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This mechanism helps avoid double taxation and accurately reflects the nature of business operations. In practice, businesses collect the tax from customers and then declare and remit it to the tax authorities.
Who Is Required to Declare VAT in Vietnam?
VAT declaration obligations depend on several factors, including business activities, revenue levels, tax calculation methods, and applicable taxpayer categories under current regulations.
This includes domestic enterprises, foreign-invested companies, importers, and foreign contractors providing services in Vietnam.
Notably, in recent years, tax authorities have expanded oversight to include cross-border service providers. Even without a physical presence in Vietnam, these entities are required to register and pay taxes through a dedicated online portal for foreign suppliers.
VAT Rates in 2026: How Do They Apply?
As of 2026, Vietnam continues to apply multiple VAT rates depending on the type of goods or services and regulatory objectives:
| VAT Type | Rate (%) | Applicable Goods and Services | Purpose / Notes |
| Standard VAT | 10% | Majority of goods and services are not eligible for VAT reduction: telecommunications, finance, banking, securities, insurance, real estate, metal products, etc. | The standard rate applied to sectors excluded from the VAT reduction policy. |
| Temporary Reduced VAT | 8% | Applies to eligible goods and services previously subject to 10%, excluding the sectors listed in Decree 174/2025/NĐ-CP, such as banking, insurance, securities, real estate business, telecom, IT services, mining, refined metals, petroleum, excisable goods, etc. | Valid from 1 July 2025 – 31 December 2026 under Decree 174/2025/NĐ-CP to support economic recovery. |
| Reduced VAT | 5% | Essential goods and services: clean water for household use, unprocessed agricultural products, medical equipment, educational books, scientific services, social housing. | To reduce tax burden on essential sectors and vulnerable groups. |
| Zero VAT | 0% | Exported goods and services, international transportation (air and sea freight) | Encourages exports and international transactions |
Transactions Not Subject to VAT
Not all transactions fall within the scope of VAT. Certain sectors are classified as non-taxable, primarily for social welfare or regulatory reasons.
Common examples include financial services (e.g., lending and interest income), life insurance, healthcare, education, and land use rights transfers. Some public utility services, such as environmental sanitation and drainage, as well as qualified investment project transfers, are also excluded.
A common point of confusion is that non-taxable transactions do not allow input VAT credit, unlike transactions subject to the 0% VAT rate.
VAT Filing and Compliance: What Should Businesses Watch For?
Once a tax code is issued, businesses must file VAT returns on a monthly or quarterly basis, depending on their circumstances. The filing period is generally determined by the previous year’s revenue, operational status, and applicable tax regulations.
- Monthly filing deadline: the 20th day of the following month
- Quarterly filing deadline: the last day of the first month of the following quarter
Electronic invoicing is now mandatory across Vietnam. Given the technical and regulatory complexity involved, businesses are encouraged to consult detailed guidance to ensure proper implementation from the outset.
VAT Calculation Principles in Business Operations
The most commonly used method is the credit method, which allows businesses to offset output VAT against input VAT.
The key principle is straightforward: only expenses supported by valid invoices, related to business activities, and meeting payment requirements are eligible for input VAT credit. Any gaps in these conditions may result in higher tax liabilities than expected.
VAT Refunds: When Can Businesses Claim Them?
Businesses may apply for VAT refunds when input VAT exceeds output VAT, which often occurs in export-oriented companies or during the early stages of investment.
In certain cases involving uncredited input VAT, businesses must meet specific thresholds and documentation requirements under current regulations. The VND 300 million threshold is commonly applied in some scenarios. Processing timelines depend on whether the application is subject to pre-refund audit or post-refund inspection.
A timely and accurate VAT refund can significantly improve cash flow, especially during periods of expansion.
Common Risks and How to Mitigate Them
In practice, many businesses face tax reassessments or penalties due to seemingly minor errors—such as applying incorrect VAT rates, using invalid invoices, underreporting revenue, or missing filing deadlines.
Beyond financial costs, tax non-compliance can also affect audits, fundraising, and business expansion plans.
To mitigate these risks, businesses should conduct regular tax reviews, reconcile accounting, invoicing, and banking records, and stay updated on the latest regulatory changes.
Conclusion
VAT in Vietnam in 2026 is no longer just about timely filing—it plays a strategic role in cost management, cash flow optimization, and regulatory compliance.
Accurately determining applicable VAT rates, managing input invoices, and keeping up with regulatory updates can significantly reduce the risk of future tax exposure.
With experience supporting local businesses, foreign investors, and cross-border operations, Green NRJ provides practical tax, accounting, and compliance solutions to help businesses operate safely and grow sustainably in Vietnam.
