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The National Assembly has recently approved a new Law on Value Added Tax and an amendment to the Law on Tax Administration, both of which are set to take effect in 2025. These changes aim to enhance compliance, clarify tax obligations, and align with evolving market practices. Below are the key highlights that businesses and investors should note:
New Law on Value Added Tax:
1. Taxpayer Regulations
The new law adds VAT responsibilities for digital commerce and platform-based businesses:
Foreign Suppliers: Non-resident foreign suppliers conducting e-commerce or platform-based business with Vietnamese entities must now fulfill tax obligations through tax deduction and remittance mechanisms.
E-Commerce Platform Operators: Entities managing e-commerce platforms or digital payment systems must deduct and remit taxes on behalf of foreign suppliers and individual vendors operating on their platforms.
2. Exemptions from VAT
Several notable changes in VAT exemptions include:
Removal of tax exemptions for enterprises purchasing unprocessed agricultural or aquatic products from cooperatives for resale.
Raising the annual revenue threshold for VAT exemptions for individuals and households from VND 100 million to VND 200 million.
Inclusion of specific imported goods in exemption categories, such as financial leases to free-trade zones, disaster relief goods, and national cultural artifacts.
Additionally, certain goods and services, such as securities trading, derivatives, and defense products, now have clarified tax-exempt statuses to ensure consistency with specialized laws.
3. Tax Base Adjustments
The amendments refine how taxable prices are determined for specific transactions:
Amended regulations on determining the taxable value for imported goods to ensure consistency with the laws on export and import taxes.
Real estate businesses can now deduct land costs from taxable amounts.
Distinct tax bases are introduced for specialized sectors, including electricity production by the Vietnam Electricity Group, transportation and loading/unloading services, travel services under the tour model, pawn services, and books subject to VAT sold at the published retail price) in accordance with Government regulations to align with current practices.
4. Tax Rate Modifications
Key changes in tax rates include:
0% VAT: Extended to exported digital content services and directly exported goods consumed outside Vietnam.
5% VAT: Applied to specific items such as fertilizers, certain agricultural equipment, and traditional performing arts.
Clear guidelines now govern cases where businesses sell multiple products or services with varying VAT rates, ensuring uniform application.
5. Input VAT Deductions
Adjustments to input VAT deductions include:
Revised rules for correcting errors in input VAT declarations and deductions to avoid implementation issues.
Allowed non-deductible input VAT to be included in CIT expenses or fixed asset values as per CIT laws.
Expanded input VAT deductions to cover employee welfare assets, capital contributions, delegated purchases, passenger cars with up to 9 seats, and vertically integrated facilities.
Mandated non-cash payment proof for input VAT deductions, with exceptions for specific cases.
Required additional documents (e.g., packing lists, bills of lading) for input VAT deductions on exported goods to prevent fraud.
Supplement some documents such as packing slips, bills of lading, cargo insurance documents to the conditions for deducting input VAT for exported goods and services to avoid fraud in tax deductions and refunds.
6. VAT Refunds
Changes to VAT refund provisions are designed to prevent fraud and improve transparency:
Added rules for VAT refunds on goods and services taxed at 5%, ensuring practical application and clarity.
Specified that imported goods re-exported to other countries are not eligible for VAT refunds.
Clarified VAT refund rules for investment projects, export goods and services, and excluded refunds for conditional investment projects lacking or failing to maintain required conditions.
Introduced conditions and responsibilities for taxpayers and tax authorities regarding VAT refunds to ensure feasibility.
7. Additional Provisions
Two new articles address the timing of VAT obligations and explicitly prohibit fraudulent practices in VAT deduction and refunds, reinforcing transparency and legal compliance.
Amendments of Law on Tax Administration:
1. Tax Obligations for Foreign E-commerce and Digital Platform Providers
Foreign suppliers conducting e-commerce or digital platform-based businesses in Vietnam must now either directly register, declare, and pay taxes or authorize a tax agency to fulfill these tax obligations. This regulation will then be instructed and detailed by a Circular promulgated by the Minister of Finance.
2. Tax Responsibilities for Businesses on Digital Platforms
For business activities conducted by households or individuals on e-commerce platforms:
Organizations managing e-commerce platforms or digital payment platforms (both local and foreign) are required to deduct, declare, and pay taxes on behalf of these entities. They must also report the deducted tax amounts.
If the business households or individuals are not covered by the deduction mechanism, they must directly register, declare, and pay taxes.
The Government will provide detailed regulations on the responsibilities of e-commerce platform managers and other digital economic organizations regarding tax deduction and declaration, as well as procedures for tax registration, declaration, payment, and refund.
3. Adjustments to Late Payment Penalties
The calculation of late payment penalties has been clarified to be counted continuously from the day following the due date, extended deadline, or stipulated date in tax notices, administrative decisions, or enforcement orders until the day before the overdue amount is remitted to the state budget.
4. Exit Restrictions for Unsettled Tax Obligations
Individuals involved in business activities, including business owners, legal representatives of enterprises, cooperatives, and unions of cooperatives, are subject to exit restrictions if they fail to fulfill their tax obligations. This includes unpaid taxes exceeding thresholds specified by the Government. Exit restrictions also apply to:
Vietnamese individuals emigrating permanently abroad.
Vietnamese expatriates and foreign nationals leaving Vietnam.
Tax authorities will notify the concerned parties in advance regarding the application of these restrictions in accordance with immigration laws.
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