The Law on Value-Added Tax (“VAT”) 2024, Decree No. 181/2025/ND-CP (“Decree 181”) issued by the Government and Circular No. 69/2025/TT-BTC (“Circular 69”) issued by the Ministry of Finance providing detailed implementation guidelines of Law on VAT have taken effect from 1 July 2025. Key changes concerning taxpayers, VAT refund and credit, and VAT applicable to foreign contractors are summarized below:

1. The scope of taxpayers is expanded to include the following entities:

• Foreign suppliers that do no have a permanent establishments in Vietnam and conduct e-commerce business or digital platform-based business with organizations and individuals in Vietnam (“foreign supplier”).
• Organizations managing foreign digital platforms that are responsible for withholding and remitting on behalf of the foreign suppliers, the tax obligations payable by such suppliers.
• Organizations managing e-commerce exchanges or digital platforms with payment functions that are required to withhold, remit and declare the tax withheld on behalf of household businesses and individual businesses operating on such exchanges or platforms.

2. Changes relating to non-VAT subjects

• The annual revenue threshold for household businesses and individual businesses eligible for VAT exemption is increased from VND 100 million to VND 200 million, effective from 1 January 2026.
• Certain goods and services are no longer eligible for VAT exemption, including securities depository services and public Internet services.
• Credit-granting services continue to fall within the scope of VAT-exempt activities; however, specific provisions previously applicable have been removed. For instance, the liquidation of loan collateral assets conducted by credit institutions, enforcement authorities, or borrowers themselves is no longer expressly regulated as VAT-exempt, as was the case under the former regulations.
• The scope of VAT-exempt public transportation services is expanded to include inland waterway vehicles, in addition to buses and electric vehicles as previously provided.
• In relation to the list of machinery, equipment, spare parts, and materials that can be manufactured domestically—used to determine whether imported goods are eligible for VAT exemption—taxpayers must refer to the list issued by the Ministry of Finance. As of now, this list has only been promulgated by the Ministry of Planning and Investment, and the Ministry of Finance has yet to release its own version. Accordingly, it remains unclear which list should be applied by enterprises seeking to determine VAT exemption eligibility for imported machinery and equipment.
• The provision under which exported products made from natural resources or minerals—where the total value of such resources, minerals, and energy costs accounts for 51% or more of the product’s cost—were VAT-exempt has been abolished. Instead, Decree 181 introduces (i) a list of exported products that are natural resources and minerals extracted but not processed into other products; and (ii) a list of exported products that are natural resources and minerals extracted and processed into other products,both of which are subject to VAT exemption under the new framework.

3. Adjustment of VAT rates applicable to foreign contractors

Circular 69 amends the VAT rates applicable under the direct method for foreign contractors. Accordingly, wholesale and retail trading activities are now subject to VAT with a tax rate of 1% on revenue, whereas such activities were previous not subject to VAT under Circular No. 103/2014/TT-BTC on foreign contractor tax. In addition, Circular 69 provides detailed classifications of each type of service, goods, together with their corresponding VAT rates.

4. Changes to the time period of VAT determination for goods

The new Law on VAT provides that the time of VAT determination for goods shall be the earlier of (i) the time when ownership or the right to use the goods is transferred to the buyer, or (ii) the time when the invoice is issued. This represents a notable change from the previous regulation, under which the time of VAT determination for the sale of goods was only the time when ownership or the right to use the goods was transferred to the buyer.

5. Changes relating to tax rates

• The 0% VAT rate: 

The Law on VAT and its implementing regulations set out clearer conditions for application of the 0% VAT rate to various cases, with the key principle that consumption must occur outside Vietnam. For example:

• In the case services provided to foreign individuals, such individuals must be located outside Vietnam during the period in which the services are rendered.
• Services directly provided to entities within a non-tariff zone and consumed therein must serve directly for the export production activities of such entities.
• For digital information content products supplied to foreign parties, the service provider must retain records and documents evidencing that the products are consumbed outside Vietnam, such as information demonstrating the foreign resident status of the purchasing organizations or individual.

• The 5% and 10% VAT rates:

Certain goods and services that were previously not subject to VAT are now subject to VAT at either 5% or 10%, while some that were previously taxed at 5% have been reclassified to the 10% rate.

For instance, services provided by foreign suppliers via e-commerce or digital platforms, as well as film production and distribution services, are now subject to VAT at the rate of 10%, instead of 5% under the previous regulations.

6. Amendment to the principles and conditions for input VAT credit

Under the new regulations, the threshold for non-cash payments eligible for input VAT credit has been reduced from 20 million VND to 5 million VND.

The Law on VAT 2024 and its implementing regulations set out more detailed provisions on the conditions for input VAT credit, covering a various cases such as settlement by way of debt offsetting; loan or borrowing transactions in cash or in kind; payments made by employees duly authorized by the enterprise; payments made through shares or bonds; payments made in execution of coercive measures imposed by competent State authorities; installment or deferred payments; and export of goods via foreign e-commerce platforms.

7. Tax refund

Under Decree No. 181, one of the conditions for a VAT refund is that the seller has duly declared and remitted VAT corresponding to the invoices issued to the taxpayer requesting the refund. If the seller has not fully submitted VAT declaration dossier or still owes the VAT for the relevant tax period, the taxpayer shall not be eligible for a VAT refund in respect of the related invoices. 

This new requirement may create significant  practical challenges for taxpayers when applying for VAT refunds, as the buyer has no control over the seller’s tax declaration or payment obligations. Furthermore, any delay or non-compliance by the seller in fulfiling such obligations falls within the administrative and enforcement authority of the tax authorities and, in principle, should not constitute a basis for denying a VAT refund to the buyer.

VAT refund for investment projects:  

Investment expansion projects are entitled to a VAT refund if they meet the conditions prescribed by law. Where an investment project has been completed but the VAT refund for the investment period has not yet been claimed, the taxpayer must submit a VAT refund application dossier within one year from the date of completion of the investment project, or of the relevant investment stage or component.

If the investment project is terminated before any output VAT arises, the taxpayer must return the amount of VAT previously refunded.

For entities producing goods or providing services, subject to the 5% VAT rate:

Under the new tax law, the scope of entities eligible for tax refunds is expanded to include entities that solely produce goods or provide services subject to the 5% VAT rate. Where such entities have accumulated input VAT of at least VND 300 million or more after 12 consecutive months or four consecutive quarters, they are entitled to a VAT refund. Previously, only enterprises exporting goods or services were entitled for a refund of non-credit input VAT of VND 300 million or more in the relevant tax period.

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Disclaimer: This publication is for general update. This should not constitute our professional advice for a particular case, entity, or individual. Should you need further information or our professional assistance for your specific cases, please feel free to contact us.

Credit: We extend our sincere appreciation to Senior Partner Lieu Phan and Trainee Associate Nhi Doan for their valuable expertise and dedicated contributions to this article.