Legal News

[Taxation] Draft Amendment to the Value-Added Tax Law: Services provided to non-tariff areas, not subject to 0% VAT

2024/03/14

According to Article 1, paragraph 3 of Law 31/2013/QH13 on Value Added Tax amending and supplementing the Law on Value Added Tax of 2008, the definition of services and goods subject to 0% VAT is stipulated as follows.
“Export goods and services are (1) goods and services consumed outside Vietnam and in non-tariff areas; and (2) goods and services provided to foreign enterprises and individuals in accordance with government regulations.”

The draft amendment to the 2008 Value-Added Tax Law contemplates amendments to a number of provisions, but the following are noteworthy
・Export goods include (1) those consumed outside Vietnam and in non-tariff areas, (2) those sold in quarantine areas to individuals (foreigners and Vietnamese) who have completed departure formalities, (3) those sold in duty-free stores, and (4) those provided to other foreign enterprises and individuals in accordance with government regulations.
・Export services are services provided to foreign businesses and individuals, including (1) vehicle rental services used outside of Vietnam, (2) international transportation services, and (3) air and maritime industry services provided directly to international transportation.

In accordance with the above, the following two new points can be identified.
・Services consumed in non-tariff zones are not considered export services and are not subject to the 0% VAT.
・In case the purchaser is a foreign enterprise or individual, the services subject to 0% VAT include (1) vehicle rental services used outside of Vietnam, (2) international transportation services, and (3) services in the airline and maritime industries directly provided to international transportation.

The draft amendment significantly narrows the scope of “export services” compared to the current statute. In particular, EPE companies using the services of Non-EPE companies (domestic companies) will be significantly affected as they pay an additional 10% VAT.

Therefore, many organizations and companies have submitted proposals to the Ministry of Finance (the competent authority for preparing the said draft) requesting that the current laws and regulations on export services be maintained. The draft is also expected to be submitted to the National Assembly in May 2024 for approval beginning in October. We will provide updates on any changes to the content or schedule of the said draft in the future.

Reference Laws and Regulations:
・Draft Amendment and Supplement to the Value Added Tax Law No. 13/2008/QH12 of 2008
・Law No. 13/2008/QH12 of 2008 on Value Added Tax
・Law No. 31/2013/QH13 on Value Added Tax amending and supplementing many provisions of the Law on Value Added Tax