VAT rate

VAT rates are an important factor that directly affects the tax obligations of businesses and individuals. This type of tax is regularly adjusted to suit fiscal policy and the economic context of each period. The following article will analyze in detail the current VAT rates, changes after July 1, 2025, instructions on correct tax calculation and optimal application in practical business activities.

What is tax rate and its role in Vietnam tax system?

Tax rate is a percentage applied to the tax base to determine the amount of tax payable. According to the provisions of Article 3, Law on VAT No. 13/2008/QH12, modified and supplemented by Law No. 31/2013/QH13 and Law No. 71/2014/QH13, tax rates may be applied at different levels depending on the type of tax and the taxable entity.

The main role of tax rates is to regulate consumption, protect domestic production, encourage exports and adjust the economic structure according to the State's direction.

VAT rate update from July 1, 2025: What should businesses pay attention to?

From July 1, 2025, some groups of goods and services may continue to be subject to the preferential tax rate of 8% instead of 10%, in accordance with the post-COVID-19 economic recovery policy orientation. The Government has issued Decree 174/2025/ND-CP on tax rate adjustment, which clearly states the list and specific scope of application.

According to Decree 174/2025/ND-CP, starting from July 1, 2025, many groups of goods and services from the tax rate of 10% will be reduced to 8%. The detailed list, conditions of application and impact on businesses have been clearly analyzed in the article "Expanding the range of goods and services eligible for VAT reduction from July 1, 2025” on the website of MAN – Master Accountant Network.

Understanding the content of the document and applying it correctly is necessary to avoid the risk of incorrect tax rates and take advantage of the State's preferential policies in the new period.

Overview of current tax rates

Current VAT rates: 0%, 5%, 8% and 10%

According to Article 8 of the Law on Value Added Tax, the VAT system in Vietnam currently applies four main tax rates, depending on the type of goods, services and regulatory goals of the State.

The system of 4 VAT rates is clearly classified according to the goals of economic regulation, social security and export support. Enterprises need to understand each level clearly to declare taxes correctly and avoid errors when making invoices.

Update the latest VAT rate table after July 1, 2025

From July 1, 2025, the temporary VAT incentives under Resolution 43/2022/QH15 and Resolution 110/2023/QH15 will officially expire. Accordingly, the VAT rate schedule will return to the standard structure as prescribed by the Law. Law on Value Added Tax, there are only three main levels: 0%, 5% and 10%.

Below is a summary table of tax rates applicable from this point in time:

VAT tax schedule from July 1, 2025 officially returns to the three-level standard system: 0%, 5% and 10%. The tax incentives 8% are only valid until the end of the year. 30/6/2025, then the business must update its accounting and invoice systems to ensure compliance with the law.

Legal references:

• Law on VAT No. 13/2008/QH12 and the amended Laws

• Circular 219/2013/TT-BTC

• Resolution 43/2022/QH15 and Resolution 110/2023/QH15

How to calculate VAT rate and practical examples

Determining and applying the correct VAT rate not only helps businesses comply with the law, but also directly affects costs, selling prices and profits. According to the instructions at Circular 219/2013/TT-BTCVAT is calculated according to the formula:

VAT payable = Taxable price × VAT rate

In there:

• Taxable price is the selling price excluding VAT.

• Tax rates apply to each type of goods and services (0%, 5%, 10%).

Illustrative example: How to calculate VAT rate for medical equipment

Suppose Viet Medical Equipment Company Limited sells an ultrasound machine to a public hospital, the unit price excluding VAT is 100,000,000 VND. Since this is an item in the list of medical equipment for medical examination and treatment, according to Circular 219/2013/TT-BTC, this item is subject to VAT rate 5%.

Step	Content of implementation	Explanation/Note
1	Determine taxable price	Is the selling price excluding VAT, excluding discounts, rebates, and surcharges (if any)
2	Determine the applicable VAT rate	Based on the type of goods and services: 0%, 5%, 10% (or 8% if still valid); look up in Laws and Circulars
3	Apply the calculation formula: VAT = Taxable price × Tax rate	The formula is specified in Article 6, Circular 219/2013/TT-BTC
4	Calculate total payment for customers	Total payment = Price before tax + VAT
5	Issue VAT invoices in accordance with regulations	Fill in the correct lines "VAT Amount" and "Total Payment" according to the calculated tax rate.

Determining the correct VAT rate is very important when issuing invoices. If a business declares the wrong tax rate (for example, calculating 10% instead of 5%), it will:

• Causing price differences, affecting buyers' rights;

• Incurring tax risks, being subject to collection, late payment penalties or administrative sanctions according to Decree 125/2020/ND-CP.

Real life situation

In 2023, a business operating in the field of medical equipment in Ho Chi Minh City was fined by the tax authority. recover more than 320 million dong after discovering incorrect declaration of VAT rate from 5% to 10% on more than 60 invoices. The incident was discovered during the process of comparing the declaration documents with the list of goods applying preferential tax rates as prescribed in Circular 219/2013/TT-BTC.

The tax authority determined that the incorrect application of tax rates not only distorted tax obligations, but also affected customers' selling prices, profits, and tax obligations.

(Source: Domesco Pharmaceuticals fined nearly 320 million VND for tax )

Items such as medical equipment, clean water, and teaching aids often apply the tax rate of 5% to support social security. Determining the wrong tax rate (for example, mistakenly recording 10% instead of 5%) will lead to incorrect invoices, incorrect tax declarations, and may be subject to additional collection or penalties according to the provisions of Article 13, Decree 125/2020/ND-CP.

Comparison of tax rates and their role in construction auditing

In the Vietnamese tax system, each tax will have one or more different tax rates, which are determined according to the nature of goods, services or consumer behavior. Here are some typical examples:

Construction audits do not directly determine tax rates, but…

Unlike tax accounting, construction auditing does not apply tax rates to calculate tax obligations, but focuses on checking and controlling the validity - reasonableness - legality of the entire construction investment costs. However, VAT is still an important part of construction contracts and settlement records, especially:

• Auditors must verify whether the VAT rate applied to each item is in accordance with regulations;

• Analysis of input and output VAT costs, especially in projects using state capital;

• Detect risks of tax errors, duplicate declarations, missing declarations or incorrect taxable entities.

See more: In-depth construction auditing services help businesses control costs and tax obligations effectively..

Although not “taxing” in the same way as tax accounting, construction auditing still plays a key role in ensuring that taxes – especially VAT – are determined and processed correctly according to legal regulations. This is also the difference between financial, tax and construction auditing that investors need to understand clearly in order to choose the right service.

Tax benefits according to regulations for businesses

Applying the correct tax rate not only helps businesses avoid mistakes but also optimize finances. Some specific benefits:

• Reduce the risk of being charged and fined

• Take advantage of tax incentives (e.g. tax rate 0%)

• Contribute to transparency of accounting records

• Easy VAT refund if you meet the conditions

Therefore, businesses should regularly update new tax policies to promptly adjust the accounting and tax system.

Common VAT taxable items in 2025

Determining the correct VAT rate applicable to each type of goods and services is a key factor in helping businesses declare and issue invoices accurately. According to updates from the Ministry of Finance and current legal documents, below are some common groups of goods and services and their corresponding VAT rates in 2025.

Tax rates are determined based on the nature of goods and services and the State's regulatory policies. For example, essential foods such as rice, salt or fish sauce are not subject to tax to ensure social security; meanwhile, transportation or fire fighting services are subject to the common 10% rate.

Advantages of VAT rate under deduction method

Enterprises applying the tax deduction method have the right to:

• Legally record and deduct input VAT

• VAT refund with export conditions

• Clear accounting, easy to audit, easy to prove valid costs

However, it should be noted that this method requires business with complete accounting books, use VAT invoices and declare on time.

See also: In-depth financial audit services

Citation of laws and documents related to VAT rates

Some important legal documents that businesses need to refer to:

• Law on VAT No. 13/2008/QH12

• Law amending and supplementing a number of articles of the Law on Value Added Tax No. 31/2013/QH13

• Circular 219/2013/TT-BTC guiding the implementation of the Law on VAT

• Resolution 110/2024/QH15 on adjusting tax policies from July 1, 2025

In addition, it is necessary to follow the guidance documents of the General Department of Taxation, periodically updated on the website: https://luatvietnam.net

Conclude

In the context of constantly changing tax policies, especially after July 1, 2025, understanding and correctly applying VAT rates is no longer a choice but a mandatory requirement for all businesses, organizations and individuals. From standard tax rates (0%, 5%, 10%) to cases of temporary reduction (8%), each level comes with specific conditions, clear legal basis and directly affects:

• Product price and competitiveness;

• Accuracy of financial and tax reports;

• Ability to get a tax refund and avoid being charged back taxes and penalties.

Particularly in the construction and public investment sector, the declaration and auditing of VAT amounts requires deep expertise and practical experience to avoid risks of invalid costs or violations of legal regulations.

Contact MAN – Master Accountant Network now for advice and support:

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