Expanding your business to Vietnam is exciting. You’re navigating new markets, new customers, and new opportunities. But let’s be honest: the idea of indirect tax can feel like reading ancient Vietnamese history, fascinating but confusing. One of the biggest questions we hear is about the Vietnam VAT rate and how it affects goods and services.
Whether you’re selling products, setting up operations, hiring staff, or selling services from overseas, this guide will walk you through tax in Vietnam in a conversational, clear way, not like a decree written in tiny print.
Understanding the Basics of Indirect Tax
First things first: what is indirect tax? In most markets, including Vietnam, value added tax (VAT) is the cornerstone of indirect tax. It’s called “indirect” because it’s collected indirectly from your customers, not directly from your business profits.
In Vietnam, VAT applies to most goods and services, from coffee beans to software subscriptions. If your business activity involves providing goods or services in Vietnam, you will encounter VAT obligations.
Tax in Vietnam: Why VAT Matters to U.S. Businesses
So why should a U.S. company care about VAT in Vietnam? Here’s the upfront, practical answer: If your business is selling or consuming goods or services in Vietnam, or even if you’re a foreign entity providing digital platforms or services used by people in Vietnam, VAT may apply to you.
Imagine this scenario: You sell digital tools to customers in Vietnam via an e‑commerce or digital platform. Even without a physical presence, the VAT in Vietnam may apply. That means you might be required to file VAT returns, pay VAT, and maintain proper books of account for VAT purposes.
This is where understanding Vietnam VAT rate and the rules around subject to VAT becomes essential.
Vietnam VAT Rate Changes
One of the most frequently asked questions is about future changes. As of the new regulations set by the National Assembly, the VAT rate in Vietnam will see changes that matter to businesses planning ahead. Effective 1 July 2025, the standard Vietnam VAT rate will be reduced to 8 percent for certain goods and services.
What does that really mean?
Right now (in 2024), the standard VAT is set at a VAT rate of 10 percent for most goods and services. But under the new VAT law, which applies from 1 July 2025 until 31 December 2026, a reduction in the VAT rate is available on select goods and services, reducing it from 10 down to 8.
This reduction affects a wide range of goods and services, particularly those tied to daily consumption and production inputs. Let’s break that down:
- If your business deals with items used for production, some of those goods may see the reduced rate of 5 percent.
- For many other products and services, the rate will move from 10 to reduced to 8 percent.
Vietnam VAT Rate Breakdown
To help you digest this without a headache, here’s how VAT in Vietnam works for U.S. companies:
| VAT Category | Rate | Applies To |
|---|---|---|
| Standard VAT Rate | 10% | Most goods and services including commercial transactions |
| Reduced VAT Rate | 8% | Certain goods and services as per Decree, effective from 1 July 2025 to 31 December 2026 |
| Special Reduced Rate | 5% | Essential goods and services including education, healthcare, and clean water |
| 0% Rate | 0% | Exported goods and services, international transportation |
| Exempt | N/A | Land use rights, credit services, construction abroad, and services used outside Vietnam |
Who is Subject to VAT in Vietnam?
Here’s where it gets immediately practical for U.S. companies:
- Business Activities That Trigger VAT Obligations
- You are subject to VAT in Vietnam if, during the course of your business, you:
- Sell goods in Vietnam
- Provide services in Vietnam or to individuals in Vietnam
- Carry out business activities in forms like e-commerce or digital platforms
- Import goods or services where the importer must pay VAT
- Provide goods or services for consumption in Vietnam
Yes, even if your business isn’t physically in Vietnam. Foreign suppliers are often required to file VAT returns and pay VAT payable under local rules if their services are consumed in Vietnam.
Input VAT and Output VAT
Understanding VAT concepts is essential for filing and compliance. Let’s unpack two big terms:
Output VAT
This is the VAT you collect from your customers.
If your company sells goods or services in Vietnam, you charge VAT at the applicable rate (standard 10% now, 8% from July 2025). That becomes your output VAT.
Input VAT
This is the VAT you pay when buying goods or services that you use in your business.
For instance:
- If you buy raw materials for manufacturing in Vietnam
- If you use software purchased from a local vendor
- Or even certain services from foreign suppliers
Under normal rules, input VAT can be deducted using the deduction method, meaning you subtract the creditable input VAT from your VAT owing when you file VAT returns.
The goal is to ensure you’re not paying VAT on VAT. Simple in theory. But in practice, you must keep accurate records to prove your input VAT amount is creditable for VAT.
What’s New With the 2025 VAT Law?
A lot changed when the National Assembly passed the new VAT law, especially with the goal of easing business burdens and stimulating economic growth.
Here’s what U.S. businesses should know:
1. Reduced VAT Rate Phased In from July 2025
As mentioned earlier, many goods and services will see the VAT rate reduced to 8 percent. This provides relief to both businesses and consumers.
2. Extended VAT Refund Opportunities
Exported goods and services, including goods processed for export, may qualify for VAT refund. That means if your business pays VAT on inputs used for export, you could be eligible to reclaim it.
However, the refund process involves compliance with Decree regulations, filing accurate VAT returns, and working with the tax authorities to substantiate your claim.
3. Expanded VAT Coverage for Digital Services
Services provided by foreign suppliers without a local presence like digital subscriptions sold to Vietnamese customers are now clearly in scope. This includes digital platforms and online tools consumed locally.
If your company serves users in Vietnam, you’re not off the hook, you might have VAT obligations.
File VAT Returns: Timing and Practical Tips
You’ll need to file VAT returns regularly, usually monthly or quarterly, depending on your annual revenue and structure of your business in Vietnam.
Here’s a simple approach:
- Monthly Filing (Typical)
- Track your output VAT
- Track your input VAT
- Calculate VAT payable = Output VAT — Creditable Input VAT
- File your VAT return on time
Quarterly Filing
Some business households or smaller entities might qualify for quarterly filings. But if your annual revenue or VAT liability is high, expect monthly deadlines.
Tip: Maintain proper books of account, Vietnamese tax authorities are strict about documentation. Invoices must clearly show VAT amounts to qualify for input VAT credit.
Important Considerations for U.S. Companies
1. Imported Goods and Import Duties
If you bring goods into Vietnam, your VAT in Vietnam doesn’t start at the point of sale, it starts at import. The value of imported goods forms the base for calculating VAT, combined with customs duties.
The importer must pay VAT at the border before goods are released.
2. Services Used in Production
If you procure services (e.g., consulting, software, logistics) and use them for production, the VAT you pay may be creditable, but only if it meets the strict invoicing and usage criteria. This is where detailed accounting matters.
What About E-Commerce and Foreign Suppliers?
This is a big one, especially for U.S. tech companies.
If you provide digital services to Vietnamese customers:
- You’re considered a foreign supplier
- VAT in Vietnam applies to your services used locally
- You may be required to file VAT
- You might have to withhold and pay VAT payable in certain situations
Even if you think your service is “just online,” the new VAT law is clear: consumption in Vietnam triggers VAT.
VAT Refunds: Do You Qualify?
Exported goods and services, including goods processed for export, are often eligible for a VAT refund. That means your company could get back VAT paid on inputs that go into exported products.
This is huge for manufacturers and exporters planning Vietnam as a production hub.
However, refunds require:
- Proper invoices
- Compliance with the Decree
- Accurate VAT return filings
- Coordination with tax authorities
Digital Platforms and the 2025 VAT Landscape
With e-commerce growing, Vietnam’s VAT rules explicitly capture digital platforms, marketplaces, and online services, even from foreign providers.
So if your platform is accessed by people in Vietnam:
- VAT applies to goods or services
- You must calculate VAT correctly
- You need to determine if you must register and file
- You may have to collect VAT at the point of sale
This is not optional, even if your only presence in Vietnam is digital.
Practical Steps to Stay Compliant
Here’s a quick checklist for U.S. companies entering Vietnam:
- Determine Your VAT Liability
- Are you selling goods? Services? Digital products?
- Are they consumed in Vietnam?
- Understand the Applicable VAT Rate
- Standard (10% until June 2025)
- Reduced (8% from July 2025)
- Lower rates (5% for select items)
- Register for VAT (if required)
- Some foreign firms must register even without a legal entity
- Maintain Accurate Invoices
- Essential for input VAT credit and compliance
- File VAT Returns on Time
- Monthly or quarterly filing, depending on your business
- Assess Export Activities for VAT Refunds
- Exported goods may qualify
- Work With Tax Professionals
- Vietnam’s VAT rules are evolving, professional advice can prevent costly mistakes
Key Takeaways for U.S. Companies
- Vietnam’s indirect tax, especially VAT, applies to most goods and services you sell or use in the country.
- As of 1 July 2025, the Vietnam VAT rate will see a reduction to 8 percent for many items.
- Digital services and foreign suppliers are clearly in scope.
- Keeping accurate records ensures you can claim creditable input VAT and avoid penalties.
- Exporters may benefit from VAT refunds.
Expanding to Vietnam and Not Sure Where to Start?
Navigating tax in Vietnam, especially changes to the Vietnam VAT rate, can feel overwhelming. Between the latest decree, shifting rates, from the standard rate of 10% to reduced to 8, and understanding what applies to goods and services, there’s a lot to track.
Whether you’re dealing with services used for production, transportation services, or goods and services purchased locally, Empleyo helps foreign organizations or individuals stay compliant. From VAT calculation to keeping you aligned with updates regulated in the law, we’re here to simplify your setup.
Need help with VAT reduction, marine and international transportation services, or land use rights? We make sure your business meets every requirement.
Let’s make doing business in Vietnam easier. Contact us today, and let’s get your team set up and compliant.
