Vietnam: Key updates on new VAT Law and amended Law on Tax Administration

26 Dec 2024    3 minute read
VAT and Law on Tax Administration Reform

In brief

During the eighth session of Vietnam's National Assembly, which concluded on 30 November 2024, new VAT and tax administration regulations were enacted. These changes affect businesses, particularly in the e-commerce and digital sectors. Key amendments include withholding tax obligation for e-commerce platform operators, 0% VAT for export services, new VAT refund conditions, and increased VAT rates for foreign suppliers through e-commerce platforms. These changes start in early 2025.

Contents

Recommended actions

The new VAT Law and Amended Law on Tax Administration will take effect in early 2025, introducing updates that could affect businesses, particularly in the e-commerce and digital sectors. Taxpayers should review these changes and assess potential impacts to prepare for future compliance.

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In more detail

1. Key updates of VAT Law No. 48/2024/QH15

  1. The scope of taxpayers for Vietnam VAT purposes has expanded to the following, among others:
  • Foreign suppliers that have no permanent establishment in Vietnam and engage in e-commerce businesses and digital-based businesses with organizations, individuals in Vietnam.
  • Organizations being operators of foreign digital platforms conducting withholding, paying tax obligations on behalf of foreign suppliers.
  • Organizations being the operators of e-commerce trading platforms and digital platforms with payment functions, which withhold, declare and pay taxes on behalf of business households, business individuals on the e-commerce trading platforms, digital platforms.
  1. The sale of debts, including the sale of accounts payable and accounts receivable, is VAT-exempt.
  2. The annual revenue threshold triggering VAT and personal income tax for business households and business individuals is increased from more than VND 100 million to more than VND 200 million.
  3. Invoice issuance is supplemented as a point triggering VAT liability for the supply of goods.
  4. "Exported services eligible for 0% VAT" is defined as services provided directly to organizations and individuals abroad and consumed outside of Vietnam, and services provided directly to organizations in non-tariff zones and consumed within these zones for directly serving export production activities. With the adoption of the new law, the application of 0% VAT for export services in Vietnam remains a complex and controversial issue as "consumed outside of Vietnam" and "directly serving export production activities" are not defined. 
  5. Foreign suppliers that provide services through e-commerce and digital platforms are currently subject to 5% VAT on the revenue received by such foreign suppliers. Under the new VAT Law, this rate is increased to 10%, and the direct calculation method no longer applies to such foreign suppliers. However, the new VAT Law does not clearly stipulate the calculation method and taxable base for calculating the VAT of foreign suppliers.
  6. The new VAT Law introduces a list of prohibited acts related to VAT credit and VAT refund procedures.
  7. VAT refund now extends to business establishments that only produce goods or provide services subject to 5% VAT and satisfy certain conditions. If business establishments provide goods or services subject to various VAT rates, VAT refund will be prorated according to the government's guidance.
  8. The new VAT Law stipulates, among others, a new condition for VAT refund procedures. Accordingly, sellers have declared and paid VAT for those invoices being requested to refund VAT by applicants (i.e., buyers).

The new VAT Law will take effect on 1 July 2025, except for item (iii) above, which will enter into force on 1 January 2026.

2. Key updates of Amended Law on Tax Administration No. 56/2024/QH15 ("Amended LTA")

  1. Under the current Law on Tax Administration, foreign suppliers that have no permanent establishment (PE) in Vietnam and engage in e-commerce and digital-based business in Vietnam have the obligation to register, declare and pay tax in accordance with the regulations of the Minister of Finance. By removing the "having no PE" feature, the registration requirement does not depend on whether foreign suppliers have a PE.
  2. Local or foreign organizations being the operators of e-commerce trading platforms and digital platforms with payment functions are required to withhold, declare and pay taxes on behalf of business households and business individuals. The government will provide further guidance in an implementing decree. 
  3. Taxpayers can supplement their tax declaration only before tax authorities or competent authorities announce an audit decision and with respect to the tax declaration that are not in the scope of an audit.
  4. Legal representatives of enterprises that have outstanding tax liabilities may in certain circumstances be subject to a temporary suspension of exiting from Vietnam.

The Amended Law on Tax Administration will take effect on 1 January 2025, except for item (ii) above, which will enter into force on 1 April 2025.

Contact Information
Thanh Vinh Nguyen
Partner
Ho Chi Minh City
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thanhvinh.nguyen@bakermckenzie.com
Thi Thanh Hoa Dao
Special Counsel
Ho Chi Minh City
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thanhhoa.dao@bakermckenzie.com

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