NEW POINTS IN THE 2024 VALUE ADDED TAX LAW

by Admin

25/03/2025

Documentation & Knowledge

NEW POINTS IN THE 2024 VALUE ADDED TAX LAW

Article by Legal Specialist at Dai Ha Thanh Law Firm - Huynh Bao Minh Duyen - Currently majoring in Law at Ho Chi Minh City University of Law.

 

In the current era of global integration, most countries in the world share the same goal, which is how to achieve rapid national development and outpace others and Vietnam is no exception. For this reason, our Government constantly updates legal provisions and issuing policies to facilitate the advancement of the national economy in the international marketplace. Value Added Tax plays a crucial role in establishing a stable source of income for the national budget. Simultaneously, providing favorable circumstances for boosting the export process and competing in the international market. However, some regulations in the 2008 Value Added Tax Law have outdated modern production and business activities and no longer guarantee the rights for individuals and organizations. As a result, the 2024 Value Added Tax Law which comes into force on July 1st, 2025 is promulgated with several updated regulations to adapt to the current economic circumstances in particular and contribute to the overall improvement of the Vietnamese legal system in general. In order to help individuals and businesses understand the latest updates about Value Added Tax (VAT), through this article Dai Ha Thanh Law Firm will present and analyze some new points in the 2024 Value Added Tax Law.

 

1. Value Added Tax (VAT) Definitions

Value Added Tax (VAT), according to legal provisions, is defined as an indirect tax, which is collected indirectly on the added value of goods and services generated throughout the stages of production, distribution and consumption. Simultaneously, from some opinions that Value Added Tax is the tax levied on the added value of goods and services, it can also be understood that the premise "giving birth" to value added tax includes all activities that increase the value of goods and services. 

At the present, Value Added Tax assumes an important role in the national market and is also a major influence on some aspects including investment promotion, export growth and fostering business economic integration. It functions as a support instrument for the government in controlling production, importing, business activities through the invoice and document system, while also limiting tax evasion. Beside that, Value Added Tax is still levied on imported goods to create equality with domestically produced goods and is levied on exported goods at a 0% tax rate to encourage export activities. Through the collection of Value Added Tax, the Government can both control the production, business activities of individuals, organizations and effectively promote the import, export of goods in the international market.

 

2. New points in the 2024 Value Added Tax Law

2.1. About Taxpayers

Taxpayers according to Clause 4, Article 4 of the 2024 Value Added Tax Law has been expanded to encompass certain subjects within the realms of trade and electronic commerce, as follows:

  1. Foreign suppliers without a permanent establishment in Vietnam conducting business activities about e-commerce and based on digital platforms with Vietnamese organizations and individuals;
  2. Foreign digital platform managing organizations make deductions and pay tax obligations on behalf of the foreign suppliers.
  3. Business organizations in Vietnam which are applying the VAT calculation method (tax deduction method) purchase services from foreign suppliers without a permanent establishment in Vietnam are making deductions and paying tax obligations on behalf of the foreign suppliers.

Furthermore, organizations that manage e-commerce and digital platforms with payment functions, who withhold, pay taxes on behalf of and declare the withheld tax amounts for business households and individual businesses on e-commerce, digital platforms, are also taxpayers as specified in Clause 5, Article 4 of the 2024 Value Added Tax Law. Specifically, these include managers of e-commerce platforms, organizations managing digital platforms with payment functions domestically or abroad and organizations with other digital economic activities as stipulated in Clause 2, Article 2 of the Draft Decree detailing the implementation of several articles of the Value Added Tax Law.

The addition of entities in the e-commerce and digital sectors to the list of Value Added Taxpayers is absolutely necessary. Especially in the current era of Industry 4.0, where all commercial activities and transactions can be conducted electronically, such as digital platforms with payment functions being widely used from large restaurants to small street vendors, and from international trade transactions to peer-to-peer money transfers. Therefore, applying Value Added Tax to this sector can help the State manage and control cash flow more effectively, while also ensuring the rights of all parties involved in transactions, between digital platform managers and customers, and between sellers/product providers and buyers of goods and services.

2.2. About Non-taxable entities

Article 5 of the 2024 Value Added Tax Law has removed several subjects, as follows:

  • Enterprises and cooperatives that purchase unprocessed cultivation, livestock, aquaculture, fishing products or have undergone only basic preliminary processing and sell them to other enterprises or cooperatives, are not required to declare or pay Value Added Tax but are entitled to input Value Added Tax deduction;
  • Fertilizers; specialized machinery and equipment for agricultural production; offshore fishing vessels;
  • Securities depository; market organization services of securities exchanges or securities trading centers;
  • Public postal, telecommunications and Internet services are popularized under the Government's program;
  • Services for maintaining zoos, flower gardens, parks, street greenery, and public lighting.

Several entities have been removed as they are no longer suitable for the current socio-economic situation, such as Internet services are popularized under the Government's program. In the 2008 Value Added Tax Law, the internet was still a novel entity not widely accessible, exempting it from taxation would attract users and support nationwide network expansion. Today, the internet is ubiquitous, used constantly and frequently, making its removal from taxable entities entirely appropriate. As an entity that generates substantial financial resources for the country's budget, it contributes to economic development.

Additionally, Article 5 also specifies some several other non-taxable entities, such as:

  • Insurance for foreign-flagged oil, gas facilities, equipment, oil tankers leased by oil and gas contractors or foreign subcontractors for operations in Vietnam's territorial waters, or in overlapping sea areas where Vietnam and adjacent or opposite coastal states have agreed to joint exploitation (Clause 8, Article 5);
  • Fees specifically stated in the loan agreement between the Government of Vietnam and Foreign lenders (Point a, Clause 9, Article 5);
  • Debt sales, including sales of payables and receivables (Point d, Clause 9, Article 5);
  • Sales of collateral securing debts of organizations with 100% government-owned charter capital established by the Government with the function of buying and selling debts to handle non-performing loans of Vietnamese credit institutions (Point h, Clause 9, Article 5);
  • Family planning services, health care nursing services, rehabilitation services for patients; patient transportation, hospital room rental services, hospital bed rentals of medical facilities; medical and nutritional care services and the organization of cultural, sports, entertainment, physical therapy, and rehabilitation activities for the elderly and disabled; revenue from medical treatments included in the medical service package as prescribed by the Ministry of Health (Point a, Clause 10, Article 5);
  • Humanitarian aid capital (accounting for 50% or more of the total capital used for the project) for historical and cultural relics, scenic spots, cultural, artistic works, public service works, infrastructure and housing for social policy beneficiaries (Clause 12, Article 5);
  • Books serving foreign information services (Clause 15, Article 5);
  • Passenger transportation by electric train, inland waterway vehicles (Clause 16, Article 5);
  • Helicopters, gliders that cannot be produced domestically need to be imported to form fixed assets of enterprises or leased from foreign countries for use in production, business, or leasing purposes (Clause 17, Article 5);
  • Goods imported from abroad by financial leasing companies are transported directly into non-tariff zones for financial leasing to businesses in those zones (Clause 20, Article 5);
  • Goods imported as donations or sponsorships for disaster, natural disaster, epidemic, war prevention and relief as prescribed by the Government (Point d, Clause 26, Article 5);
  • Artifacts, antiques and national treasures as defined by the Law on cultural heritage that were imported by competent government agencies (Point e, Clause 26, Article 5).

Moreover, the maximum annual revenue for households, individuals producing and trading goods, services has been increased to 200 million VND, compared to the previous regulation of 100 million VND or less according to Clause 25, Article 5 of the 2024 Value Added Tax Law. These adjustments demonstrate the Government's efforts to adapt to the current socio-economic situation. The provision that public passenger transport by electric train is a non-taxable entity due to the official operation of two lines in Hanoi and Ho Chi Minh City, encourages people to use this transport as the main method to travel to reduce significant amounts of dust and smoke, especially during peak hours and also save costs. Similarly, the provision that non-taxable entities include goods imported as donations or sponsorships for disaster, natural disaster, epidemic, war prevention and relief is a truly necessary preparation for the future. Part of the reason is also due to the Covid pandemic, a period when medical masks and medicine became increasingly scarce because domestic consumption continued to rise while 'opening up' had to be limited to prevent a rise in infection rates. At this time, receiving support and aid goods from other countries was a precious morale boost. However, at that point, imported goods for support and sponsorship in these cases were not yet classified as non-taxable entities, which impeded the work of Covid prevention and control.

2.3. About the Taxable price

Taxable price is defined in Article 7 of the 2024 Value Added Tax Law. According to Point b, Clause 1 of this Article, the taxable price of imported goods has been more clearly specified. Specifically, it is equal to the Import taxable value plus Import tax and then plus any Additional import taxes as prescribed by law (if any), Special consumption tax (if any) and Environmental protection tax (if any). Meanwhile, the Import taxable value as defined by the Law on Export and Import Tax is the “customs valuation according to the Customs Law”, meaning the actual price paid up to the initial port of entry.

Furthermore, according to the regulations on the taxable price for real estate business activities based on Point h, Clause 1 of this Article, the taxable price is the selling price of the real estate minus the land use fees or land lease fees paid to the Government budget (deductible land price) and excluding Value Added Tax. The Government must also provide specific regulations on determining the deductible land price to align with land law regulations and the taxable price for specific production, business activities such as electricity production by Vietnam Electricity Group, transportation, loading/unloading… as listed in Point m, Clause 1 of this Article.

2.4. About the Tax rate

The Tax rates under the 2024 Value Added Tax Law are stipulated in Article 9, with clearer regulations aimed at adjusting certain types of goods and services to correspond with the new tax rates. Specifically, Point a, Clause 1 of this Article lists the goods considered export goods subject to a 0% tax rate, including: "goods from Vietnam sold to organizations, individuals abroad and consumed outside of Vietnam; goods from mainland Vietnam sold to organizations in non-tariff zones and consumed within non-tariff zones directly serving export production activities; goods sold in isolation areas to individuals (foreigners or Vietnamese) who have completed departure procedures; goods sold in duty-free shops". Other exported goods and services are also subject to a 0% tax rate according to Point c, Clause 1 of this Article, such as international transportation or vehicle rental services used outside the territory of Vietnam… Simultaneously, it also specifies several new cases where the 0% tax rate does not apply, including: derivative products; imported tobacco, alcohol, beer imported then exported; gasoline and oil purchased domestically and sold to businesses in non-tariff zones; cars sold to organizations and individuals in non-tariff zones as stipulated in Point d, Clause 1 of this Article.

Several new goods and services are subject to a 5% tax rate according to Clause 2 of this Article, including fertilizers (Point a); offshore fishing vessels; specialized machinery and equipment for agricultural production as prescribed by the Government (Point g) and traditional and folk performing arts (Point k).

Moreover, Article 9 of the 2024 Value Added Tax Law also provides additional regulations for applying tax rates in specific special cases. Clause 4 stipulates that if a business establishment conducts transactions involving various goods and services with different Value Added Tax rates (including those not subject to Value Added Tax), it must declare taxes according to the prescribed tax rates for each type of goods and service. In cases where it is not possible to determine the tax rate for each item, tax must be calculated and paid at the highest tax rate applicable to the goods and services produced or traded by the business establishment. Beside that, for unprocessed cultivation, forestry, livestock, aquaculture and fishing products or those that have undergone only basic preliminary processing, which are used as animal feed or medicinal materials, the tax rate shall be applied according to the regulations for cultivation, forestry, livestock and aquaculture products; recovered by-products, scraps and waste materials for recycle, reuse, when sold shall be subject to the tax rate applicable to the sold by-products, scraps, and waste materials as stated in Clause 5 of this Article.

2.5. About the Deduction of input Value Added Tax

The Deduction of input Value Added Tax is regulated in Article 14 of the 2024 Value Added Tax Law with some modifications, such as:

Firstly, it provides more specific regulations on the resolution when a business establishment discovers errors, omissions in the input Value Added Tax when declaring and deducting, based on Point đ, Clause 1 of this Article:

  • Taxpayers must submit an additional declaration for the month or quarter in which the input tax error or omission originated; pay the full amount of additional tax payable or have the corresponding refunded tax amount recovered, and pay late payment interest (if any) to the Government budget, when the erroneous input Value Added Tax declaration for that month or quarter leads to an increase in tax payable or a decrease in tax refund;
  • Taxpayers are allowed to carry forward the tax deduction to the subsequent month or quarter if the erroneous tax declaration in the month or quarter reduces the tax payable or only increases or decreases the Value Added Tax.

Secondly, business establishments are allowed to include the non-deductible input Value Added Tax in the costs for corporate income tax calculation or in the original cost of fixed assets excluding the Value Added Tax of purchased goods, services without non-cash payment documents as prescribed by the Government, based on Point e, Clause 1 of this Article.

Thirdly, the Government will make clear provisions regarding input tax deductions for goods and services that create fixed assets intended for employee use. In cases of capital contribution with assets, goods, or services purchased under the form of authorization to other organizations, individuals where the invoice lists the authorized party; fixed assets such as passenger vehicles with up to 9 seats; production and business entities that maintain closed production and centralized accounting as outlined in Point g, Clause 1 of this Article.

Fourthly, regarding the conditions for input Value Added Tax deduction, non-cash payment documents are required for purchased goods and services, except for certain special cases as stipulated by the Government according to Point b, Clause 2 of this Article. Beside that, export goods and services as per Point c, Clause 2 of this Article are required to ensure the presence of a packing slip, waybill, and goods insurance documentation (if any) to deter fraudulent practices in Value Added Tax deduction and refund. Furthermore, the Government will specify more detailed conditions for the export of goods through foreign e-commerce platforms and other particular cases.

2.6. About the Refund of Value Added Tax

The refund of Value Added Tax as stipulated by Article 15 of the 2024 Value Added Tax Law, have been supplemented and specified in more detail in the following points:

According to Point a, Clause 1 of this Article, tax refunds will not apply to cases where imported goods are subsequently exported to another country. While the previous regulations did not apply tax refunds to imported goods for export, exported goods not exported at customs operation areas according to the Customs Law. Clause 3 of this Article defines the condition that business operating only in goods and services that are taxed 5% Value Added Tax rate if the remaining input tax amount not yet deducted is 300 million VND or more after 12 consecutive months or 4 consecutive quarters. In cases where multiple tax rates apply, tax refunds are granted according to the allocation ratio prescribed by the Government. Moreover, it also sets out the conditions that businesses must fulfill to apply for Value Added Tax refunds as per Clause 9 of this Article, the responsibilities of taxpayers entitled to Value Added Tax refunds and the duties of tax authorities as outlined in Clause 10 of this Article.

Additionally, Article 15 further specifies the tax refund provisions for exported goods and services as outlined in Point b, Clause 1, the tax refund for investment projects as detailed in Clause 2 and the circumstance where business establishments are not entitled to Value Added Tax refunds but may transfer the undeducted tax from investment projects to the subsequent period when engaging in conditional investment business sectors without meeting the regulatory business requirements of investment law or failing to uphold necessary business conditions throughout their operations, as described in Point b1, Clause 2.

 

 

The above information is a comprehensive update on the new points of the 2024 Value Added Tax Law, which will take effect on July 1st, 2025. Dai Ha Thanh Law Firm, with a team of professionally trained Lawyers and Legal Advisors both domestically and internationally, is committed to providing professional legal services to our valued clients. If you require detailed consultation, please contact us to receive professional and effective legal advisory services.

 

REFERENCES

A.  LIST OF LEGAL DOCUMENTS

  1. The 2024 Value Added Tax Law;
  2. The 2016 Export tax, Import tax Law;
  3. The 2024 Credit Institutions Law;
  4. Circular 39/2015/TT-BTC on Customs Valuation of Exported and Imported Goods (amended and supplemented by Circular 60/2019/TT-BTC);
  5. Draft Decree on Tax management for business activities on e-commerce platforms and digital platforms of business households and individual businesses.

 

B.  LIST OF REFERENCES IN VIETNAMESE

  1. Tran Dinh Hao and Nguyen Thi Thuong Huyen, Value Added Tax Law. Theoretical and Practical Issues, published by Finance, 2003, p.52;
  2. Ho Chi Minh City University of Law, Tax Law Textbook, published by Hong Duc - Vietnam Lawyers Association, 2012, p.196-197.