Value Added Tax (VAT), also called “Good and Services tax” or “Consumptions tax” in other countries, is the indirect tax that the products and service suppliers have to pay for their products. The main purpose of this tax is to maintain the stable budget for the country and encourage firms to enhance the quality and value of their products and service during the producing and distributing activities.
Vietnam Value Added Tax is calculated based on the added value from each stage of the supply chain, from manufacturing to distribution and consumption. The subjects of this tax is almost all products and services in Vietnam domestic market, except some subjects that are used for societal purpose, in agriculture, education, medical service, insurance, aiding, science, mineral, national defense or telecommunications.
There are three main rates of VAT that the firms need to pay based on the kinds of products and services.
1 - The rate of 0% is mostly used for the exported products, software exported, services and products for foreigners in Vietnam such as construction to the foreigner projects.
2 - The rate of 5% is applied for mostly convenient and popular, or normal industrial products and service including machine, chemistry, computer and component, construction service, food and beverage, fertilizer, medical facilities, toys, forestry and agricultural products
3 - Finally, the rate of 10% is used for special products and services with high value and prices likes gold business, cars, oil, electrical devices, construction and installation, telecommunication, tourism, air and water transportation, household devices or accountancy services.