Vietnam’s New VAT Law: Key Changes Effective July 1, 2025

Exported Goods & Services Eligible for 0% VAT

The new VAT Law clearly defines the scope of exported goods and services, distinguishing them from previous regulations:

• Exported goods: Items sold from Vietnam to overseas entities for use outside the country or goods supplied from inland Vietnam to companies in non-tariff zones, specifically for export production.
• Exported services: Directly provided to foreign individuals or businesses and consumed outside Vietnam. Services delivered to companies in non-tariff zones are also considered exported if they support export-related activities.

E-Commerce & Digital Services Taxation

• Foreign vendors providing goods and services through e-commerce platforms or offering digital services will be subject to a 10% VAT rate starting July 1, 2025. Businesses operating in this space must ensure compliance with the new tax regulations.

VAT Refund Adjustments

• The new VAT Law abolishes VAT refunds for ownership transfers, mergers, consolidations, separations, or de-mergers—allowing refunds only in cases of dissolution.
• Additionally, businesses exclusively engaged in producing goods and offering services taxed at a 5% VAT rate may now claim a VAT refund if their unclaimed input VAT exceeds VND 300 million (approximately US$11,900) after 12 consecutive months or four quarters.

Updated VAT Compliance & Payment Thresholds

Key compliance updates include:

• Removal of the non-cash payment limit for transactions over VND 5 million (US$192), which must now be processed via bank transfer unless an exception applies.
• Raising the VAT exemption threshold for individual businesses and households from VND 100 million (US$3,900) to VND 200 million (US$7,900), effective January 1, 2026.

On-Spot Import & Export Adjustments

Vietnamese authorities are considering abolishing the on-spot import-export scheme, impacting businesses reliant on this mechanism. A recent Official Letter (No. 1872/BTC-TCT, dated February 17, 2025) confirmed that goods sold to foreign companies with a Vietnam presence but stored in bonded warehouses will no longer qualify as exports and will not receive the 0% VAT rate.

Global Minimum Tax (GMT) & Transfer Pricing Updates

• The Global Minimum Tax (GMT) regulation applies in Vietnam from 2024, though specific guidance remains under development.
• Decree No. 20/2025/ND-CP introduces revised criteria for related-party transactions, affecting financial borrowings, transfer pricing disclosures, and interest deductibility caps.

New VAT Invoice & Declaration Standards

• Decree No. 70/2025/ND-CP, effective June 1, 2025, simplifies e-invoice issuance and enhances compliance procedures.
• The annual revenue threshold for VAT compliance is increased, offering greater flexibility for small businesses.