In order to do business while abiding with Vietnamese Law, business owners are required to have some knowledge about VAT (Value Added Tax). According to the VAT Law, the tax will be imposed on the value added to goods and services emerging from the process of production, distribution and consumption in the country. The VAT law is also subjected to goods and services overseas.
What is VAT Tax? Definition and tax rate:
The current VAT Law was passed by the National Assembly on June 03 2008. The law has become effective since January 01 2009.
Since the first introduction time, the tax law has been amended for 3 times, which are January 2013, November 2014 and April 2016.
Value Added Tax (VAT), in other countries can be referred to as “Consumptions tax” or “Good and Services tax”. This is the indirect tax that goods and service suppliers charge customers in the final price. The aim of VAT is to contribute to the state budget for Vietnam as well as to encourage firms to upgrade the products and services’ quality and value during the 3 crucial process of production, distribution and consumption.
The normal/ popular VAT rate applicable to general goods and services is 10% of the price before VAT. However, some certain goods and services can be applied to a reduced rate at 5%, or more preferable 0%. The detailed lists of goods and products along with specific conditions are listed in the VAT law guidance.
In term of imported goods from other countries, payment for VAT must be made from the import stage. In term of services purchased from foreign countries, they are subject to VAT under the withholding regime of another related tax – FCWT (Foreign Contractors Withholding Tax).
Recently, there have been a proposal for new adjustments concerning the Value Added Tax Law. Accordingly, the preferential level of 5% VAT will be applicable to less goods and services. In addition, there will be a timeline of two phrases to increase the base VAT level: from 10% to 12% from 2019 or even to 14% from 2021. However, the new proposal has received a lot of disagreement from citizens and economists. On the other hand, some state that the increased tax could be an effective way to help government reduce public debt, and only results in a negligible impact on consumers. Therefore, it is uncertain that the VAT tax will be changed in the near future.
Why You Need to Outsource Value Added Tax Preparation?
As a business owner of a newly established company, especially start-up, you may be overwhelmed by a lot of questions about how to business in Vietnam, including “What is VAT tax?”. In this case, the VAT preparation services at S4B Vietnam is ideal for your firm. With the help of our expert team in accounting and financial field, you can effectively increase the productivity of firm and profitability by freeing yourselves of troublesome documents and numbers, focusing on other executive tasks.
S4B Vietnam – The best solution for Value Added Tax (VAT) services for your business.