strictly defined under Circular 219/2013/TT-BTC; applies to essential livelihood sectors. |
| 10% | Standard rate: Manufacturing, consumer electronics, hospitality, digital software services, marketing, legal services, and general commerce. | Default statutory baseline rate for all goods and services not specifically exempt or set at 0% or 5%. |
| 8% (Stimulus Rate) | Temporary economic stimulus reduction applying to most commercial goods and services previously taxed at 10%. | Excludes telecommunications, finance, banking, securities, insurance, real estate, metal products, and mining goods. |
Three Golden Rules for Input VAT Deduction
To claim input VAT deductions under the deduction method, your expenses must satisfy three statutory requirements:
1. Valid Electronic Invoice: Must hold legitimate electronic VAT invoices issued with or without tax authority codes under Decree 123/2020/ND-CP.
2. Direct Operational Purpose: The purchased goods, services, or fixed assets must directly serve the taxable manufacturing or business operations of the company.
3. Non-Cash Payment Voucher (20M VND Rule): For any invoice of 20 million VND or more (including VAT), the transaction must be paid via non-cash corporate bank transfer. Cash payments disqualify both the VAT deduction and the corporate income tax deduction.
5. Step-by-Step Electronic VAT Filing Process
Filing Procedure: All corporate tax declarations in Vietnam occur online through the General Department of Taxation portal (thuedientu.gdt.gov.vn). Follow this 5-step compliance roadmap:
Step 1 – Prepare Return: Your accounting team extracts all sales and purchase data, validates electronic invoices, and generates Form 01/GTGT in standardized XML format via the Tax Declaration Software.
Step 2 – Digital Signature: Connect your company USB Token (digital certificate) to sign the XML file with a legally registered digital signature.
Step 3 – Upload to eTax Portal: Log into the national eTax portal and submit the digitally signed XML return before midnight of the statutory deadline.
Step 4 – Remit Tax Funds: If your return shows positive VAT payable, generate a State Budget Payment Slip on the eTax portal to transfer funds from your corporate bank account.
Step 5 – Archive Acceptance Notices: Within 15 minutes, download the official Submission Notice (Notice 1). Within 1 to 2 business days, download the official Acceptance Notice (Notice 2) confirming valid receipt.
6. VAT Compliance Deadlines and the Mandatory ‘Zero-Filing’ Rule
Companies file VAT returns either monthly or quarterly, depending on their operational revenue in the preceding calendar year.
Monthly Filing: Mandatory for operational companies with prior-year revenue exceeding 50 billion VND. The submission deadline is the 20th day of the following month.
Quarterly Filing: Applies to companies with prior-year revenue of 50 billion VND or below, as well as newly incorporated enterprises during their initial operational year.
The submission deadline is the last day of the first month of the following quarter (April 30 for Q1, July 30 for Q2, October 30 for Q3, and January 30 for Q4).
Tax Payment Deadline: The tax payment deadline matches the tax return filing deadline exactly.
The Mandatory ‘Zero-Filing’ Rule: Even if your company has zero commercial transactions, zero revenue, and zero input purchases during a tax period, you must still submit a ‘zero-return’. If you forgot to submit a zero-return. You must pay a fine between 2,000,000 VND and 25,000,000 VND and causes the tax authority to check you company status.
If a filing deadline falls on a weekend or a national public holiday, the deadline moves to the next business day. However, filing at least 2 to 3 days ahead of the deadline prevents system errors caused by national portal traffic congestion.
7. Four Official Documents That Prove Full VAT Compliance
Foreign headquarters, external auditors, bidding committees, and commercial banks require official proof that your Vietnamese subsidiary is fully tax-compliant before approving legal profit remittances abroad. Maintain these four key documents:
- Electronic Tax Acceptance Notice: Official system notification issued by the tax authority via eTax confirming that your VAT return was processed and accepted without errors.
- State Budget Payment Slip: Electronic payment voucher showing tax funds debited from your corporate account and credited into the State Treasury, carrying the transaction ID and digital signatures of the company, bank, and tax authority.
- Electronic Tax Account Statement (eTax Balance): An official statement extracted from your company’s digital eTax portal profile showing tax liabilities, payments made, and an ending balance of exactly 0 VND.
- Tax Clearance Certificate: The highest legal confirmation document issued under Form 01/DN-XNNV. The tax authority issues this certificate within 7 to 14 business days, formally confirming the company has no outstanding taxes or penalty debts.
8. Mandatory Legal and Technical Tools for VAT Management
Foreign investors establishing a company in Vietnam must configure seven fundamental tools to manage VAT:
- Enterprise Tax Code: The unique 10-digit identification number issued on your Business Registration Certificate (BRC/ERC).
- IRC and BRC/ERC Licenses: Foundational legal licenses defining the company’s legal status and authorized business lines.
- Digital Signature (e-Token): Hardware USB token or cloud digital certificate required for the General Director to sign electronic invoices and tax returns.
- Certified E-Invoice Solution: 100% mandatory software connected to the General Department of Taxation. Paper invoices are completely void.
- eTax Portal Account (thuedientu): National tax administration portal account linked to your corporate bank account for electronic submissions and payments.
- Corporate Bank Account: Commercial bank account registered with the tax authority to execute non-cash supplier payments and tax remittances.
- VAS Accounting Software: Specialized software to track input/output VAT ledgers, calculate tax offsets, and export XML returns formatted for the tax portal.
9. Ensure Flawless VAT Compliance with VNBG
A single invoicing error or unverified cash payment can eliminate 8% to 10% of your input tax deductions and delay your offshore profit repatriation. In addition, missed quarterly declarations lead to immediate regulatory sanctions.
Regulatory Compliance Support: VNBG delivers comprehensive corporate compliance solutions for international businesses in Vietnam. Our certified local accountants manage your electronic invoice verification, monthly and quarterly VAT filings, corporate income tax reconciliations, and tax clearance certifications.
10. Book a Free Meeting with VNBG
Book a Free 30-Minute VAT Compliance Review with VNBG experts today. We will audit your current invoice records, confirm your filing status, and ensure your business operates with zero tax liability risks.
11. Frequently Asked Questions About Vietnam Value Added Tax
Q1: What is the difference between 0% VAT and VAT exemption in Vietnam?
A 0% VAT rate applies mainly to exported goods and services; businesses charging 0% can still claim full input VAT deductions. In contrast, VAT-exempt goods (such as unprocessed agricultural products or certain healthcare services) do not allow the seller to claim input VAT deductions.
Q2: Can my company pay cash for invoices above 20 million VND and still claim VAT deduction?
No. Under Circular 219/2013/TT-BTC, purchases of 20,000,000 VND or more (inclusive of VAT) must be paid via non-cash bank transfer from the buyer’s account to the seller’s account. Cash payments forfeit both the VAT credit and the CIT deduction.
Q3: How long does it take to obtain a Tax Clearance Certificate in Vietnam?
After submitting Form 01/DN-XNNV via the eTax portal, the supervisory tax office processes the request and issues the official Tax Clearance Certificate within 7 to 14 business days, provided all liabilities are cleared.
Q4: What happens if my company submits a VAT declaration late?
Late submission of a tax return incurs administrative fines ranging from 2,000,000 VND up to 25,000,000 VND depending on the number of days delayed. If tax payments are also overdue, the tax authority assesses late payment interest of 0.03% per day on the unpaid amount.
Q5: Can a new foreign-invested company choose quarterly VAT filing?
Yes. Newly established enterprises are permitted to file VAT returns on a quarterly basis during their initial operational phase. After completing a full calendar year of operations, the company evaluates its annual revenue: if revenue exceeds 50 billion VND, it must switch to monthly filing.
