Vietnam’s Value Added Tax (VAT) Changes in 2025: A Comprehensive Overview
Vietnam’s Value Added Tax (VAT) system is set for significant revisions in 2025, highlighted by legislative updates in Law No. 48/2024/QH15, Decree No. 181/2025/ND-CP, and Circular No. 69/2025/TT-BTC. With VAT rates being applied at 0%, 5%, and 10%, understanding these changes is vital for business owners and investors aiming for compliance and strategic positioning in the Vietnamese market.
Revised VAT Rates and Applicability
While the structure of Vietnam’s VAT remains at three primary rates—0%, 5%, and 10%—the eligibility criteria for each rate have been significantly refined.
0 Percent Rate
Effective from July 1, 2025, the following categories will qualify for a 0% VAT rate:
- Exported Goods: Goods sold from Vietnam to international customers, goods consumed in non-tariff zones, and sales at duty-free shops.
- Exported Services: Services provided to overseas entities and consumed outside Vietnam.
- Other Exported Items: This includes international transport services, digital products, and specific construction activities abroad.
For example, international transportation and services aimed at foreign organizations will benefit from the 0% VAT rate, making Vietnamese offerings more competitive globally.
5 Percent Rate
The 5% VAT category expands into specific areas, offering clarity for compliance. This rate will apply to products that directly contribute to agricultural and rural development as outlined in Decree No. 181. Key categories include:
- Fertilizers and Pesticides: Essential for agricultural productivity.
- Agricultural Services: Such as the cultivation and preservation of agricultural products.
- Medical Equipment and Supplies: Affordable healthcare solutions with a focus on essential medicines.
This nuanced approach encourages the growth of critical sectors, supporting both producers and consumers in the Vietnamese economy.
10 Percent Rate with Temporary Reduction
For goods and services not falling under the 0% or 5% thresholds, a 10% VAT rate applies. However, a temporary reduction to 8% will be in place until December 31, 2026, as a part of the government’s efforts to revive the economy post-pandemic. This reduction will uniformly affect goods across all stages of production, except for certain sectors like telecommunications, financial services, and those subject to special consumption tax.
Moreover, foreign services provided through e-commerce in Vietnam will also face a 10% VAT from mid-2025, indicating the government’s intent to regulate online market activities effectively.
VAT-Exempt Goods and Services
Certain goods and services are explicitly exempt from VAT under Decree 181/2025. This exemption aims to alleviate financial burdens on essential sectors and includes:
- Agricultural Products: To promote local farmers and the agricultural sector.
- Public Transport: Ensuring affordable travel options for citizens.
- Educational Services: Keeping education accessible and affordable.
These exemptions align with Vietnam’s socio-economic goals, fostering growth in critical areas while maintaining support for vulnerable segments of the population.
Implications for Businesses
The revamped VAT system in Vietnam presents both opportunities and challenges for businesses. As the government emphasizes compliance and clarity, companies must enhance their understanding of these new regulations to strategize effectively.
For foreign investors, these changes could impact operational decisions, accounting practices, and cost structures. Local businesses will need to adapt their pricing models and sales strategies to remain competitive while adhering to the new tax architecture.
Key Takeaway
With these new VAT regulations set to take effect in 2025, businesses must stay well-informed and prepared to navigate the complexities of the updated tax landscape. Adopting a proactive approach will not only ensure compliance but also help seize potential opportunities presented by these legislative changes.
For further support and guidance in adapting to these regulatory changes, businesses can refer to specialized consultancy services that cater to navigating Vietnam’s evolving market landscape effectively.