Vietnam VAT for FDI applies at 10% — temporarily reduced to 8% through December 31, 2026 under Resolution 204/2025/QH15. All foreign-invested enterprises must register for VAT from day one regardless of revenue. The input-output credit mechanism requires enterprises to charge output VAT on sales, claim input credits on purchases, and remit the net difference monthly or quarterly.
VAT compliance for FDI operations involves four critical areas: registration, rate classification, input credit management, and refund eligibility. Incorrect supplier invoice handling — not the rate itself — causes the majority of FDI VAT losses. VAT also intersects with CIT deductibility — invalid invoices forfeit both input VAT credit and CIT deduction simultaneously.
VAT Registration: Day-One Obligation for FDI
VAT registration is a mandatory component of the overall post-licensing tax compliance setup for every foreign-invested enterprise within 10 working days of receiving the Enterprise Registration Certificate (ERC). No grace period, no revenue threshold, no opt-out applies.
Registration runs in parallel with two other mandatory steps: e-invoice provider setup and tax code activation through the General Department of Taxation portal. Missing any step means the enterprise’s first supplier payment creates an unrecoverable input VAT gap — credits cannot be claimed for purchases made before registration.
What registration requires:
- E-tax portal registration at dichvucong.gdt.gov.vn — a single account covers all electronic tax filings (VAT, CIT, PIT withholding) and online payment
- Digital certificate from an approved CA (VNPT-CA, FPT-CA, Viettel-CA, or BKAV-CA) for e-tax portal access and e-invoice signing
- E-invoice registration through an approved provider (VNPT, Viettel, FPT, or others)
- Bank account linked to tax code for payment and refund processing
⚠️ Common mistake: starting procurement before completing e-invoice registration. Equipment purchased during the gap — even if for the investment project — generates invoices the enterprise cannot credit. Registration timelines should be coordinated with the company formation process to avoid this cash flow hit.
VAT rate structure: rate categories for FDI operations
Vietnam’s VAT rate structure applies four tiers to FDI operations. Most foreign-invested companies operate at 8% (temporary) or 10% (standard). Identifying the correct rate for each product line prevents classification disputes during tax audits.
| Rate | Scope | Common FDI Scenarios |
|---|---|---|
| 0% | Direct exports, international transport, goods sold to non-tariff zones | Manufacturing for export, EPZ operations, import/export operations |
| 5% | Essential goods: clean water, medical equipment, educational materials, agricultural inputs | Rare for typical FDI — mainly healthcare, agri-processing |
| 8% | Temporary reduction covering most taxable goods/services (Resolution 204/2025/QH15, through Dec 2026) | Most FDI trading, services, manufacturing for domestic market |
| 10% | Standard rate — also applies to telecom, financial services, real estate, luxury goods excluded from the 8% reduction | Fintech, insurance, premium retail, property development |
| Exempt | Financial derivatives, life insurance, land-use rights transfers, certain healthcare | Tech-finance hybrids need careful classification |
Mixed-Supply Allocation
FDI enterprises selling goods at different VAT rates — 0% for exports and 8% for domestic sales, for example — must maintain separate accounting records by rate category. Separate accounting is mandatory under Law 48/2024/QH15. Failure to segregate triggers the highest applicable rate across the enterprise’s entire revenue.
Practical example: a manufacturing FDI exports 70% of production (0% VAT) and sells 30% domestically (8% VAT). Input VAT on shared costs (utilities, rent, admin) must be allocated proportionally. The allocation formula: input VAT credit = (export revenue / total revenue) × total input VAT on shared costs. Incorrect allocation leads to VAT refund application rejection.
Input vs. Output VAT: The Cash Flow Mechanics
VAT in Vietnam operates as a credit mechanism, not a direct cost to the enterprise. The input-output flow determines whether an FDI company owes the government or qualifies for a refund.
Output VAT — VAT charged to customers on each sale. The enterprise collects output VAT on behalf of the government. Output VAT is not company revenue.
Input VAT — VAT charged by suppliers on purchases. Input VAT serves as a credit against output VAT obligations.
Net VAT payable = Output VAT − Input VAT. A positive balance means the enterprise owes the government. A negative balance (input exceeds output) carries forward to the next period — or qualifies for refund once thresholds are met.
Filing Frequency
Two options exist under Decree 126/2020/ND-CP:
| Method | Threshold | Deadline | Best For |
|---|---|---|---|
| Monthly | Revenue > VND 50 billion/year | 20th of following month | Large FDI with high transaction volume |
| Quarterly | Revenue ≤ VND 50 billion/year | Last day of first month following quarter | Smaller FDI, startups in investment phase |
New FDI companies default to quarterly filing for the first year. Enterprises switch to monthly after the first full fiscal year if revenue exceeds the threshold. The filing frequency locks in for the calendar year — mid-year switching is not permitted.
The Input Credit Trap
Not all input VAT is creditable. Three conditions must be met simultaneously:
- Valid e-invoice from supplier with correct tax code (TIN), item description, and digital signature
- Non-cash payment for invoices ≥ VND 5 million (~USD 200) — bank transfer required, not cash
- Business-purpose expenditure — personal expenses or non-deductible costs are excluded
⚠️ Cash trap: paying a VND 6 million supplier invoice in cash forfeits the entire input VAT credit on that transaction. Not just the portion above VND 5 million — the full amount.
Supplier invoice compliance: the primary FDI VAT risk
VAT input credit risk falls entirely on the buyer, not the seller. When a supplier issues a defective e-invoice, fails to file their own VAT return, or loses their tax registration — the purchasing enterprise loses the input credit. The supplier faces no consequence for the buyer’s lost credit.
What Makes an Invoice Invalid?
- Supplier’s tax code is deregistered or suspended
- E-invoice issued through an unauthorized provider
- Invoice details don’t match actual goods/services delivered
- Supplier hasn’t declared and paid their own VAT (requirement removed for VAT refund claims from January 2026)
Decree 359/2025/ND-CP (effective January 1, 2026) removed the requirement that sellers must have declared and paid VAT before buyers can claim VAT refunds on accumulated input VAT. The decree change does not affect routine input credit rules — those remain unchanged. All other invoice validation requirements still apply.
Monthly Reconciliation Protocol
FDI enterprises should not wait until refund filing to discover invalid invoices. A monthly reconciliation protocol catches problems early:
- Cross-reference supplier tax codes against the GDT active taxpayer database
- Verify all invoices ≥ VND 5 million (~USD 200) have matching bank transfer records
- Flag suppliers with irregular patterns — new companies, address changes, tax code anomalies
- Archive all purchase contracts alongside invoices for audit defense
Manufacturing FDI companies with 50+ suppliers process thousands of invoices monthly. One invalid supplier can block an entire refund batch. The reconciliation cost is trivial compared to a rejected VND 2 billion (~USD 80,000) refund claim.
VAT Refund: Three Paths for FDI Enterprises
VAT refund eligibility for FDI enterprises follows three distinct channels. All require uncredited input VAT reaching VND 300 million (~USD 12,000) as the minimum threshold under Decree 181/2025/ND-CP.
Path 1: Investment-Phase Refund
Pre-revenue FDI projects recover input VAT on capital expenditure — equipment, construction, infrastructure. The investment-phase refund path has no revenue cap, only the VND 300 million threshold.
Applications must be submitted within one year of project completion or commencement of operations. The clock starts when the Investment Registration Certificate project timeline expires, not when the enterprise decides to file.
Key detail: FDI enterprises must file separate VAT declarations for the investment project, distinct from any existing operational entity. Commingling declarations is the #1 rejection reason for investment-phase refunds. Full procedures are covered in the Investment VAT Refund Guide.
Path 2: Export Activity Refund
For enterprises with export revenue, input VAT on exported goods and services qualifies for refund. Two conditions:
- Uncredited input VAT reaches VND 300 million
- Refund amount capped at 10% of export revenue, excluding re-exports (Circular 69/2025/TT-BTC, Appendix II)
The 10% cap is the constraint most exporters hit. A company with VND 10 billion in export revenue can claim maximum VND 1 billion in refund — even if actual uncredited input VAT is higher. The excess carries forward.
Processing timelines range from 6 working days (low-risk, “refund first, audit later”) to 40 working days (high-risk, “audit first, refund later”). Clean compliance history and consistent operations earn the faster track. For the full refund process including documentation requirements, see the dedicated VAT Refund Guide for FDI.
Path 3: 5% VAT Rate Businesses
New from July 2025: businesses operating exclusively at the 5% VAT rate can claim refunds once uncredited input VAT hits VND 300 million over 12 consecutive months or 4 quarters (Decree 181/2025/ND-CP, Article 31). The 5%-rate refund path mainly benefits agricultural processors, educational services, and medical equipment distributors.
Mixed-rate operations (5% and 10% combined) do not qualify for the 5%-rate refund path. Separate accounting by rate is mandatory.
FCT Overlap: When Foreign Suppliers Create VAT Liability
Foreign Contractor Tax (FCT) includes a deemed VAT component affecting FDI companies managing cross-border service payments. When an FDI enterprise pays a foreign entity without a Vietnam permanent establishment — for software licenses, management fees, consulting, or royalties — the Vietnamese party withholds both deemed CIT and deemed VAT on the contractor’s behalf.
Deemed VAT rates vary by service type under Circular 69/2025/TT-BTC (Appendix I):
| Service Type | Deemed VAT | Deemed CIT | Total FCT |
|---|---|---|---|
| General services | 5% | 5% | 10% |
| Management fees | 5% | 5% | 10% |
| Royalties, licensing | 5% | 10% | 15% |
| Construction (with materials) | 3% | 2% | 5% |
| Leasing equipment | 5% | 5% | 10% |
⚠️ Contract trap: each contract with a foreign supplier must specify whether pricing is FCT-inclusive or exclusive. Inclusive means the foreign contractor absorbs the tax. Exclusive means the FDI enterprise grosses up — and the cost difference is 10-15% of contract value.
One alternative: if the foreign contractor registers directly for VAT in Vietnam (Circular 69/2025, Article 9), the contractor charges and files VAT directly instead of the Vietnamese party withholding. Direct registration gives contractors input credit access but creates compliance obligations they may resist. For the full FCT mechanics, see the Foreign Contractor Tax Guide.
Key Deadlines Calendar
| Obligation | Deadline | Notes |
|---|---|---|
| VAT registration | Within 10 working days of ERC | Simultaneous with e-invoice setup |
| Monthly VAT filing | 20th of following month | For revenue > VND 50B/year |
| Quarterly VAT filing | Last day of 1st month of following quarter | For revenue ≤ VND 50B/year |
| Refund application | Rolling — once threshold met | 6-40 working days processing |
| Annual VAT reconciliation | 90 days after fiscal year-end | Part of CIT finalization package |
Late filing penalties: VND 2-25 million (~USD 80-1,000) per Decree 125/2020/ND-CP. Late payment interest: 0.03%/day on unpaid VAT, uncapped. A VND 500 million (~USD 20,000) VAT liability delayed 60 days generates VND 9 million in interest — enough to fund the monthly reconciliation process that would have prevented it.
For how VAT fits within the broader tax framework — including CIT, PIT, FCT, and compliance operations — see the Vietnam Tax System Overview. Indochina Link Vietnam’s accounting and tax compliance team manages VAT registration, filing, and refund coordination for FDI enterprises.
This article reflects VAT regulations current as of March 2026. VAT rules change frequently — consult qualified tax advisors for compliance guidance specific to each enterprise’s operations.
