Output VAT is a key element in the VAT mechanism, combined with input VAT to accurately determine the tax liability of enterprises. According to the General Department of Taxation, in 2024, VAT revenue will account for about 32% of total domestic revenue, demonstrating the important role of this tax. Understanding the mechanism helps enterprises manage costs effectively, declare invoices and documents transparently, and avoid being taxed multiple times on the same value of goods or services.
See more articles at: What is VAT? Subjects subject to VAT in 2025
General introduction to VAT
“Value added tax is a tax calculated on the added value of goods and services arising in the process from production, circulation to consumption” – Definition is stipulated in Article 2 of Law No. 48/2024/QH15
Besides, VAT is not only an important source of revenue for the State budget but also a tool to regulate consumption, ensure transparency in business and encourage businesses to manage costs effectively.
The VAT calculation mechanism is built on the principle of stage-by-stage deduction, that is, VAT payable is calculated by output tax minus input tax. This principle ensures that the final consumer bears the tax, while the enterprise only acts as an intermediary to collect the tax.
In this system, two important concepts are output VAT and input VAT. They determine exactly how much VAT a business must pay to the State.
See more at: VAT Overview – MAN to learn more about VAT
Output VAT
What is output VAT?
Output VAT (Output Value Added Tax or VAT) is the tax that businesses must collect from customers when selling goods and providing services subject to VAT. Accordingly, businesses are obliged to declare and pay this tax to the State budget after deducting the valid input VAT.
The role of output VAT
Output VAT is not only a number that businesses must pay, but also an important tool to help the value-added tax mechanism operate transparently and effectively.
Output VAT reflects the tax obligations of enterprises.
Output VAT represents the tax liability that a business must pay to the State budget in each reporting period. When a business sells goods or provides services, this tax is calculated based on the sales value and the applicable tax rate. Clearly defining output tax liability helps businesses manage their finances accurately, avoiding under-declaration or under-payment of tax.
Output VAT is the basis for input tax deduction.
Another important role of output VAT is to serve as a basis for input VAT deduction. Under the phased deduction mechanism, the actual VAT payable by a business is determined by subtracting the valid input tax from the output tax. This helps businesses avoid being taxed twice on the same value of goods or services, while ensuring that the final consumer is the taxable subject.
Output VAT ensures transparency in business
Output VAT also plays an important role in improving financial transparency and tax management. Enterprises are required to declare detailed output tax amounts on VAT invoices, thereby allowing tax authorities to accurately control transactions and promptly detect errors or fraud. This helps create a fair and transparent business environment and increases trust between enterprises and tax authorities.
| ASPECT | DESCRIPTION CONTENT | MEANING |
| Reflecting the tax obligations of the enterprise | Output VAT is calculated on the sales value and tax rate applied when a business sells goods or provides services. | Clearly define tax obligations to the State budget, helping to manage finances accurately, avoiding under-declaration or under-payment of taxes. |
| Basis for input tax deduction | Actual tax payable = Output VAT – Valid input VAT. | Avoid double taxation, ensuring that the final consumer is the one who bears the tax. |
| Ensuring transparency in business | Enterprises must declare detailed output tax on VAT invoices. | Tax authorities can easily control transactions, detect violations, and contribute to creating a transparent and fair business environment. |
Subjects subject to output VAT
Output value added tax is applied to certain subjects, clearly stipulated in the Law. Article 2, Law No. 48/2024/QH15 on VAT. Determining the correct taxable entity helps businesses declare accurately, while ensuring transparency and fairness in the tax system.
Goods and services subject to VAT
Goods and services subject to VAT are those produced, circulated and provided within the territory of Vietnam that are subject to tax by law. This includes both domestic goods and domestic services, from production, processing, distribution to retail. Output VAT is calculated based on the sales value of these goods and services.
Business organizations and individuals subject to VAT
Organizations and individuals trading in goods and services subject to VAT must declare and pay output tax. This applies to manufacturing, trading, and service enterprises, and even business households with sufficient revenue to be subject to tax.
Export and import activities subject to VAT
In addition to domestic goods and services, output VAT is also applied in some cases related to export or import according to the provisions of law. Although many exported goods have a tax rate of 0%, enterprises must still declare output VAT to ensure transparency and serve as a basis for input tax deduction.
Summary table of subjects applying output VAT
The table below summarizes the main groups of subjects subject to output VAT:
| OBJECT | CONTENT OF APPLICATION OF OUTPUT VAT | NOTE |
| Goods and services subject to VAT | Products and services produced, circulated and provided within the territory of Vietnam. Output VAT is calculated on selling price. | Includes domestic goods and domestic services (production, processing, distribution, retail). |
| Taxable business organizations and individuals | Manufacturing enterprises, trading companies, service units, individual business households with taxable revenue. | It is mandatory to declare and pay output VAT according to regulations. |
| Export and import activities | Some cases of export and import of goods and services are subject to output VAT. | Exported goods are usually subject to the tax rate of 0%, but businesses still have to declare to deduct input VAT. |
See more articles at: VAT tax rates and corresponding taxable subjects in 2025
Formula for calculating output VAT and illustrative examples
Formula for calculating output VAT
The formula for calculating output VAT is prescribed as follows:
|
Output VAT = Taxable price of goods and services sold X VAT rate |
In there:
- Taxable price: Is the selling price excluding VAT. This is the actual price that the customer must pay before adding tax.
- VAT rate: Is the percentage applied to each type of goods and services according to State regulations. Currently, the common rates are 0%, 5%, 10% depending on the type of product and service.
Illustrative example of output VAT
To understand how output VAT is calculated, let's look at some practical examples applied to domestic and exported goods and services.
Example 1: Domestic consumer products
A mobile phone retailer has a pre-tax selling price of 50 million dong and apply VAT rate 10%.
|
Output VAT = 50 million dong X 10% = 5 million VND |
The store will declare this 5 million VND output VAT to the tax authority.
Example 2: Taxable Services
A company that provides website design services 30 million dong for customers, apply tax rate 10%.
|
Output VAT = 30 million dong X 10% = 3 million VND |
This tax amount is the basis for businesses to pay to the State and deduct input tax related to software and labor costs.
Example 3: Exported goods apply tax rate 0%
Topic: A business exports rice to foreign countries at a selling price of 200 million dongVAT rate 0% as prescribed.
|
Output VAT = 200 million VND X 0% = 0 VND |
Even if the output VAT is zero, businesses must still issue output VAT invoices and declare them to the tax authorities as a basis for deducting input VAT such as costs of purchasing raw materials, transportation and packaging.
See more at: VAT Invoice – MAN
Input VAT
What is input VAT?
Input VAT is the amount of tax that a business has paid when purchasing goods or services for production and business activities. This tax can be deducted when the business calculates the amount of VAT payable, helping to reduce tax obligations and avoid the situation of calculating tax multiple times on the same value of goods or services.
The role of input VAT
In the VAT mechanism, input VAT plays an equally important role as output VAT. Understanding the role of input VAT helps businesses manage tax obligations effectively and comply with legal regulations. Here are some of the main roles:
Reduce corporate tax liability
Input VAT is the tax that a business has paid when purchasing goods and services for production and business. This tax is directly deducted from output VAT to determine the actual tax amount payable to the State. As a result, businesses only have to pay the tax arising from the actual added value they create, helping to reduce the tax burden and manage finances effectively.
Ensure the principle of deduction at each stage
Input VAT helps businesses avoid paying tax on the value of tax paid at previous stages. This principle ensures fairness between businesses in the supply chain and avoids multiple taxation on the same value of goods or services.
Encourage transparency and use of legal invoices
Another important role of input VAT is to encourage businesses to use legal invoices. By regulation, only valid VAT invoices can be deducted. This helps reduce the risk of fraud and tax evasion, while improving transparency in business and financial management.
Conditions for input VAT deduction
In the VAT mechanism under the deduction method, input VAT deduction is one of the key principles to determine the actual tax amount that enterprises must pay. Accordingly, output VAT will be reduced by the valid input VAT amount, ensuring that enterprises do not have to pay tax twice on the same value of goods or services. At the same time, this mechanism ensures that the final consumer bears the entire tax burden, while enterprises only play the role of tax collection intermediary.
To be eligible for input VAT deduction, businesses must meet the following conditions:
- Legal VAT invoice: Must have VAT invoice according to law.
- Goods and services used for business activities subject to VAT: If purchased for non-taxable activities, the business is not entitled to a deduction.
- Legal payment documents: In many cases, businesses need to pay via bank (non-cash) to prove the legality of the transaction.
See more articles: What is VAT deduction? Some latest related regulations 2025
The relationship between output VAT and input VAT
Output VAT and input VAT have a close relationship, determining the actual amount of tax that businesses must pay to the State budget. Understanding this relationship helps businesses manage tax obligations effectively, avoid errors and comply with the law.
Applicable tax authority Phased deduction mechanism, the formula is as follows:
|
VAT payable = Output VAT – Deductible input VAT |
This principle helps ensure that each business only has to pay the tax incurred in its own production or business stage, while end consumer bear the entire tax burden. This mechanism helps avoid multiple taxation on the same value of goods or services, while encouraging businesses to transparently declare invoices and documents, improving transparency and fairness in the tax system.
Real-life situation of the correlation between output VAT and input VAT
To understand the relationship between output VAT and input VAT, we can consider some typical situations that VAT-registered businesses often encounter in the course of doing business. In these situations, businesses must fully declare VAT on periodic VAT declarations as prescribed.
See more articles at: Summary of the 5 latest VAT declaration forms according to Circular 80/2021/TT-BTC and Circular 40/2025?
Output VAT is greater than input VAT.
This is a common case for most businesses. When a business sells goods or provides services of large value, the number of output VAT on total revenue is usually higher than the number input VAT paid when purchasing raw materials or services for production.
For example: A confectionery company buys raw materials with input VAT of 5 million dongDuring the month, the company sold finished products and collected output VAT of 20 million dongWhen declaring, the actual tax payable is:
|
20 million - 5 million = 15 million VND |
This means that the company only has to pay tax on the added value that I create, while taxes paid on raw materials are deductible, helping to avoid paying taxes twice on the same value of goods.
Input VAT is greater than output VAT.
In some cases, businesses buy more than they sell, leading to input VAT exceeds output VAT. At that time, the business will VAT refund or carry over the remaining tax to the next tax period, depending on the regulations of each country.
Illustrative example: An electronics export company purchases components with a total input VAT of 30 million dongDuring the same period, the company sold products with output VAT of only 20 million dong.
|
Difference: 30 million – 20 million = 10 million |
This amount of 10 million VND can be return or carry over to the next tax period for deduction, depending on the legal regulations in the country where the business is registered for tax. According to Article 16, Law on VAT No. 48/2024/QH15Enterprises are refunded VAT when the input tax is greater than the output tax, or transferred to the next period if they are not eligible for a refund.
Conclude
Output VAT is the tax that businesses collect from customers when selling goods or providing services, while input VAT is the tax that businesses have paid when purchasing raw materials or services for production and business. These two types of taxes are associated with a stage-by-stage deduction mechanism, helping businesses pay tax only on the value added they create, while ensuring that the final consumer bears the entire tax and avoiding the situation of being taxed multiple times on the same value of goods or services.
The article helps to understand the role, applicable subjects, formula for calculating output VAT, the role and conditions for deducting input VAT, the relationship between these two types of taxes, and practical situations illustrating the correlation. Mastering this mechanism helps businesses manage taxes effectively, make invoices and documents transparent, and optimize financial obligations.
If your business has difficulty declaring, calculating or managing output and input VAT, MAN – Master Accountant Network always ready to accompany. With a team of experienced experts and updated tax law knowledge, we help you optimize tax obligations, ensure compliance with the law and improve financial efficiency. Contact MAN today for detailed advice and comprehensive tax solutions for your business.
Contact information:
- Company: MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Hotline: 0903 963 163 – 0903 428 622
- E-mail: man@man.net.vn
