Vietnam to amend VAT law as business complaints mount

The government will further modify the Law on Value Added Tax (VAT), acting on complaints by domestic and foreign businesses who have expressed frustration, particularly in accessing refunds.

In a document prepared for a National Assembly (NA) conference on lawmaking on September 6, the Ministry of Finance said it will submit to the NA Standing Committee proposed amendments to the 2024 legislative agenda by the end of this year.

After gathering feedback from other ministries and NA committees, the amended VAT Law will get feedback from NA members in a sitting to be convened in May 2024, and passed in another parliamentary session five months later.

To stimulate local demand and production, the NA, the country’s supreme legislative body, had agreed to a two-percentage-point VAT cut for 2022 and 2023, covering a wide range of goods and services, except the telecom, real estate, securities, insurance and banking sectors. The reduction was estimated to cost the national budget around $2 billion each year.

However, businesses operating in Vietnam have been repeatedly complaining about implementation of the VAT Law, especially related to VAT refunds.

At a hearing on July 12, NA Chairman Vuong Dinh Hue urged the General Department of Taxation under the finance ministry not to delay the refunds as businesses were crying out for credit access while their money was lying in government coffers.

A month later, on August 16, a Samsung Electronics HCMC CE executive complained to Ho Chi Minh City’s authorities that the company had not been refunded some $44 million in VAT for two years after being allowed to change its status to an export processing enterprise in May 2021.

The Vietnam Chamber of Commerce and Industry (VCCI) has urged the government to fix the VAT Law, arguing that the legislation was being unfair to enterprises in Vietnam and encouraged the import of goods rather than their production at home. The most commonly affected products affected were fertilizers, agricultural produce, software, agricultural machinery and animal feed.

In Vietnam, VAT is levied on four groups that attract rates of 10%, 5% and 0%. One group is non-taxable.

The VAT Law was adopted in 2008, amended in 2013 and has undergone minor updates since.