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Vietnam's VAT Law for Gifts - 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 Gifts category in Vietnam’s VAT law.

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Transactions related to certain products and services are viewed as non-taxable transactions, these include: 

  • Goods imported as humanitarian aid or non-refundable aid; gifts for state agencies, political organizations, social-political organizations, social-political-professional organizations, social organizations, etc., donations or gifts for Vietnam-based individuals and individuals within diplomatic immunity quotas; belongings of foreign organizations and individuals within diplomatic immunity quotas; and personal effects within duty-free luggage quotas.
  • Goods and services sold to foreign organizations or individuals or international organizations for use as humanitarian aid, and non-refundable aid to Vietnam.

The chargeable amount of taxable price includes the following terms:

  • For goods and services (including those purchased from outside or produced by business establishments themselves) which are used for barter, presentation as gifts, donation or payment of salaries, the taxed price is that of goods or services of the same or similar type at the time such activities are carried out.
  • Particularly for letters of invitation (free-of-charge) to art performances, fashion shows, beauty and model contests or sports competitions licensed by competent state agencies, the taxed price is zero (0).
  • Art performance organizers shall determine and take responsibility for the number of letters of invitation and lists of organizations and individuals that will receive letters of invitation before art performances or sports competitions take place. Those who commit fraudulent acts by collecting money for letters of invitation shall be handled according to the law on tax administration.

The Gifts 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.

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

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.

Deduction and Recovery of Input Tax – Saving Your Money 

Business establishments which pay VAT according to the tax credit method are entitled to input VAT credit as follows:

  • The input VAT on goods used by enterprises as donations, gifts or presents or for sale promotion or advertising in various forms to serve the production of and trading in VAT-liable goods and services is creditable.
  • The input VAT on goods and services purchased by businesses for the production of or trading in goods and provision of services to foreign organizations and individuals or international organizations for provision of humanitarian aid or non-refundable aid may be wholly credited.

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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 the Financial Category

Vietnam’s VAT Law for Farming and Animals

Vietnam’s VAT Law for Housing

Vietnam’s VAT Law for Healthcare

Vietnam’s VAT Law for Imports/Exports