Vietnam Value Added Tax (VAT) the complete guide

What is VAT in Vietnam?

Value Added Tax (VAT) is an indirect tax levied on the value added at each stage of production and distribution. It is governed by the Law on Value Added Tax (Law 13/2008/QH12, as amended) and its implementing regulations including Decree 209/2013 and Circular 219/2013. The tax is administered by the GDT alongside CIT.

VAT is collected at each stage of the supply chain, with input credits offset against output tax. The end consumer effectively bears the tax. For business-to-business transactions, VAT is typically a flow-through — the seller collects, the buyer claims credit, the net is paid to the GDT.

VAT is imposed on: goods and services used for production, trading, and consumption in Vietnam (including imported goods and services); exports (at 0%). VAT is not imposed on certain categories (financial services, certain medical services, public transport, real-estate transfers under specific conditions, etc.).

Vietnamese VAT uses two calculation methods: the credit method (default for most businesses) and the deduction method (available to small and medium enterprises below a turnover threshold). Most FDI companies use the credit method.

VAT rates: 0%, 5%, 8%, 10%

Vietnam applies four VAT rates: 0%, 5%, 8%, and 10%. The 8% rate is a transitional rate applied to selected categories from 1 February 2025 through 31 December 2026, reverting to 10% from 1 January 2027.

0% rate — applied to exports of goods and services; international transportation; construction and installation for foreign entities; certain services rendered abroad. The 0% rate is also called 'zero-rated' — the seller charges 0% but remains entitled to input credit.

5% rate — applied to essential goods and services including: clean water, fertiliser, certain medical equipment, certain agricultural products, scientific/technical services, certain cultural/artistic services, certain transport services, and certain financial services.

8% rate (transitional, 1 Feb 2025 – 31 Dec 2026) — applied to selected items previously at 10% including: certain food products, certain consumer goods, certain services (lodging, restaurants, tourism). The list is defined in the law and its amendments.

10% rate (standard) — applied to all goods and services not subject to 0%, 5%, or 8%. This is the default rate and applies to most B2B services, professional fees, most consumer goods, and most imports.

Credit method vs. deduction method

Under the credit method (default for most businesses), the company pays VAT on outputs (sales) and claims credit for input VAT on business purchases. Net VAT payable = output VAT - input VAT credit.

Under the deduction method (available to small and medium enterprises below a turnover threshold of VND 1 billion for goods or VND 2 billion for services per year), VAT is calculated as a fixed percentage of revenue (e.g. 1% for distribution, 3% for certain services). Input credit is NOT claimed under the deduction method.

Most FDI companies use the credit method. The deduction method is simpler administratively but rarely advantageous for businesses with significant input purchases. We help clients model both methods at incorporation.

Once chosen, the method is locked in for a defined period (typically 2 years). Switching methods requires advance registration and GDT approval.

Filing cycle: monthly and quarterly

VAT returns are filed monthly by default. Quarterly filing is available for companies with revenue below VND 50 billion in the prior calendar year, with returns due by the last day of the month following the quarter end.

Monthly VAT returns (Form 01/GTGT) are due by the 20th day of the following month. Late filing triggers penalties of VND 1–25 million depending on the days late. Late payment triggers late-payment interest at 0.03% per day.

Quarterly VAT returns are due by the last day of the month following the quarter end. The Q1 return is due 30 April, Q2 by 31 July, Q3 by 31 October, Q4 by 31 January of the following year.

Output VAT is the VAT collected from customers on sales; this is the company's liability regardless of whether collected from the customer. Input VAT is the VAT paid on business purchases, claimed as credit subject to documentation and validation.

Input VAT credit rules

Input VAT is creditable where: (1) the invoice is valid (correct form, content, supplier tax code); (2) the underlying purchase is for a deductible business purpose; (3) the goods/services are received; and (4) payment is supported.

Common reasons for input VAT denial: invalid invoice (missing tax code, wrong format, supplier not registered), expense not for business purpose (e.g. personal expenses), goods/services not received, payment not supported, expense for non-deductible category.

The GDT routinely audits input VAT claims. The most common audit findings: invoices from blacklisted suppliers (not on the GDT database), invoices with the wrong tax code, expenses without supporting documentation, and double-claim of the same invoice.

We help clients implement a pre-validation step: each input VAT claim is reviewed against the GDT's e-invoice database, the supplier's tax-code status is checked, and the documentation is bundled. This dramatically reduces the risk of denial on audit.

When VAT refunds are available

VAT refunds are available for: (1) FDI projects in pre-revenue phase in encouraged industries; (2) exporters with input VAT exceeding output VAT; (3) certain other categories including ODA projects, foreign diplomatic missions, and certain specific industries.

General businesses (non-exporters, non-encouraged) cannot claim refunds of accumulated input VAT credits. The credits carry forward indefinitely and offset against future output VAT.

Exporters (defined under the law) can claim refunds when input VAT exceeds output VAT. The refund is processed by the provincial tax department where the company is registered. The timeline is typically 2–6 months, depending on documentation and audit history.

Pre-revenue FDI projects in encouraged industries (high-tech, software, certain R&D) can claim refunds of input VAT accumulated during the pre-revenue phase. The refund requires documentation of the encouraged-industry status (IRC, GDT registration) and a clean audit trail.

Exports and 0% VAT

Exports of goods are zero-rated (0% VAT) where the goods leave Vietnam and supporting documentation is retained. The documentation typically includes: the export contract, the customs declaration, the bill of lading, and the payment receipt.

Services consumed outside Vietnam may also qualify for 0% VAT. Common examples: advertising for foreign clients, training for foreign clients, consulting for foreign clients, certain financial services rendered abroad. The company must retain documentation proving the service was consumed abroad — typically the contract, beneficiary location, and payment evidence.

The 0% VAT rate does NOT mean the seller is exempt from VAT — the seller remains entitled to input credit. The 0% rate means the seller charges 0% on the export but does not pay VAT on the export sale; the seller can still claim input credits.

Foreign Contractor Tax (VAT component)

Foreign contractors providing services in Vietnam without a Vietnamese permanent establishment are subject to Foreign Contractor Tax (FCT). The VAT component of FCT is 5% (deemed) or actual 10% (direct filer).

The deemed FCT regime is the default for foreign contractors without a PE: VAT 5% + PIT 5% = 10% total. The Vietnamese payer withholds and remits FCT on the payment to the foreign contractor.

Direct filer regime: foreign contractors with a Vietnamese PE can register as direct filers and pay VAT at 10% on actual revenue and CIT at 20% on actual profit. The direct filer regime is typically more favourable for profitable operations and is the regime we recommend for most cases where the foreign contractor has substance in Vietnam.

The FCT rules are covered in detail in our Foreign Contractor Tax guide.

E-invoices and validation

Vietnam mandates the use of e-invoices (electronic invoices) for B2B transactions. The e-invoice must be issued through the GDT's portal or via a GDT-authorised e-invoice provider. The e-invoice contains: invoice number, issue date, seller and buyer details (name, tax code, address), description of goods/services, quantity, unit price, VAT rate, and VAT amount.

E-invoice validation is the process of confirming that the e-invoice is properly issued and registered with the GDT. The GDT publishes a database of valid e-invoices that can be queried by tax code, invoice number, or other criteria.

The company's input VAT credit is denied where the underlying e-invoice is invalid. Pre-validation of supplier invoices is a standard control we implement for clients.

Common VAT mistakes

The most expensive VAT mistakes we see: (1) claiming input VAT on invalid invoices (denied on audit), (2) failing to charge VAT on deemed-supply transactions (gifts, samples, internal use), (3) claiming VAT refunds for ineligible categories, (4) missing the deadline for refund applications, (5) treating inter-company recharges as exempt when they are taxable.

The most common avoidable VAT penalty: late filing. The penalty is small (VND 1–25 million) but the broader signal is poor compliance. The GDT uses late filing as a trigger for deeper review.

The most expensive avoidable VAT penalty: claiming a refund you are not entitled to. The GDT assesses back tax, interest, and a 1–3x penalty. We have seen VND 100 billion+ assessments for fabricated refund claims.

Frequently asked questions

The most common questions our tax and accounting team receives about vietnam vat guide for foreign companies (2026).