FDI enterprises in Vietnam pay VAT at 10% — temporarily reduced to 8% through December 31, 2026 under Resolution 204/2025/QH15. All enterprises, including foreign-invested companies, must register for VAT from day one regardless of revenue. The system operates on input-output credit mechanics: you charge VAT on sales, claim credits on purchases, and pay the net difference.
This guide covers the VAT lifecycle from registration through refund — structured for tax managers and finance teams setting up or running FDI operations.
VAT Registration: Day-One Obligation for FDI
Every foreign-invested enterprise must register for VAT within 10 working days of receiving the Enterprise Registration Certificate (ERC). There’s no grace period, no revenue threshold, no opt-out.
Registration runs in parallel with two other mandatory steps: e-invoice provider setup and tax code activation through the General Department of Taxation portal. Miss any of these, and your first supplier payment creates an unrecoverable input VAT gap — you can’t claim credits for purchases made before registration.
What registration requires:
- E-tax portal registration at thuedientu.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 you can’t credit. Coordinate registration timelines with your company formation process to avoid this cash flow hit.
VAT Rate Structure: Which Rate Applies to Your Business?
Vietnam’s VAT system uses four rate tiers. Most FDI companies operate at 8% (temporary) or 10% (standard), but knowing which rate applies to each product line prevents classification disputes during audits.
| Rate | Scope | Common FDI Scenarios |
|---|---|---|
| 0% | Direct exports, international transport, goods sold to non-tariff zones | Manufacturing for export, EPZ operations, cross-border logistics |
| 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
If your company sells goods at different VAT rates — say 0% for exports and 8% for domestic sales — you must maintain separate accounting records by rate category. This isn’t optional. Failure to separate means the tax authority applies the highest applicable rate to your entire revenue per Law 48/2024/QH15.
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. Get this wrong, and your VAT refund application faces rejection.
Input vs. Output VAT: The Cash Flow Mechanics
VAT operates as a credit mechanism, not a direct cost. Understanding the flow prevents both overpayment and missed credits.
Output VAT — the VAT you charge customers on each sale. You collect this on behalf of the government. It’s not your revenue.
Input VAT — the VAT your suppliers charge you on purchases. This is your credit against output VAT.
Net VAT payable = Output VAT − Input VAT. Positive balance means you owe the government. Negative balance (input exceeds output) carries forward to the next period — or qualifies for refund if 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. Switch to monthly after the first full fiscal year if revenue exceeds the threshold. The choice locks in for the calendar year — you can’t switch mid-year.
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 — bank transfer, not cash
- Business-purpose expenditure — personal expenses or non-deductible costs don’t qualify
⚠️ Cash trap: pay a VND 6 million supplier invoice in cash? You lose the entire input VAT credit on that transaction. Not just the portion above VND 5 million — the full amount.
Supplier Invoice Compliance: Your Biggest VAT Risk
Here’s what most VAT guides don’t tell you: the buyer bears the risk of invalid seller invoices. If your supplier issues a defective e-invoice, fails to file their own VAT return, or loses their tax registration — you lose the input credit. Not them. You.
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)
From January 1, 2026, Decree 359/2025/ND-CP removed the requirement that sellers must have declared and paid VAT before buyers can claim VAT refunds on accumulated input VAT. This does not affect routine input credit rules — those remain unchanged. The other invoice validation requirements still apply.
Monthly Reconciliation Protocol
Don’t wait until refund filing to discover invalid invoices. Build a monthly check:
- Cross-reference supplier tax codes against the GDT active taxpayer database
- Verify all invoices ≥ VND 5 million 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 refund claim.
VAT Refund: Three Paths for FDI Enterprises
FDI companies access VAT refunds through 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 recovering input VAT on capital expenditure — equipment, construction, infrastructure. This 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 your Investment Registration Certificate project timeline expires, not when you decide to file.
Key detail: you 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). This mainly benefits agricultural processors, educational services, and medical equipment distributors.
Mixed-rate operations (5% and 10% combined) don’t qualify for this path. Separate accounting by rate is mandatory.
FCT Overlap: When Foreign Suppliers Create VAT Liability
Foreign Contractor Tax includes a deemed VAT component that catches FDI companies managing cross-border service payments. When you pay a foreign entity without a Vietnam permanent establishment — for software licenses, management fees, consulting, or royalties — you withhold both deemed CIT and deemed VAT on their 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: your contract with the foreign supplier needs to specify whether pricing is FCT-inclusive or exclusive. Inclusive means the foreign contractor absorbs the tax. Exclusive means you gross up — and the cost difference is 10-15% of contract value. Map this contract-by-contract before finalizing commercial terms.
One alternative: if the foreign contractor registers directly for VAT in Vietnam (Circular 69/2025, Article 9), they charge and file VAT themselves instead of you withholding. This gives them 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 per Decree 125/2020/ND-CP. Late payment interest: 0.03%/day on unpaid VAT, uncapped. A VND 500 million 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.
Disclaimer: This article reflects VAT regulations current as of March 2026. VAT rules change frequently — consult qualified tax advisors for compliance guidance specific to your operations.
