Vietnam’s new VAT law under Law 48/2024/QH15, effective July 1, 2025, changes three compliance fundamentals for FDI enterprises: the standard rate drops from 10% to 8% through December 2026 (Resolution 204/2025/QH15), the non-cash payment threshold for input VAT deduction falls from VND 20 million to VND 5 million (~USD 200), and on-spot export treatment is redefined under Law 90/2025. VAT refund rules also tighten — investment projects now need VND 300 million (~USD 12,000) accumulated input VAT before filing. The Vietnam tax system overview covers how these changes fit within the broader 2025-2026 reform cycle.
VAT Rate Changes: 8% Reduction and Sector Exclusions
VAT rate reduction under Resolution 204/2025/QH15 temporarily lowers the standard rate from 10% to 8% through December 31, 2026. The reduction applies to most goods and services — but several FDI-heavy sectors are excluded.
Sectors Maintaining 10%
| Sector | VAT Rate | FDI Impact |
|---|---|---|
| Telecoms & IT services | 10% | Software development may qualify for 0% if consumed offshore |
| Financial services & fintech | 10% | Including payment processing |
| Banking & securities | 10% | — |
| Insurance | 10% | — |
| Real estate business | 10% | Property management and sales |
| Metals, prefabricated products | 10% | Raw materials vs finished goods distinction applies |
Dual-activity FDI companies — for example, a manufacturer that also leases warehouse space — must segregate 8% and 10% activities in accounting systems. Failure to separate creates input VAT allocation disputes during audits. The accounting framework should track revenue by VAT rate category from the first transaction. For the full VAT compliance framework including registration, credit mechanics, and refund paths, see the VAT Guide for FDI.
Input VAT allocation for mixed activities: When input costs cannot be attributed to a specific rate category (shared rent, utilities, management fees), Article 14 of the VAT Law requires proportional allocation based on the ratio of 8% taxable revenue to total revenue. FDI companies with manufacturing (8%) and real estate leasing (10%) must calculate this ratio monthly and reconcile annually.
Agricultural machinery, fertilizers, and offshore fishing equipment move from VAT-exempt to the 5% bracket (Law 48/2024/QH15, Article 9). For FDI enterprises purchasing these inputs, the shift from exemption to 5% is actually favorable — exemption blocked input VAT recovery, while the 5% rate allows deduction.
Cash Flow and System Impact
- Cash flow: 20% reduction in VAT payment obligations on qualifying sales
- System updates: Accounting software and POS systems require configuration for dual-rate processing
- Invoice compliance: Separate tracking needed for 8% qualifying goods vs 10% excluded sectors
- Transfer pricing: FDI manufacturers should evaluate whether temporary rate changes warrant adjusting TP policies
0% VAT for Exports and On-Spot Transactions
VAT at 0% applies to qualifying export goods and services, enabling FDI enterprises to reclaim all input VAT paid during production (Law 48/2024/QH15, Article 9). The 0% rate differs fundamentally from VAT exemption — exemption prohibits input VAT recovery entirely.
Eligible activities: manufactured goods sold to foreign buyers with customs declarations, cross-border services consumed outside Vietnam, and goods sold to Non-Tariff Zones or Export Processing Enterprises. Services consumed within Vietnam are subject to standard VAT even if paid by foreign entities — the “place of consumption” test is strictly enforced.
On-Spot Export: Redefined Under Law 90/2025
On-spot export treatment changes significantly from July 1, 2025. Law 90/2025 redefines on-spot import-export transactions as “goods delivered and received in Vietnam as designated by a foreign trader under contracts for sale, processing, leasing, or borrowing between Vietnamese enterprises and the foreign trader.”
Two key changes for FDI:
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Commercial presence requirement removed. Previously, the foreign buyer needed a presence in Vietnam for on-spot transactions to qualify. Law 90/2025 eliminates this requirement — expanding eligibility for 0% VAT treatment.
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Bonded warehouse scenarios clarified. When goods are exported to a bonded warehouse and later retrieved by another Vietnamese company, the 0% rate may apply if the foreign buyer has no commercial presence in Vietnam. If the foreign buyer has a Vietnamese establishment, the transaction does not qualify (per Official Letter 1872/BTC-TCT, February 2025).
For past on-spot shipments where the 0% rate was disputed, retroactive resolution requires case-by-case discussion with tax authorities. FDI enterprises with existing on-spot arrangements should review documentation against the new definition before the July 2025 effective date.
Non-Tariff Zone sales: Goods and services sold to organizations within Non-Tariff Zones qualify for 0% only when consumed within the zone and directly supporting export production activities. This limitation matters for FDI suppliers serving EPEs — general office supplies or non-production services sold to EPE companies do not qualify for 0% treatment.
For FDI enterprises with mixed domestic and export sales, maintaining separate revenue streams and documentation for each category is critical. Commingling export and domestic invoices creates allocation disputes during VAT refund applications.
Non-Cash Payment: VND 5 Million Threshold
VAT input credit eligibility now requires non-cash payment for all transactions exceeding VND 5 million (~USD 200), effective July 1, 2025 (Law 48/2024/QH15, Decree 181). The previous threshold was VND 20 million — a 75% reduction that catches far more routine transactions.
Practical steps: Reduce petty cash limits to VND 4 million maximum, issue corporate cards for business expenses, and notify suppliers that cash payments above VND 5 million are not accepted for VAT-applicable purchases.
The split payment trap: The VND 5 million rule applies to the transaction total, not individual line items. A VND 10 million (~USD 400) purchase split into two VND 5 million cash payments still triggers disqualification if tax authorities determine it was a single transaction. Each payment must be documented independently with separate invoices and distinct business purposes.
Audit pattern: Tax authorities cross-reference bank statements against purchase invoices. If input VAT claims significantly exceed payments routed through banking channels, an automated flag triggers desk review before field inspection. Maintaining a bank-to-invoice ratio above 95% is the single most effective measure to avoid VAT refund delays.
For FDI enterprises in the investment stage with large capital expenditure, the VND 5 million threshold is particularly impactful. Construction site purchases, equipment accessories, and daily operational expenses frequently exceed VND 5 million per transaction — all must route through banking channels from day one.
VAT Refund: New Thresholds and Removed Cases
VAT refund rules change under Law 48/2024/QH15, affecting both investment-stage and operating FDI enterprises.
Investment Project Refunds
Investment projects can apply for VAT refund once accumulated input VAT reaches VND 300 million (~USD 12,000) during the investment stage. Applications must be filed within 1 year of project completion — a defined window that replaces the previous open-ended approach.
⚠️ Form 02 → Form 01 transition risk: During the investment phase, refundable amounts must be included in the final VAT return on Form 02 (investment phase declaration). Under current regulations, refundable amounts cannot be included in a revised return once the Form 01 (production phase) return is submitted. FDI enterprises must capture all refundable input VAT before switching forms — missing this window forfeits the refund claim.
Operating Enterprise Refunds
FDI enterprises exclusively producing goods or providing services at 5% VAT are eligible for refund after accumulating VND 300 million (~USD 12,000) in unclaimed input VAT over 12 consecutive months or 4 quarters. For enterprises with mixed VAT rates, refund is calculated by allocation ratio.
Refund Cases Removed
Law 48/2024/QH15 eliminates VAT refunds for ownership changes, mergers, consolidations, separations, and de-mergers. Only dissolution remains as a refund-eligible restructuring event. FDI groups planning corporate restructuring should factor this into transaction timing.
Export refund documentation: Companies claiming 0% VAT on exports must now maintain packing slips, bills of lading, and cargo insurance certificates (for CIF Incoterm shipments). Missing any document blocks the refund claim.
E-Invoice Updates and Cross-Border Compliance
E-invoice requirements tighten under Decree 70/2025/ND-CP (effective June 1, 2025): stricter data fields, mandatory POS integration for retail/F&B/hospitality, and enhanced buyer identification. Non-compliance results in automatic input VAT deduction disqualification plus VND 2-5 million per violation.
Cross-border e-commerce: Foreign sellers must register for Vietnamese VAT from the first VND of revenue — no threshold exemption. Foreign suppliers without a permanent establishment face a VAT rate increase from 5% to 10% on e-commerce and digital services (Law 48/2024/QH15). These suppliers may now register for Vietnamese VAT invoices and offset the 10% FCT-VAT paid to tax authorities against 10% output VAT collected from customers — reducing double taxation.
From the buyer’s perspective, obtaining VAT invoices from foreign suppliers is essential. Without invoices issued under Vietnamese regulations, FDI companies cannot claim input VAT on cross-border digital services.
For complete e-invoice registration procedures, see the E-Invoice Registration Guide.
Implementation Timeline
| Phase | Date | Key Changes |
|---|---|---|
| Phase 1 | June 1, 2025 | Decree 70/2025 e-invoice updates, POS integration for retail |
| Phase 2 | July 1, 2025 | 8% rate, 0% export expansion, VND 5M payment threshold, on-spot export redefined |
| Phase 3 | January 1, 2026 | Revenue threshold changes for domestic businesses |
| Phase 4 | December 31, 2026 | 8% temporary reduction expires, standard rate returns to 10% |
Post-2026 planning: When the 8% rate expires, the standard rate reverts to 10%. FDI companies with long-term contracts should review pricing clauses — contracts with fixed pricing that absorb VAT may need renegotiation. Manufacturing companies should also evaluate whether accelerating capital expenditure before reversion optimizes input VAT recovery.
For how VAT integrates with CIT obligations, FCT withholding, investment project VAT refund, and the broader Vietnam Tax System, see the respective cluster guides.
This article reflects VAT regulations as of March 2026 under Law 48/2024/QH15, Resolution 204/2025/QH15, Decree 181, and Law 90/2025. VAT rules are subject to implementing circulars — consult qualified tax advisors for compliance guidance specific to each enterprise’s operations.
