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May 2024 Tax Alert

The draft Law on Value Added Tax


At the afternoon session of 23 April, 2024, Minister of Finance Ho Duc Phoc submitted The draft Law on Value Added Tax (VAT) to the National Assembly Standing Committee.


According to the submission of the draft law, the amended Draft Law on Value Added Tax (Draft) consists of 4 chapters, 16 articles, amending and supplementing the contents specified in 10 Articles of the current Law on Value Added Tax (VAT).


Some notable changes in the draft are as follows:


  • Regarding non-taxable subjects: amending the regulation "goods and services of business households and individuals with an annual turnover of VND 100 million or less" to "goods and services of business households and individuals with annual turnover below the level prescribed by the Government" are not subject to VAT.

This is said to ensure flexibility, proactively adjust to suit the reality and requirements of socio-economic development of the country in each period.


  • Proposing to transfer some groups of goods and services to VAT subjects to comply with international practices and avoid the effect of increasing costs, reducing complications for enterprises when both providing taxable goods and services and providing non-taxable goods and services (must declare,  allocate input VAT for general use for both taxable and non-taxable activities). For example, fertilizers; fishing vessels in offshore areas and waters; specialized machinery and equipment for agricultural production; universal postal, telecommunications and In-ter-net services;


  • Supplementing a number of groups of goods and services to non-VAT subjects to legislate regulations that are stably implemented in documents under the Law: Such as, assets of organizations or individuals that are not doing business, not being VAT payers; national reserves sold by the National Reserve Authority; charges and charges in accordance with the law on fees and charges; public passenger transportation by tran, inland waterway vehicles...


  • Group of non-taxable goods and services: The draft Law retains 26 groups but has narrowed down goods and services subject to non-VAT in these 26 groups (removing 12 types of goods and services subject to non-VAT, including:  fertilizer; specialized machinery and equipment for agricultural production; offshore fishing vessels (the Law on Fisheries has changed its name to fishing vessels in offshore areas and waters); securities depository; market organization services of stock exchanges or stock exchange centers; public postal services; public telecommunications services; universal In-ter-net services under the Government's program; zoo maintenance services; services for maintaining flower gardens and parks; street tree maintenance services; public lighting services).


  • Regarding taxable prices: Supplementing regulations on the determination of deductible land prices when determining taxable prices for real estate business activities, taxable prices for specific production and business activities (electricity production activities of Vietnam Electricity; transportation,  loading and unloading; tourism services in the form of travel; pawn services; VAT-taxable books sold at the correct issue price (cover price);...) according to the Government's regulations to ensure the legal basis for the competence to assign the Government and legislate regulations has been implemented stably and in accordance with the current situation.


  • Regulations on subjects applying the 0% tax rate: Supplemented quite a lot, including specific provisions on 3 groups of goods that are not allowed to apply the 0% tax rate to legislate regulations that are being implemented stably in documents under the Law. Specifically, cigarettes, alcohol, beer imported and then exported; gasoline and oil purchased domestically sold to businesses in the non-tariff zone; cars sold to organizations and individuals in the non-tariff zone; goods supplied to individuals not registered for business in the non-tariff zone.


+ Supplementing regulations that the tax rate of 0% cannot be applied to products and services provided on digital platforms according to the Government's regulations to ensure flexibility for determining whether these products and services are consumed in Vietnam or abroad at the time of supply.


  • Goods and services subject to the 5% tax rate: The Draft has narrowed from 15 groups to 12 groups and removed 2 categories of goods. Specifically, 3 groups of goods and services (fresh food, unprocessed forest products; sugar, by-products in sugar production, including sugar rust, bagasse, sludge; cultural activities, exhibition activities, physical training, sports, art performances, film production, import, distribution and screening) and 2 types of goods (preliminarily processed turpentine; types of equipment,  specialized instruments for teaching, research, scientific experiments).


According to the agenda, the Law on Value Added Tax (amended) will be submitted to the National Assembly at its 7th session this May.

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05.2024 Tax Alert - RSMHanoi
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