The 2024 VAT Law marks an important turning point in tax policy reform, replacing and updating many points from the 2008 Law. According to the Ministry of Finance, VAT accounts for about 30% of total annual budget revenue, showing its far-reaching impact. The adjustments in the new Law not only expand the tax incentives but also tighten regulations on tax deductions and refunds, ensuring transparency and fairness. Comparing the 2024 VAT Law with the 2008 Law will help businesses and individuals clearly understand the changes that need to be noted in order to adapt promptly.
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Overview of the 2008 VAT Law
VAT Law 2008 was passed by the National Assembly with the aim of replacing turnover tax, moving towards a more modern and transparent tax mechanism. This law has laid an important foundation for the indirect tax system in Vietnam, with three basic tax rates (0%, 5% and 10%) and clearly stipulates taxable and non-taxable subjects. For many years, the 2008 VAT Law has played a pivotal role in creating a stable source of revenue, accounting for about 25-30% of total state budget revenue.
The 2008 VAT Law gradually revealed its limitations such as narrow scope of application, rigid tax rates and lack of regulations for cross-border transactions. To overcome this, the 2024 VAT Law was issued with many new points: adding preferential subjects, clearly stipulating conditions for tax deduction and refund and applying flexible tax rates, aiming at modern management and in line with international practices.
New highlights in the VAT Law 2024
Compared to the 2008 VAT Law, the 2024 VAT Law has many notable amendments, in line with the new economic context and the requirement for more transparent tax management. First of all, the scope of non-taxable subjects has been expanded, including a number of essential goods and services to reduce the cost burden on people and businesses. This is a meaningful change in supporting domestic consumption and encouraging production development.
Another notable difference is the maintenance of policy. reduce tax rate from 10% to 8% for some industries until the end of 2026. If in 2008, the common tax rates were only concentrated at 0%, 5% and 10%, the 2024 VAT Law has added this incentive, demonstrating the flexibility of tax policy in the context of the economy needing to be stimulated.
Besides, VAT Law 2024 also provides more detailed and strict regulations on tax deduction and refund conditions. Compared to before, enterprises wishing to apply the 0% tax rate for exported goods must have full contracts, customs declarations and bank payment documents. This helps increase transparency, limit tax fraud, and reduce budget revenue loss.
In particular, cases that are not subject to the 0% tax rate are also clarified, such as reinsurance services, transfer of intellectual property rights abroad or domestic consumer services. These are adjustments that the 2008 VAT Law has not specifically regulated, leading to difficulties in practical application.
See more articles at: 07 new points of the Law on Value Added Tax 2024 (effective from July 1, 2025)
Comparison table of VAT Law 2024 and 2008
The comparison between the 2008 VAT Law and the 2024 VAT Law is important in identifying the trend of tax policy reform in Vietnam. Thereby, it is possible to clearly see the adjustments in the tax rate structure, the scope of taxable and non-taxable subjects, as well as the provisions on tax deduction and refund. These changes reflect the State's efforts to both ensure budget revenue and promote transparency and fairness in the tax system.
| Criteria | VAT Law 2008 | VAT Law 2024 | Highlights of the change |
| Scope of application | Focus mainly on domestically consumed goods and services. | Expand the tax-free objects to include some essential goods and services. | Reduce cost burden for people and businesses. |
| Common tax rate | 0%, 5%, 10%. | 0%, 5%, 8% (promotion until 2026), 10%. | Supplementing tax rate 8% to stimulate consumption and support economic recovery. |
| Conditions for deduction and tax refund | The regulations are not too strict, still general. | Be specific: there must be a contract, customs declaration, and bank payment documents. | More transparency, reducing fraud and tax losses. |
| Non-taxable entities | Narrow regulation, mainly some public services, health, education. | Expand further to include many other essential goods and services. | Create social justice, reduce cost of living. |
| Cases where tax rate 0% is not applied | Not clearly defined. | Additional details: reinsurance services, transfer of intellectual property rights abroad, consumer services in Vietnam. | Avoid taking advantage of the policy to cheat. |
| Economic impact | Ensuring revenue but lacking flexibility in market regulation. | Maintain revenue, support economic growth and encourage consumption. | Policy close to reality, creating development momentum. |
Practical impact of VAT Law 2024 and illustrative examples
Practical impact of VAT law 2024
For business
The 2024 VAT Law will have a strong impact on business operations by providing clearer regulations on tax deductions and refunds, helping businesses to make their books more transparent, reduce legal risks and take advantage of input tax benefits. However, the requirement to prove invoices and make payments via banks puts pressure on businesses, especially small and medium-sized enterprises, to improve their financial management and accounting systems.
In addition, the Convert to electronic invoices and digitize tax management also poses an urgent requirement for businesses to invest in information technology infrastructure. If utilized well, this will be an opportunity for businesses to reduce operating costs and improve management efficiency.
For individuals
For individuals, the main influence is expressed in price fluctuations of goods and services. The narrowing of the low-tax group (5%) means that consumers may pay higher prices in some areas. However, the expansion of the non-taxable categories, especially in education, health and technology, helps reduce the burden of spending on essential services, thereby improving social welfare.
Illustrative examples of the practical impact of the VAT Law 2024
Example 1: Seafood export enterprise in Can Tho
A seafood company in Can Tho specializes in exporting pangasius to the European market. This is a key product that brings in a large amount of revenue for the company as well as contributes significantly to the local export turnover. However, in previous years, the company often encountered difficulties in completing procedures for value added tax refunds according to the 2008 VAT Law.
The main reason is that customs documents have not been standardized. Paper documents are constantly requested by management agencies to be supplemented, edited or re-verified, causing significant delays. Tax refund processing time often lasts from 6 to 9 months, severely affecting business operations.
During the time waiting for the tax refund, the company had tens of billions of dong in working capital stagnant. This capital was originally used to buy raw materials from farmers, maintain the production line and invest in market expansion. When the cash flow was "locked up" for too long, the company was forced to reduce the scale of operations, missing out on many international contract opportunities.
Since the 2024 VAT Law came into effect, the situation has changed positively. The new law requires the application of electronic invoices, transparency of documents and promotion of data connection with customs authorities. Procedures have become simpler and clearer, minimizing the possibility of loss or error in declaration.
Thanks to these reforms, businesses only need about 1-2 months to get tax refunds, instead of having to wait up to 9 months as before. The fast cash flow helps the company reinvest in processing, purchasing raw materials and boosting exports. As a result, competitiveness in the international market has been significantly improved, bringing benefits to both businesses and fish farmers.
Example 2: Individual using private medical services
Mr. Minh is an office worker in Ho Chi Minh City. Due to the busy nature of his job, he often chooses to see a doctor at a private hospital because the service is faster and the quality is better than many public facilities.
Previously, he had to pay about 2 million VND for each general health check-up. Of that, 5% was VAT, equivalent to 100,000 VND. With an average income of about 12 million VND per month, this cost became a significant burden, especially when he needed to go for check-ups many times a year.
Since the 2024 VAT Law was enacted, basic medical services have been exempted from tax. Thanks to this change, Mr. Minh's general examination fee is only 2 million VND all-inclusive, without having to add tax as before.
This adjustment brings practical benefits to people, especially the middle-income and low-income groups. The financial pressure when using private health services is reduced, helping many families have better health care conditions.
In addition, VAT exemption for basic health services also encourages people to have regular check-ups. This contributes to raising awareness of disease prevention, early detection of diseases and improving the quality of public health.
Important notes when applying the VAT Law in 2024
The implementation of the 2024 VAT Law in practice requires businesses and individuals to have a firm grasp of the new regulations to avoid legal and financial risks. Firstly, businesses need to pay attention to electronic invoices: all transactions of buying and selling goods and providing services must issue standard electronic invoices, synchronized with the tax authority's management system. This helps increase transparency, but also requires investment in technology and personnel training.
Second, the issue of tax deduction and refund is regulated more strictly. Enterprises must ensure that input documents are valid and legal, and clearly classify taxable and non-taxable activities and apply preferential tax rates. In case of not being able to separate, enterprises must use the allocation rate according to the guidance of the Ministry of Finance and the 2024 VAT Law, avoiding the situation of declaring deductions exceeding regulations.
Third, for individuals, it is necessary to pay attention to regulations related to the consumption of specific services such as healthcare, education, and real estate. The 2024 VAT Law adds a number of groups of goods and services that are not subject to tax or subject to the 0% tax rate, in order to reduce the cost burden. However, individuals still need to understand clearly to have a reasonable spending plan, especially in the context of frequent fluctuations in prices of goods and services.
Finally, the application of the VAT Law 2024 is not only a compliance issue but also an opportunity for businesses to optimize financial strategies, improve tax management capacity and make good use of tax refund and deduction benefits.
Conclude
Changes in the 2024 VAT Law on non-taxable entities, preferential tax rates and tax refund conditions provide opportunities to reduce cost burdens for businesses, while creating incentives to stimulate consumption and economic growth.
However, practical implementation also requires deep understanding, the ability to manage tax risks and careful preparation from both businesses and individuals. In this context, choosing a reputable consulting partner is a key factor to optimize benefits and ensure legal compliance.
MAN – Master Accountant Network With a team of experienced experts in the field of accounting and tax consulting, we are always ready to accompany businesses in answering questions, supporting tax declaration - deduction - refund, and promptly updating the regulations of the VAT Law 2024. Contact us now MAN for in-depth advice to help your business proactively adapt and develop sustainably.
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