Vietnam’s 2024 Law on Value-Added Tax Approved: Key Provisions

On November 26, 2024, Vietnam’s National Assembly passed the 2024 Law on Value-added Tax (VAT), scheduled to take effect from July 1, 2025. This article will guide investors and businesses through the most significant amendments of the law, as well as potential regulations that are under discussion.

The 2024 VAT Law comprises  four chapters and 17 articles, which put in place regulations on:

• Taxable and non-taxable entities;
• Taxpayers;
• The basis and methods for tax calculation; and
• VAT deduction and refunds.

It is expected that the official text of the 2024 VAT Law will be released no later than December 11, 2025. While the official text is currently unavailable, key changes have been announced, mainly dealing with VAT exemptions and refunds.

Key changes under the 2024 VAT Law

New tax-exempt revenue threshold

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A key provision of the new law is the increase in the tax-exempt revenue threshold, raised from VND 100 million (US$3,934) to VND 200 million (US$7,879) per year. In a report presented before the vote on the law, the Chairman of the National Assembly’s Finance-Budget Committee, Le Quang Manh, brought forward this amendment.

According to the Ministry of Finance (MOF), if the tax-exempt revenue threshold is set at VND 200 million per year, the number of taxable businesses will decrease by 620,653 entities, and the state budget revenue will decrease by about VND 2,630 billion (US$103.6 million).

However, the Government requested to be in charge of adjusting this revenue threshold in accordance with the socio-economic development situation of each period to ensure flexibility in management and suitable adaptation to real-life developments. This change is also believed to reflect a reasonable modification in alignment with the growth rates of Vietnam’s average gross domestic product (GDP) and consumer price index (CPI) since 2013.

With the approval from the National Assembly, goods and services of households and individuals doing business with a maximum annual revenue of VND 200 million will not be subject to VAT after the law enters effect.

VAT payable subjects

According to Article 4 of the draft law, entities entitled to pay VAT include:

• Organizations, households, and individuals producing and trading goods and services subject to VAT (hereinafter referred to as business establishments).
• Organizations and individuals importing goods subject to VAT (hereinafter referred to as importers).
• Organizations and individuals producing and trading in Vietnam that purchase services from foreign organizations without a permanent establishment in Vietnam or individuals abroad who are non-residents in Vietnam.
• Organizations producing and trading in Vietnam that purchase goods and services to conduct oil and gas exploration, development and exploitation activities from foreign organizations without a permanent establishment in Vietnam, individuals abroad who are non-residents in Vietnam.
• Other taxpayers according to the provisions of the law on tax administration.

Updated non-taxable subjects

According to the latest draft of the 2024 VAT Law, there will be considerable amendments in terms of non-taxable subjects.

Exclusion of several subjects

The new law will omit certain subjects from the non-taxable list, including:

• Fertilizers;
• Specialized machinery and equipment for agricultural production;
• Offshore fishing vessels;
• Securities depository;
• Market organization services of stock exchanges or securities trading centers; and
• Other securities trading activities.

Prescribed exemption list of natural resource exports

Exported products, that are goods processed from natural resources and minerals, must adhere to a list established by the government for VAT exemption. Currently, if the combined value of the resources, minerals, and energy costs constitutes 51 percent or more of the total product cost, those exported products will not be subject to VAT.

New subjects of VAT exemptions

Imported goods serving the prevention of natural disasters, epidemics, and wars will also not be subject to VAT.

Revised regulation on VAT refunds

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Article 14 of the draft Law on VAT adds the following cases of tax refund as follows:

Business establishments that produce goods or provide services subject to a VAT rate of 5 percent may qualify for a VAT refund if they have an input VAT amount of VND 300 million or more that has not been fully deducted after a period of 12 months or four quarters.

Other amendments

The National Assembly has approved several provisions as part of the 2024 VAT Law, which will soon be detailed in the official text. These amendments include:

• Adjustments to the list of items exempt from VAT.
• Clarifications regarding taxable prices for goods and services used for promotional purposes.
• An expansion of items that qualify for the 0-percent VAT rate.
• Regulations concerning non-taxable products that will now be subject to a 5-percent VAT rate.
• Changes to the regulations governing input VAT deductions.

Updates to be monitored

In addition to the 2024 VAT Law, the fate of several other regulations concerning VAT management in Vietnam will soon be determined.

Extension of the 2-percent VAT reduction

The MOF has recently proposed a resolution to extend the current VAT reduction. The plan suggests maintaining a 2 percent reduction on goods and services that are currently subject to the 10 percent tax rate during the first six months of 2025. If approved, this will be the fifth time Vietnam has implemented such a policy.

Abolishing tax exemption for small-value imported goods via e-commerce platforms

The government has proposed eliminating tax exemptions for low-value imported goods sold through e-commerce platforms. This recommendation includes addressing the repeal of Decision 78/2010, citing concerns about unfair competition arising from the recent emergence of e-commerce platforms that sell goods to Vietnam at very low prices.

The National Assembly’s Standing Committee has acknowledged the situation and is urging the government to promptly issue a decree to manage customs for goods traded through e-commerce channels. This decree should ensure that there are no exemptions for low-value imports. Additionally, the committee has agreed to the immediate repeal of Decision 78, which will provide a legal basis for tax authorities to regulate and collect taxes from foreign e-commerce platforms selling goods in Vietnam.

Conclusion

The 2024 VAT Law represents a significant shift in Vietnam’s tax framework, aimed at fostering a more flexible and responsive tax environment. The increase in the tax-exempt revenue threshold is a notable change that could alleviate the burden on a large number of small businesses, while the revised guidelines for VAT exemptions and refunds are designed to streamline processes and enhance compliance.

As businesses in Vietnam prepare for the new VAT law’s implementation on July 1, 2025, it is essential to stay informed about the detailed provisions and forthcoming official text, which will provide clarity on the specific regulations and any additional adjustments. Seeking professional and local expert tax and legal advice is advisable.

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