Vietnam's New VAT Legal Framework: Key Considerations for U.S. Investors

1. Key Structural Changes Impacting U.S. investors 

Expanded Taxpayer Scope & VAT Liability Timing

• Foreign digital and e-commerce service providers without a Vietnamese permanent establishment must declare and pay VAT at 10% when serving Vietnamese customers (B2B or B2C)

• MVF service thresholds and liability timing clarified: VAT is triggered on transfer of ownership or invoice issuance—even if payment hasn't been received

Revised VAT Rates & Exemptions

• 0% VAT for exported goods/services consumed outside Vietnam, including international transport and services provided to export zone enterprises—subject to documentation requirements in Circular 69 

• 5% VAT newly applies to specialized agricultural machinery, fertilizers, offshore fishing vessels—before exempt .

• 10% standard VAT now applies more broadly, including for digital services supplied by eligible foreign suppliers, film production/distribution, and unprocessed forestry products .

Non‑cash Payment Requirement

Purchases equal to or exceeding VND 5 million (~US $200) must be paid via non-cash channels to qualify for input VAT credit. This applies per seller per day—including aggregate invoices—excluding bank deposit to seller account .

VAT Credit & Refund Conditions

Decree 181 and Circular 69 detail:

• Stricter documentary conditions for non-standard payment methods (offsets, barter, third-party payments, securities) .

• Refund eligibility limited to cases where input VAT is clearly allocated to 5% goods or when sellers have declared and paid VAT previously .

• For businesses dealing exclusively in 5% VAT goods/services, VAT refund is permitted if input VAT remains unutilized for ≥ 12 months and reaches VND 300 million (~US $11,900) .

Transitional Provisions

• Projects initiated before July 1, 2025, may choose to apply the new VAT refund regime under Decree 181 .

• Businesses supplying 5% VAT goods/services may claim refunds on eligible input VAT accrued after July 1, 2025, under new conditions .

2. Industry-specific Considerations for U.S. Investors

Manufacturing & Export-Oriented

• Export services and goods sold to non-tariff zones are zero-rated, but strict documentation is required (service agreements, customs, zone certificates, invoices) .

• Input VAT credit demands non-cash procurement channels—even for machinery imports—so harmonizing ERP/payment processes is key.

• Factory expansions: capital goods often require separate VAT treatment due to offset loan/bond payments or securities.

Technology & Digital Services

• U.S. cloud providers, SaaS, digital content platforms will be subject to mandatory VAT (10%) when servicing Vietnamese customers without a local entity.

• E‑commerce platforms operating in Vietnam must withhold VAT on behalf of sellers—affecting commission structures and cash flow forecasting .

• U.S. tech investors should analyze eligibility for the 5% VAT rate on certain IT goods/services potentially expanded under Resolution 174 and Decree 174 through 2026 .

Logistics & Transportation

• Transport services related to export or international movement may qualify for 0% VAT—but internal cross-charging and customs-clearance services require audit-ready documentation.

• Where logistics firms operate in bonded warehouses or export zones, they must separate 0% taxable activities from domestic operations carefully.

Agriculture & Agritech

• Fertilizers and agricultural machinery once VAT-exempt now attract 5% VAT; this potentially affects cost structure and deductibility significantly .

• Companies in agritech or farm-to-table exports must ensure compliance with input VAT rules—especially non-cash payment and documentation for equipment procurement.

Real Estate & Construction

• Construction at free-trade zones or overseas may qualify for 0% VAT on eligible services/goods.

• High-value construction procurement will trigger the non-cash rule; lien contracts, offset arrangements, or third-party financing structures must be formalized in writing.

3. Strategic & Operational Implications

Under Vietnam’s new VAT framework, U.S. investors must prepare for several key operational implications. First, cash flow and working capital management will require heightened attention. The enforcement of non-cash payment rules means businesses need to ensure liquidity is available through formal payment channels, while potential delays in VAT refunds—especially in sectors subject to the 5% VAT rate—could strain short-term finances. In terms of contracts and procurement, all non-traditional payment arrangements, such as barter, debt offset, and third-party payments, must now be backed by formal, pre-signed contracts and reconciliation documentation to qualify for input VAT credit. For ERP and invoicing systems, businesses must ensure systems are capable of capturing daily totals per supplier, tracking non-cash payment evidence, and tagging invoices by VAT rate (0%, 5%, or 10%) in accordance with Circular No. 69/2025/TT-BTC. On the tax governance and audit readiness front, enterprises should be prepared to present comprehensive documentation during audits, including proof of compliant payment methods, offset agreements, and eligibility for preferential tax zones. Lastly, pricing and commercial strategy must be realigned to reflect the updated VAT treatments. This is particularly relevant for digital service providers and agribusinesses, where VAT obligations may now apply. U.S. firms must also adjust pricing to account for VAT withholding obligations in cross-border transactions.

4. Action Roadmap for U.S. Investors

1. Perform Tax Impact Review: Map VAT rate changes and credit/refund implications across goods, services, exports, and digital deliveries.

2. Engage Local Tax Advisers: Review industry-specific treatment for zero-rating eligibility, refund thresholds, and offset/non‑cash rules.

3. Revise Procurement & Payment Policies: Update internal policies to enforce non‑cash payments (payment cards, wire transfers), especially on contracts ≥ VND 5 million.

4. Update Contracts & Off‑Balance Agreements: Include clauses for barter, debt offset, third‑party payments, and investment securities payments to preserve VAT credit eligibility.

5. ERP & Invoicing Alignment: Tag invoices by VAT rate; integrate non‑cash payment tracking; support digital invoices as required for e‑invoicing compliance.

6. Cash Flow Modeling: Build scenarios accounting for delayed VAT refunds, cash flow timing, and cost of WHT or credit mechanisms.

7. Ongoing Monitoring: Track updates to Circulars and Decrees, especially industry-specific VAT rate guidance and documentation changes.

5. Final Thoughts

Vietnam’s modernized VAT regime places greater emphasis on non-cash payment transparency, contractual clarity, and precise documentation. For U.S. companies, especially in manufacturing, technology, logistics, and agribusiness, this means tighter alignment of procurement, invoicing systems, finance policies, and tax governance frameworks.

Executed well, these reforms can still support growth—especially in export-driven sectors eligible for 0% VAT. But failure to comply risks disallowed input credits, VAT refund delays, and audit exposure. A proactive, aligned approach now will build resilience and competitive advantage in Vietnam’s evolving legal landscape.