Vietnam’s VAT Law for the Housing Sector
HANOI – Vietnam’s VAT law touches on a number of goods and services. Please see our latest magazine on the country’s VAT law, entitled A Guide to Understanding Vietnam’s VAT, in order to receive a general overview of what VAT is and how to properly ensure that you follow all regulations involved.
In this article, we examine the VAT implications for a number of goods and services listed under the Housing category in Vietnam’s VAT law.
There have been a number of updates to Vietnam’s VAT law with relation to Housing. The Law on Amendment of Law on VAT 2013 addressed new points of non-taxable subjects, taxable prices, tax rates, tax calculation methods, tax credits and refunds. The Law, which took effect on January 1st 2014:
- Supplements a tax rate of 5% for the case of selling, leasing and leasing-purchasing social housing, which took effect on July 1st 2013.
Transactions related to certain products and services are viewed as non-taxable transactions, these include:
- Transfer of land use rights;
- State–owned residential houses sold by the State to the current tenants.
The chargeable amount of taxable price includes the following terms:
- For property lease services the taxed price is the VAT-exclusive rent.
– In case of leasing with rent paid in installments or prepaid for a leasing term, the taxed price is the rent amount paid in installments or prepaid for the leasing term, exclusive of VAT.
- For construction and installation, the taxed price is the VAT-exclusive value of the completed and handed over work, work item or job.
– For cases of construction and installation involving contracted supply of materials, the taxed price is the construction and installation price, inclusive of the VAT-exclusive value of materials.
– For cases of construction and installation without contracted supply of materials, the taxed price is the construction and installation value exclusive of the VAT-exclusive value of materials.
– For construction and installation with payments to be made for each completed and taken-over construction item or based on the value of the completed and taken-over construction and installation volume, the taxed price is the VAT-exclusive value of the completed and taken-over construction item or work volume.
- For real estate trading, the taxed price is the real estate transfer price minus (-) the land price allowed to be subtracted when determining VAT.
The Housing category has exposure to more than one tax category depending on what the good or service is. See below for further clarification.
0% Tax Rate
Applies to exported goods and services; work construction and installation for export processing enterprises; international transportation; goods and services not liable to VAT upon exportation.
Cases ineligible for the 0% tax rate are subject to the corresponding tax rates applicable to goods and services sold or provided domestically.
5% Tax Rate
Goods and services entitled to the tax rate of 5% include:
- The tax rate of 5% will be applied on selling, leasing and leasing-purchasing social houses starting from July 1, 2013.
10% standard tax rate
Applies to all goods and services not otherwise specified. The VAT rates previously specified apply uniformly to each type of good or service at the stages of importation, manufacture, processing and trading.
A variety of goods and service transactions may qualify to be exempted from VAT. It is best to contact a tax professional to ensure that all regulations are followed.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
You can stay up to date with the latest business and investment trends across Vietnam by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
In this issue of Vietnam Briefing, entitled A Guide to Understanding Vietnam’s VAT, we attempt to clarify the entire VAT process by taking you through an introduction as to what VAT is, who and what is liable, and how to pay it properly. We first take you through the basics of VAT in Vietnam before taking you deeper into the topic. Additionally, we provide updates on the new changes to the VAT process and explain how they will impact your business. The magazine is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore until the end of April.