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Vietnam's VAT Law for the Financial Sector - Vietnam Briefing News

HANOI – Vietnam’s VAT law touches on a number of goods and services. Please see our latest magazine on the country’s VAT law, entitled A Guide to Understanding Vietnam’s VAT, in order to receive a general overview of what VAT is and how to properly ensure that you follow all regulations involved.

In this article, we examine the VAT implications for a number of goods and services listed under the Financial category in Vietnam’s VAT law.

Transactions related to certain products and services are viewed as non-taxable transactions. These include the following financial activities:

  • Credit provision services provided by credit institutions;
  • Securities trading and other services;
  • Lending services of taxpayers that are not credit institutions;
  • Capital transfer;
  • Selling debts/ foreign currency trading;
  • Derivative financial services;
  • Selling security property of debts of government-established organizations of which 100 percent of chartered capital is held by the State to deal with bad debts of  Vietnam’s credit institutions.

The chargeable amount of taxable price includes the following terms:

  • For goods and service sale and purchase agency and brokerage activities, remunerated or commissioned import or export entrustment activities, the taxed price is VAT-exclusive remunerations or commissions earned from these activities.
  • Offshore capital transfer, credit extension or securities investment;
  • Derivative financial services.

The Financial category has exposure to more than one tax category depending on what the good or service is.  See below for further clarification.

0% Tax Rate

Applies to exported goods and services; work construction and installation for export processing enterprises; international transportation; goods and services not liable to VAT upon exportation.

Certain types of Financial activities are ineligible for the 0 percent tax rate. These include:

  • Offshore re-insurance;
  • Offshore capital transfer, credit extension or securities investment;
  • Derivative financial services;
  • Online payment, digitalized service (if provided to overseas organizations and individuals).

Cases ineligible for the 0% tax rate are subject to the corresponding tax rates applicable to goods and services sold or provided domestically.

10% standard tax rate

This tax rate applies to all goods and services not otherwise specified. The VAT rates previously specified apply uniformly to each type of good or service at the stages of importation, manufacture, processing and trading.

Exemptions

A variety of goods and service transactions may qualify to be exempted from VAT. It is best to contact a tax professional to ensure that all regulations are followed.

Special Regimes or Arrangements

Sale of business as a going concern:

The VAT regulations state that “Capital transferring activities including transferring a part or entire invested capital and sale of business to other business for production and doing business, transferring securities and other capital transferring activities in accordance with the laws shall not be subject to VAT”. Therefore, sale of business as a going concern is not subject to VAT.

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Related Reading

In this issue of Vietnam Briefing, entitled A Guide to Understanding Vietnam’s VAT, we attempt to clarify the entire VAT process by taking you through an introduction as to what VAT is, who and what is liable, and how to pay it properly. We first take you through the basics of VAT in Vietnam before taking you deeper into the topic. Additionally, we provide updates on the new changes to the VAT process and explain how they will impact your business. The magazine is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore until the end of April.

Vietnam’s VAT Law for Machinery and Equipment

Vietnam’s VAT Law for Media

Vietnam’s VAT Law for Gifts

Vietnam’s VAT Law for the Financial Category

Vietnam’s VAT Law for Housing

Vietnam’s VAT Law for Healthcare

Vietnam’s VAT Law for Imports/Exports

Commercial Housing Receives VAT Incentive

Calculating Value-added Tax in Vietnam

Vietnam Issues New VAT Regulations

Valued-added Tax in Vietnam: Filing, Payment and Refund