Vietnam rolls out key tax reforms from July 1 to support fairer system

The Star

30-06-2025

HANOI: From July 1, Vietnam will officially enforce a new set of tax laws that are expected to reshape the country's tax system in both structure and administration.
These changes follow the passing of several amended tax laws, including the revised Law on Value-Added Tax (VAT), Law on Corporate Income Tax, Law on Personal Income Tax and Law on Special Consumption Tax. The updates are seen as a major reform to improve fairness, efficiency and transparency in taxation.
Under the new rules, the VAT system will see major changes.
One key highlight is the mandatory use of non-cash payments for VAT input deduction. This applies even to purchases under VND20 million (roughly US$770). In the past, only payments over that threshold required bank transfers. Now, businesses must show non-cash payment proof for all purchases to claim VAT credit.
This aims to prevent fake invoices and strengthen tax integrity. It may pose challenges at first for small vendors and traditional market sellers. But in the long run, non-cash payments will help them build a clear financial history, which makes it easier to access official credit.
The revised VAT Law also doubles the taxable income threshold for household and individual businesses.
From 2026, only those earning over VND200 million per year will be subject to VAT and personal income tax. This is a strong support measure for micro businesses, easing their tax burden and paperwork. It gives them more room to reinvest and grow.
At the same time, the law updates the list of non-taxable goods and services. It adjusts taxable prices for imported goods and revises tax rates for several product groups. These changes are made to better reflect the real economic value and encourage the right consumption behaviour in society.
VAT exemptions are applied for several items — including fertilisers, agricultural machinery, offshore fishing vessels, securities custody and stock market operation services. Exports made from processed natural resources or minerals will only be VAT-exempt if listed by the Government.
The law also introduces VAT exemption for imported goods donated for disaster relief, epidemic control or war-related support.
In addition, the method for calculating VAT on imported goods has been revised. The new formula bases VAT on the customs value plus applicable import duties, any additional import-related taxes, special consumption tax and environmental protection tax — if any.
One important area of focus is e-commerce. Authorities will now apply a 'tax withholding at source' mechanism.
From July 1, e-commerce platforms like Shopee, Lazada and Tiki must withhold taxes before transferring payments to sellers. The tax is calculated as a percentage of the revenue from each transaction.
For example, VAT is applied at one per cent for goods, five per cent for services and three per cent for transportation or services tied to goods. Personal income tax for local sellers is 0.5 per cent for goods, two per cent for services and 1.5 per cent for transportation. For foreign sellers, the corresponding rates are one per cent, five per cent and two per cent.
If a platform cannot identify whether a sale is a good or a service, the highest rate applies. Monthly tax filing is required. Cancelled or refunded orders must be adjusted.
This ensures proper and timely tax collection. It also creates fairness between online and offline sellers, since traditional shops have long been required to follow full tax rules.
A major shift in personal tax management is also being introduced.
From July 1, personal tax codes will be replaced by 12-digit personal ID numbers. These IDs, found on every citizen's national ID card, will be used for all tax filings, payments and refunds. By linking tax records with population data, social insurance, land use and banking information, authorities will be able to use big data to detect tax risks and trace fraud more effectively.
However, tax officials have also clarified a key concern from the public: not every transfer into a personal bank account will be taxed.
Many people have worried that all incoming funds — like wedding gifts, birthday money or family support — could be subject to tax audits.
But the tax department confirmed this is a misunderstanding. Under current rules, many kinds of income are exempt from personal income tax. These include gifts between close relatives, inheritance, one-time property sales, income from savings or insurance, and compensation payments. Transfers related to agriculture or fishing are also usually tax-free.
Still, taxpayers are encouraged to keep records of their transactions, especially when large amounts are involved. Having documents can help prove the nature of a transfer if questions arise later.
Officials also said that they do not monitor all bank transfers. Checks are only made when there are signs of tax evasion, especially when people receive large sums but do not issue invoices or report income.
The case of social media influencer 'Cun Bong' (real name Vu Nam Phuong) is one such example. She reported VND5 billion in income from 2023 until now, but authorities discovered her actual revenue was over VND120 billion. She is now under criminal investigation for serious accounting violations and tax evasion. This case is a warning to all influencers and online sellers to follow the law. - Bizhub/Vietnam News/ANN