Value-added tax (VAT) is a tax levied on the additional value of goods and services generated during production, circulation, and consumption processes. The typical taxpayer of VAT is the consumer of the goods and services subject to tax. However, the entity responsible for fulfilling the tax obligations to the State is the producer or business entity. Depending on the goods and services, VAT is applied at different rates.
I. GOODS AND SERVICES SUBJECT TO A 0% VAT RATE
According to Article 9 of Circular No. 219/2013/TT-BTC, a 0% VAT rate applies to the following goods and services:
1. Exported Goods and Services
a) Exported goods include:
– Goods exported abroad, including those under export entrustment.
– Goods sold to non-tariff areas as regulated by the Prime Minister; goods sold to duty-free shops.
– Goods sold where the place of delivery and receipt is outside Vietnam.
– Spare parts and materials for the repair and maintenance of machinery and equipment for foreign entities and consumption outside Vietnam.
– Cases considered as exports according to the law:
+ Goods processed for export as per commercial law on international trade and agency agreements for buying and selling goods with foreign entities.
+ Goods exported locally as regulated by the law.
+ Goods exported for sale at international trade fairs and exhibitions abroad.
b) Exported services include: services provided directly to organizations or individuals abroad or in non-tariff areas and consumed outside Vietnam or within non-tariff areas.
An individual abroad refers to a foreigner who is not residing in Vietnam, a Vietnamese citizen residing abroad, or any individual outside Vietnam during the provision of the service. Organizations or individuals in non-tariff areas are those registered for business and other cases as stipulated by the Prime Minister.
If the service is provided partly in Vietnam and partly abroad, but the contract is signed between two taxpayers in Vietnam or a foreign entity with a permanent establishment in Vietnam, the 0% VAT rate applies only to the portion of the service provided abroad, unless the service concerns insurance for imported goods, in which case the 0% rate applies to the entire contract value. If the contract does not specify the portion of the service performed in Vietnam, the tax base is determined based on the percentage of costs incurred in Vietnam compared to the total cost.
Business entities providing the service are required to have documentation proving that the service was performed outside Vietnam.
2. Construction and Installation Activities Abroad and in Non-Tariff Areas
3. International Transportation International transportation includes passenger, luggage, and cargo transport on international routes from Vietnam to abroad or from abroad to Vietnam, or both departure and arrival points abroad, regardless of whether transportation is directly by vehicle.
Example: A transportation company in Vietnam has international vessels and accepts cargo from Singapore to South Korea. The revenue from transporting goods from Singapore to South Korea is considered international transport revenue.
4. Goods and Services Exempt from VAT When Exported, Except for Cases Not Applying the 0% Rate Services in the aviation and maritime sectors provided directly to organizations abroad or through agencies, including:
– Aviation services subject to the 0% rate: Catering services; takeoff and landing services; aircraft parking services; security services for aircraft; security checks for passengers, luggage, and cargo; baggage handling at airports; ground technical services; aircraft protection services; towing services; aircraft guidance services; renting passenger boarding bridges; flight operation services; transporting flight crews, attendants, and passengers within airport areas; cargo handling and checking; passenger service charges for international flights departing from Vietnamese airports.
– Maritime services subject to the 0% rate: Tugboat services; maritime pilotage; maritime rescue; port, pier services; cargo handling; mooring and unmooring services; cargo hold cleaning; cargo counting and delivery; registration services.
5. Other Goods and Services:
– Construction and installation activities abroad or in non-tariff areas.
– Goods and services exempt from VAT when exported, except for cases not applying the 0% rate.
– Repair services for aircraft and ships provided to foreign organizations or individuals.
II. CONDITIONS FOR APPLYING THE 0% VAT RATE
1. For Exported Goods
– There must be a contract for selling or processing exported goods; an export entrustment contract.
– Payment for the exported goods must be made through a bank, with other required documents as per the law.
– Customs declarations must be made according to the regulations.
For goods sold where the place of delivery and receipt is outside Vietnam, the business (seller) must have documentation proving that the delivery occurred outside Vietnam, such as contracts with foreign sellers, contracts with foreign buyers, shipping documents (e.g., international invoices, bills of lading, packing slips, certificates of origin), and payment documents via the bank.
2. For Exported Services
– There must be a service supply contract with organizations or individuals abroad or in non-tariff areas.
– Payment for the exported services must be made through a bank, with other required documents as per the law.
For aircraft and ship repair services provided to foreign organizations or individuals, to apply the 0% VAT rate, the aircraft or ship must go through the import procedure when entering Vietnam, and the export procedure must be done once the repair is completed.
3. For International Transportation
– There must be a transportation contract for passengers, luggage, or cargo between the transporter and the transporter of international routes from Vietnam to abroad or from abroad to Vietnam, or both departure and arrival points abroad as per applicable laws. For passenger transport, the transportation contract is the ticket.
– Payment must be made through a bank or other payment methods considered as bank payments. In cases where passengers are individuals, direct payment documentation is required.
4. For Aviation and Maritime Services Provided Directly to Foreign Organizations or Through Agencies
– Aviation services subject to the 0% rate must be performed at international airports and meet the following conditions:
+ There must be a service supply contract with foreign organizations, foreign airlines, or a request for service provision from these entities.
+ Payment for services must be made via a bank or other methods considered as bank payments. In cases where services are provided to foreign organizations or foreign airlines on an irregular basis, without a contract, direct payment documents from the foreign organization or foreign airline are required.
The conditions mentioned above do not apply to passenger service charges for international flights departing from Vietnamese airports.
– Maritime services subject to the 0% rate must be performed at port areas and meet the following conditions:
+ There must be a service supply contract with foreign organizations, maritime agents, or a request for service provision from these entities.
+ Payment for services must be made via a bank or through other payment methods considered as bank payments.
III. CASES WHERE THE 0% VAT RATE DOES NOT APPLY
The 0% VAT rate does not apply to the following cases:
– Reinsurance abroad; technology transfer, intellectual property transfer abroad; capital transfer, credit granting, securities investment abroad; derivative financial services; postal and telecommunications services to destinations outside Vietnam (including services provided to organizations or individuals in non-tariff areas, such as mobile phone cards with codes and face value sold to foreign countries or non-tariff areas).
Exported products that are resources or minerals are not subject to VAT, as stipulated in Clause 23, Article 4 of Circular 219/2013/TT-BTC, amended by Article 1 of Circular 25/2018/TT-BTC.
– Tobacco, alcohol, and beer imported and then exported are not subject to VAT on export, but input VAT cannot be refunded.
– Gasoline and oil sold to businesses in non-tariff areas purchased domestically.
– Vehicles sold to organizations or individuals in non-tariff areas.
– Services provided by businesses to organizations or individuals in non-tariff areas, including leasing of houses, halls, offices, hotels, warehouses; transport services for employees; catering services (except for industrial catering services or services in non-tariff areas).
– Services provided within Vietnam to organizations or individuals abroad, such as sports events, performances, art, culture, entertainment, and conferences, are not subject to the 0% VAT rate.
