Value-Added Tax (VAT) in Vietnam is an indirect consumption tax applied at each stage of the supply chain from manufacturing and distribution to the final sale taxing the “value added” at every point of production and distribution. VAT generally applies to most goods and services used for production, business, and consumption in Vietnam.
VAT is levied on a variety of activities, including domestic supply of goods and services by local businesses, importation of goods at customs clearance, and certain export-related services that may be zero-rated or taxed depending on conditions. It also applies to construction, leasing, and logistics services, including those provided by foreign contractors or cross-border entities.
Entities required to register for VAT under Vietnamese law include domestic enterprises engaged in manufacturing, trading, or service provision; importers of goods; foreign-invested enterprises (FIEs) operating in Vietnam; foreign contractors providing goods or services under contracts with Vietnamese entities (subject to VAT or the Foreign Contractor Tax regime); and e-commerce or digital service providers without a permanent establishment in Vietnam, who must register and pay VAT via the Foreign Supplier Portal.
VAT Rates in Vietnam (2025)
As of 2025, Vietnam’s Value-Added Tax (VAT) system includes three main VAT rates: 10%, 8%, 5%, and 0%, depending on the nature of the goods or services. Understanding these rates is essential for businesses to comply with Vietnamese tax regulations and apply the correct rate in invoices and VAT declarations.
| 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), offshore outsourcing services. | Encourages exports and international transactions; requires proper documentation. |
VAT-Exempt Goods and Services in Vietnam (2025)
Besides the standard VAT rates, certain goods and services in Vietnam are fully exempt from VAT. This means these transactions are not subject to VAT, and businesses cannot claim input VAT credits for related expenses. Common VAT-exempt sectors include financial and banking services such as loans and interest income, public postal and telecommunications services, education and vocational training, public healthcare, life insurance policies, and the transfer of land use rights. Other exempt activities include veterinary services, public utility services like drainage, sanitation, and waste collection, the sale of state-owned assets, and the transfer of investment projects that meet specific exemption conditions.
Note: Even if a transaction is VAT-exempt, businesses may still need to file VAT declarations periodically to comply with Vietnamese tax regulations.
How to Register for Value-Added Tax (VAT)
Registering for VAT is a legal requirement for both local and foreign-invested businesses in Vietnam. The process begins with establishing your company and obtaining an Enterprise Registration Certificate (ERC) from the Business Registration Office under the Department of Finance. Along with the ERC, your company will receive a Tax Identification Number (TIN), which is necessary for all tax filings, including VAT. Once your company is registered, VAT registration must be completed within 10 working days, either through the General Department of Taxation’s eTax system or via a certified accounting or tax service provider.
From 2025, electronic invoicing (e-invoice) is mandatory. Companies must register and issue e-invoices through either the national e-invoice portal or an authorized service provider. Each e-invoice must include the applicable VAT rate (0%, 5%, or 10%), buyer and seller details, a digital signature, and timestamps as required by law. Ensuring your e-invoice system is fully integrated and approved by the General Department of Taxation is essential to avoid penalties.
Businesses must also determine their VAT filing frequency based on annual revenue. Companies with revenue above VND 50 billion (approximately USD 2 million) are required to file monthly, with declarations and payments due by the 20th of the following month. Those with lower revenue can file quarterly, with deadlines on the 30th of the month following each quarter. The tax authority will confirm your filing cycle based on your previous year’s revenue or your first year’s projected income.
Calculating Value-Added Tax (VAT)
The Vietnamese VAT system is credit-based, which means businesses can offset the VAT they collect from sales, known as output VAT, against the VAT they pay on purchases, known as input VAT.
The basic formula is simple:
VAT Payable = Output VAT – Input VAT
Output VAT is the tax your business collects when selling taxable goods or services. It is calculated by multiplying the selling price by the applicable VAT rate, which can be 10%, 5%, or 0%. Input VAT is the VAT paid on goods or services purchased for business use and can be credited as long as proper invoices and documentation are available.
For example, if your company generates VND 200 million in sales in a month with a 10% VAT rate, the output VAT would be VND 20 million. If your business purchased VND 80 million worth of goods and services for operations, the input VAT would be VND 8 million. Therefore, the VAT payable to the tax authority for that period would be VND 20 million minus VND 8 million, resulting in VND 12 million.
Common VAT Filing Errors and Solutions
Proper VAT declaration is essential to avoid penalties and audits. Many businesses encounter similar mistakes, but they can be easily prevented with the right practices.
One frequent issue is using incorrect or invalid e-invoices, often caused by unregistered platforms or wrong invoice formats. To avoid this, always use e-invoicing software approved by the General Department of Taxation (GDT) or authorized providers licensed by the Ministry of Finance.
Another common problem is neglecting to record input VAT. Missing or disorganized invoices can lead to lost VAT credits. Businesses should ensure all input VAT invoices and receipts are properly recorded and valid, including correct buyer and seller information and digital signatures.
Applying the wrong VAT rate is also a frequent error, typically due to misclassifying goods or services. Consulting a tax advisor or cross-checking with GDT guidance can help confirm whether the correct rate is 10%, 5%, or 0%.
Finally, missing VAT declaration deadlines can result in penalties and interest charges. To stay on track, businesses can use automated accounting software, tax compliance platforms, or simple calendar reminders.
Pro Tips for Businesses: Reconcile your VAT ledger monthly, conduct periodic internal audits, and stay updated with the latest regulations, including Circulars, Decrees, and announcements from the tax authority.
Claiming VAT Refunds in Vietnam
In Vietnam, businesses may be eligible for a VAT refund when their input VAT exceeds their output VAT. This situation often arises in export activities or large capital investment projects. The Vietnamese government provides VAT refunds to ease cash flow pressures and support business growth.
Businesses can claim a VAT refund under several conditions. Export-oriented companies frequently pay high input VAT on purchases such as raw materials while charging 0% VAT on exports, creating a refundable VAT credit. Companies in the setup phase or undertaking large-scale expansion may also accumulate substantial input VAT before generating revenue, making them eligible for refunds to reduce financial burden. Additionally, enterprises investing in infrastructure, factories, or machinery with long investment cycles can claim refunds on input VAT incurred before operations begin.
To qualify, the minimum refund value is VND 300 million. Once a complete and valid refund dossier is submitted, processing typically takes about 20 to 40 working days.
Penalties for Non-Compliance
Failure to comply with VAT regulations in Vietnam can lead to monetary penalties, delayed refunds, or even tax audits. Below is a summary of common violations and their associated penalties:
| Violation | Penalty |
|---|---|
| Late VAT filing or declaration | VND 2 – 25 million |
| Filing incorrect VAT returns | Up to 20% of the understated or underpaid VAT amount |
| Failure to issue valid e-invoices | Heavy administrative fines and potential audit/investigation |
| Using unlicensed e-invoicing platforms | May result in rejection of input VAT and legal penalties |
Best Practices for Managing Value-Added Tax (VAT)
To ensure VAT compliance and minimize tax risks, businesses should adopt effective VAT management strategies. Maintaining accurate and real-time accounting records is essential, ideally using digital systems integrated with Vietnam’s tax portal to track transactions and issue valid e-invoices.
Setting up internal reminders for filing deadlines can help avoid late submissions, whether for monthly or quarterly VAT returns. Conducting monthly VAT reconciliations is equally important, matching input VAT invoices with purchases and output VAT with sales to catch discrepancies before submission.
For companies engaging foreign service providers, it is crucial to understand and coordinate with Foreign Contractor Tax (FCT) obligations, including withholding and declaring VAT when required. Finally, for complex issues such as VAT refunds, exemptions, cross-border services, or audits, consulting licensed tax advisors or accounting firms can provide valuable guidance and reduce the risk of non-compliance.
Final Thoughts
Understanding and complying with VAT in Vietnam is essential for business success and legal compliance. Timely registration, accurate VAT calculation, meeting filing deadlines, and maintaining complete records help businesses avoid penalties and claim refunds efficiently.
For reliable support with VAT in Vietnam, Green NRJ provides expert guidance on registration, reporting, refunds, and long-term compliance. Contact us today to ensure your business stays fully compliant and optimized.
