The Law on Value Added Tax 2024, effective from July 1, 2025, will have a profound impact on FDI enterprises in Vietnam, especially in adjusting tax rates, tax refunds and requiring strict compliance with invoices and payments. DNP Viet Nam Law Firm will provide FDI enterprises with information on this issue!
1. New highlights of the VAT Law effective from July 1, 2025:
1.1 Adjustment of taxable objects and tax rates:
- Adjustment of non-VAT taxable objects: The new law specifically stipulates 26 groups of subjects that are not subject to tax (Article 5 of the 2024 Law on VAT), including: primary agricultural products, financial services, securities; tax exemption for imported goods used to finance and support the prevention of natural disasters, epidemics, and wars.
- Change from non-taxable to 5% taxable (Clause 2 Article 9 Law on VAT 2024): including fertilizers, fishing vessels, scientific equipment, teaching equipment, cultural services, sports, film production, etc.
- Add 0% tax rate (Clause 1, Article 9 of the 2024 VAT Law): applied to international transportation activities, construction and installation of works outside Vietnam’s territory in duty-free zones, export services (aviation, customs, logistics), digital services provided to organizations/individuals abroad, duty-free goods, etc.
1.2 Regarding tax calculation price for imported goods:
CSPL:Article 7 of the Law on VAT 2024
The price for calculating VAT on imported goods includes: import tax value + additional import tax (if any) + special consumption tax (if any) + environmental protection tax (if any). This is a change from the current calculation method which is only based on the price at the border gate.
1.3 Additional regulations for promotional goods:
The new law stipulates that the VAT taxable price is 0 for goods and services used for promotions in accordance with commercial law (a point never mentioned in the 2008 VAT Law).
1.4 Regarding conditions for input VAT deduction:
CSPL:Clause 2, Article 14 of the 2024 Law on VAT.
- From July 1, 2025, all transactions for purchasing goods and services must have non-cash payment documents, including transactions under 20 million dong– different from current regulations that only apply to transactions from 20 million or more.
- Expand the deduction of additional documents such as packing list, bill of lading, insurance documents in export.
- Clearly stipulate the condition for input VAT deduction is having non-cash payment documents for purchased goods and services, except for some special cases as prescribed by the Government.
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1.5 Regarding VAT refund:
CSPL:Clause 3, Article 15, Law on VAT 2024
- Business establishments applying a tax rate of 5%, if in 12 consecutive months or 4 consecutive quarters the input VAT amount not yet deducted is from 300 million VND or more, will be refunded.
- Supplementing regulations that imported goods then exported to other countries are not eligible for tax refund.
- Stipulate to avoid difficulties in implementation of VAT refund for investment projects; tax refund for exported goods and services;
- No VAT refund for investment projects of business establishments in conditional investment and business sectors when they do not meet the business conditions prescribed by the law on investment or do not ensure that they maintain sufficient business conditions during operation.
2. Impact on FDI enterprises:
| Main content | Positive impact | Negative impact | |
| 1 | VAT rate | Apply 0% tax rate for logistics and export, helping to reduce output costs. | Some goods and services are taxed from 5% to 10%, increasing costs. |
| 2 | Non-taxable entities | Review the list of tax exemptions to reduce tax fraud. | Some inputs move from non-taxable to taxable, increasing input costs. |
| 3 | VAT taxable price | Clarify the method of calculating taxable prices, creating convenience when applying tax calculation for FDI enterprises. | Importing enterprises will be subject to import tax, special consumption tax, and environmental tax. |
| 4 | Conditions for input tax deduction | Increase transparency and financial discipline in the payment system. | Remove the exemption threshold below 20 million, increasing the burden of controlling payment documents. |
| 5 | VAT refund | Facilitate tax refunds for businesses with large un-deducted cash flows. | Long wait for refund if not eligible for 12 months or 4 quarters. |
| 6 | Invoice and tax management | Increase transparency, reduce risks from fake invoices. | Increased responsibility for invoice control – accounting systems must meet new requirements. |
| 7 | Administrative procedures | Reduce time and cost of tax declaration thanks to post-audit. | Enterprises need to upgrade internal systems and processes to meet post-audit mechanisms. |
| 8 | Investment environment | Create a legal foundation consistent with global minimum tax, in line with international trends. | Indirect tax incentives will decrease if there is no timely compensation policy from the State. |
The 2024 VAT Law brings both opportunities and challenges for FDI enterprises. The 0% tax rate incentives help reduce export costs, while new regulations on tax deduction and refund require stricter compliance. Enterprises need to proactively review their accounting, invoice and payment systems to adapt, optimize cash flow and ensure compliance in a rapidly changing legal context.
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