There are a number of taxes that foreign business owners in Vietnam should be aware of.
One of these taxes is Vietnam’s value-added tax which is particularly important for foreign retail businesses.
With this in mind, this article runs through what this tax is, what it applies to, and the key elements that apply to foreign business persons.
What is the Value Added Tax in Vietnam?
Vietnam’s Value Added Tax or VAT is an indirect tax applied to most goods at the point of purchase in Vietnam.
It is outlined in the Law on Value Added Tax which was first passed in 2008 but has been subsequently amended several times.
This information is pulled from the aforementioned law and Circular 219 that was issued at the end of 2013.
Who needs to pay VAT?
All businesses that engage in the production or trading of goods and services in Vietnam must pay VAT. This includes both domestic and foreign-invested enterprises. Foreign firms importing goods into Vietnam are generally subject to VAT at the time of import, and local retail businesses must collect VAT at the point of sale.
What is the VAT rate in Vietnam?
Vietnam’s VAT applies to almost all goods and services bought or sold in Vietnam. It is currently set at 10 percent, however, there are some exceptions.
Firstly, the VAT is currently, but only temporarily, 8 percent. Reducing the VAT was an initiative taken to stimulate the economy during the COVID-19 pandemic, however, it has been extended repeatedly.
As of writing, it was due to end on June 30, 2024, however, there is legislation currently before Vietnam’s National Assembly that would see the reduction extended to the end of the year if approved.
Items subject to a 5 percent VAT
Also, there are some items that only attract a 5 percent VAT. These include:
- Tap water;
- Most fertilisers and pesticides;
- Animal feed;
- Dredging operations for agriculture;
- Preprocessing and preservation of agricultural products;
- Most unprocessed aquaculture products;
- Unprocessed farming products including unhusked rice, husked rice, corn, potatoes, cassava, and wheat;
- Latex and resin for fishing nets,
- Raw foods that have not been cooked or processed;
- Unprocessed forestry products such as rattan, bamboo, mushrooms, roots, leaves, flowers, herbs, resin, and other forestry products;
- Sugar and sugar by-products like molasses or bagasse.
- Products made of jute, rattan, bamboo, leaves, straws, coconut shells, hyacinth, and other handicrafts made of recycled materials from agriculture;
- Preprocessed cotton;
- Newspaper printing paper;
- Most agricultural machinery and equipment;
- Most medical equipment certified by the Ministry of Health.
- Mot medicinal products;
- Teaching aids like models, pictures, boards, and chalk;
- Artistic activities, like exhibitions, sports, art performances, cinematography, the importation and distribution of films;
- Children’s toys and some books;
- Scientific research and equipment used for scientific research; and
- Social housing.
Note that this has been simplified. The Law on Value Added Tax goes into much greater detail on each item.
VAT exemptions
Broadly speaking the VAT applies to goods consumed within Vietnam–so goods that are imported solely to be made into something else and then reexported are generally not taxed under the VAT. That said the VAT law has a lot of smaller nuances
Low value imports
Imports valued at under VND 1 million or about US$40 are currently tax exempt per a Decision issued back in 2010 and that came into force in 2011.
Over the decade since this was introduced, however, Vietnam’s e-commerce industry has grown rapidly and by some estimates US$1 billion worth of goods bought through e-commerce platforms now enter Vietnam everyday.
In this light, the Ministry of Industry and Trade has moved to end this exemption, however, as of writing this was just an idea with no timeline in place.
Zero-rated VAT
Certain goods and services are subject to a zero percent VAT rate.
These are still technically VAT-applicable but attract a zero percent rate.
These include goods exported to foreign countries, international transportation services, and goods sold to export processing enterprises.
Firms exporting goods or services can usually claim back input VAT on these transactions.
VAT registration requirements for foreign businesses in Vietnam
Foreign businesses operating in or selling to Vietnam may be required to register for VAT, depending on the nature of their activities.
Vietnam’s tax regulations apply not only to companies with a physical presence in the country but also to those offering services digitally or under contract.
Below are the key categories:
Permanent establishments
Foreign enterprises with a permanent establishment (PE) in Vietnam—such as a representative office, branch, or local subsidiary—must register for VAT as part of their general tax registration.
These entities are treated similarly to domestic companies and are required to charge, collect, and pay VAT on goods sold or services rendered within Vietnam.
Foreign contractors
Foreign companies that do not have a PE in Vietnam but provide services, goods, or works under contract to Vietnamese entities may be subject to Foreign Contractor Tax (FCT), which includes both Corporate Income Tax and VAT components.
In such cases, VAT is generally withheld and paid on their behalf by the Vietnamese counterparty, unless the foreign firm opts for direct registration under the credit method—in which case they must register for VAT with the General Department of Taxation.
Digital and e-commerce service providers
Foreign digital service providers (e.g. Netflix, Google, Meta, Apple) that supply goods or services to individuals or non-VAT-registered entities in Vietnam must register and pay VAT directly through the General Department of Taxation’s e-portal.
This requirement was introduced to improve tax compliance in the fast-growing digital economy. Registration is done online, and quarterly VAT declarations are required even if no tax is payable.
Voluntary VAT registration
In certain cases, a foreign business without a legal presence in Vietnam may voluntarily register for VAT—typically to reclaim input VAT on expenses related to investment or export activity, though this is subject to tax authority approval.
Businesses should consult a qualified tax advisor to assess whether VAT registration is required and which method is most appropriate based on their operational model.
VAT refunds in Vietnam
VAT refunds typically apply when goods or services are zero-rated for VAT purposes (e.g. exports) or when the input VAT exceeds output VAT over a certain period.
Refunds are processed either quarterly or annually, depending on the business’s tax declaration method and compliance status. This section breaks down the key components of a VAT refunds in Vietnam.
What is a VAT refund?
A VAT refund is the reimbursement of input Value Added Tax (VAT) that a business has paid on goods or services purchased in the course of its operations.
In Vietnam, this typically applies when the input VAT paid by a company exceeds the output VAT it collects from customers during a tax period.
The most common scenario for VAT refunds involves exporters, whose goods or services are subject to a zero percent VAT rate.
While these firms don’t charge VAT on sales, they still incur VAT on inputs such as materials, equipment, or services.
To avoid unfair tax accumulation, Vietnamese law allows eligible businesses to claim back the VAT they have paid, provided strict documentation and compliance requirements are met.
VAT refunds play a crucial role in maintaining business cash flow, especially for export-driven manufacturers and newly established foreign-invested firms with large upfront investments.
Who is eligible for a VAT refund in Vietnam?
Foreign-invested enterprises (FIEs) operating in Vietnam may be eligible for a refund of input Value Added Tax (VAT) in specific circumstances, particularly when their activities involve exports.
Under Vietnam’s VAT law and related guidance (including Circular 219/2013/TT-BTC), businesses that purchase goods or services subject to VAT for the purpose of producing exports or providing zero-rated services can claim a refund on the VAT they have paid.
Typically, this applies in the following situations:
Export-oriented manufacturers: Businesses that import raw materials or semi-finished goods to manufacture products for export can claim back the VAT paid on those imported inputs.
Enterprises selling to export processing zones (EPZs) or other zero-rated buyers may also be eligible, provided the sales meet documentation and payment requirements set by the tax authority.
Newly established foreign-invested companies that incur large upfront capital and operational costs before generating revenue (and VAT output) may be entitled to refunds to avoid excess accumulation of input VAT credits.
Construction projects operated by FIEs can sometimes qualify if the project is VAT-registered and intended for export use or zero-rated activities.
Enterprises with a consistent VAT credit balance over several months due to a high volume of zero-rated transactions may apply for periodic refunds rather than carrying the balance forward.
Eligibility is contingent upon full compliance with Vietnam’s tax regulations.
Businesses must be VAT-registered, maintain valid VAT invoices, pay via non-cash methods as required, and ensure timely submission of VAT declarations.
Refunds are only issued after the General Department of Taxation or local tax departments verify the accuracy and legitimacy of the claims.
How is a VAT refund calculated?
In Vietnam, a VAT refund is calculated by determining the difference between input VAT (the VAT a business pays on purchases) and output VAT (the VAT it collects on sales).
If the input VAT exceeds the output VAT in a given tax period, and the transaction qualifies under the law, the business may be eligible to claim a refund for the excess amount.
The basic formula is:
VAT refund = Total input VAT – Total output VAT
However, several key conditions affect this calculation:
Only VAT paid on valid invoices that meet all regulatory requirements (e.g. registered supplier, non-cash payment) can be included in the input total.
Input VAT must relate directly to taxable activities, especially zero-rated exports or investment projects.
Certain expenses are non-creditable, such as VAT on goods or services used for personal consumption or non-VAT-liable operations.
The refund may be capped or denied if the tax office determines a compliance risk, such as during a tax audit or if the taxpayer has outstanding liabilities.
For exporters, the input VAT incurred on materials, production inputs, and export-related services is often refundable in full, provided supporting documentation (contracts, customs declarations, payment records) is in place.
How to apply for a VAT refund in Vietnam
To claim a VAT refund in Vietnam, eligible businesses must submit a complete refund dossier to their local tax authority, in accordance with procedures outlined in Circular 80/2021/TT-BTC and related guidance.
The application can be filed quarterly or annually depending on the taxpayer’s filing method and VAT credit balance.
Step 1: Prepare the refund dossier
A standard VAT refund dossier includes:
A written request for VAT refund using Form No. 01/ĐNHT
The VAT declaration forms for the relevant period
A list of input VAT invoices and supporting documentation
Copies of customs declarations and export contracts (for exporters)
Bank payment vouchers showing non-cash payment for input costs
Proof of compliance with other tax obligations
All invoices must be valid, fully traceable, and paid via bank transfer. Transactions involving cash payments are not eligible for refunds.
Step 2: Submit to the tax office
The completed dossier is submitted electronically via the General Department of Taxation’s online portal or in person to the local tax authority managing the business’s tax code.
In most cases, the tax office has 40 working days to assess the application.
For low-risk enterprises with a clean compliance history, the refund may be issued first and reviewed later under a post-audit process.
Step 3: Await verification and disbursement
If approved, the refund will be transferred to the company’s registered bank account.
If rejected or delayed, the tax office will provide written reasons. Refunds may be denied for incomplete documentation, suspected tax risk, or if the business is under inspection or audit at the time of filing.
Firms are advised to keep detailed records and consult with a qualified local tax advisor to avoid common procedural errors and ensure full compliance.
Common mistakes when claiming VAT refunds in Vietnam
Despite being eligible for VAT refunds, many foreign businesses operating in Vietnam find their applications delayed, reduced, or rejected due to compliance oversights.
Understanding these common errors is essential for avoiding disruptions to cash flow and maintaining a clean tax compliance record.
Below are the most frequent issues:
1. Failing to obtain valid VAT invoices
Vietnamese tax law requires that input VAT can only be claimed if supported by proper red VAT invoices (hóa đơn GTGT) issued by registered suppliers. Invoices must be complete, correctly formatted, and match the information in the VAT declaration.
Missing or incorrect invoices are a common reason for refunds being denied.
2. Using cash payments instead of bank transfers
Refund claims are only valid when the input costs have been settled via non-cash methods, typically through bank transfer. Cash payments, even for legitimate business expenses, are not eligible for VAT credits.
This is a frequent pitfall for smaller transactions or service-based purchases.
3. Mixing VAT-liable and exempt activities without proper allocation
Businesses engaged in both taxable and exempt operations (e.g. selling both VAT-liable goods and VAT-exempt services) must allocate input VAT proportionally.
Failure to do so correctly can result in input VAT being disallowed.
The tax authority may recalculate or reject the refund if the allocation method is unclear or unsupported.
4. Late or incorrect filing of VAT declarations
VAT refunds are only considered when the business has submitted accurate and timely VAT returns.
Errors in declaration forms, inconsistencies with supporting documentation, or missing submission deadlines can lead to processing delays or outright rejections.
5. Attempting to claim ineligible expenses
Some input costs—such as entertainment, personal expenses, or purchases for non-VAT-liable activities—are not refundable.
Including these in a refund application may trigger audits or raise risk flags, especially for newly registered foreign businesses.
6. Filing during tax audits or with outstanding liabilities
Refunds may be automatically suspended if the business is under tax inspection or has unresolved tax debts.
Applying for a refund during such periods often results in delays and may lead to additional scrutiny from the tax authority.
To minimise risk, foreign firms should ensure strict internal controls over invoicing, payment, and VAT declaration processes.
Working with a reputable local tax advisor can help reduce the likelihood of costly mistakes and increase the chance of a successful refund.
FAQ
What is Vietnam’s Value Added Tax (VAT)?
Vietnam’s VAT is an indirect tax applied to most goods and services at the point of purchase.
It’s governed by the Law on Value Added Tax (2008, as amended) and Circular 219 (2013).
Who is required to pay VAT in Vietnam?
All businesses involved in producing or trading goods and services in Vietnam, including domestic and foreign-invested enterprises, must pay VAT.
Importers pay VAT at the time of import, and local retailers collect it at the point of sale.
What is the standard VAT rate in Vietnam?
The standard VAT rate is 10 percent.
However, there is a temporary reduced rate of 8 percent in place, which has been extended multiple times and may continue.
Are there any goods or services subject to a lower VAT rate or exempt from VAT?
Yes.
Some items attract a 5 percent VAT (e.g., tap water, fertilizers, unprocessed agricultural products, medical equipment, teaching aids, social housing).
Certain goods and services are VAT exempt (e.g., goods for re-export, low-value imports under VND 1 million – though this exemption is under review).
What is the VAT treatment for exported goods and digital services provided by foreign suppliers?
Exported goods and international transportation services are subject to a zero percent VAT rate, allowing businesses to claim back input VAT.
Foreign digital service providers are required to register and pay VAT directly through a dedicated online portal.
What’s next?
Firstly, Vietnam’s Value-added Tax is just one of several taxes in Vietnam foreign firms should be aware of.
Other important taxes in Vietnam include Corporate Income Tax, Capital Gains Tax, Special Consumption Tax, Foreign Contractor Tax in Vietnam, and Personal Income Tax.
By familiarising themselves with these taxes it may foreign firms to avoid running afoul of Vietnam’s tax department.
The VAT is a key pillar of Vietnam’s tax system alongside corporate income tax, personal income tax, and the special consumption tax.
This is a crucial tax that foreign firms should be aware of and make sure that they understand.
It’s also worth noting that the temporary reduction of the VAT to 8 percent has been extended several times and it looks as though it may be extended again.
In this light, firms that may be impacted by an extension can best keep abreast of development related to Vietnam’s Value Added Tax by subscribing to the-shiv.
First published June 3, 2024. Last updated April 4, 2025.