Updates on New VAT Regulations Effective from July 1, 2025: Key Points to Note

Starting from July 1, 2025, new tax regulations will officially take effect, including the Value-Added Tax (VAT) Law No. 48/2024/QH15, Decree No. 181/2025/NĐ-CP, and Decree No. 174/2025/NĐ-CP. These documents will significantly impact the calculation and deduction of VAT, especially regarding input expenses from VND 5 million and above that are not paid via non-cash methods.

A. Changes in VAT Rates for Certain Goods and Services (According to Law 48/2024/QH15)

1. 5% VAT Rate Applies to:

• Agricultural products such as planted trees, cultivated forests, livestock, aquaculture and seafood—unprocessed or only minimally processed—when traded between enterprises or cooperatives.

2. Shift from Exempt to 5% VAT Rate:

• Items such as fertilizers, fishing vessels, and specialized equipment for agricultural production.

3. Shift from 5% to 10% VAT Rate:

• Goods like unprocessed forest products, sugar, sugar by-products, educational/research/sports/art/film production equipment.

B. Input VAT Deduction Method Effective from July 1, 2025

Decree 181/2025/NĐ-CP clarifies the conditions for input VAT deduction:

• Threshold of VND 5 million (VAT inclusive):

  • Purchases of goods or services worth VND 5 million or more must have non-cash payment evidence (bank transfers, cards, e-wallets, etc.).

  • Cash deposit slips to the seller's account will no longer be accepted.

• Payments through Employees:

  • Business-related expenses paid through employees may still qualify for input VAT deduction if aligned with the company’s financial policies.

C. VAT Reduction Measures (According to Decree 174/2025/NĐ-CP)

1. Applicable Goods and Services:

• Applies to goods and services previously taxed at 10%, except those already excluded by the Decree.

2. Reduction Rates:

• Reduction of VAT rate from 10% to 8% for businesses using the credit method.

• A 20% reduction in the percentage-based VAT calculation for business households and individuals.

Conclusion

The changes introduced by Decree 181/2025/NĐ-CP and Decree 174/2025/NĐ-CP will significantly affect how businesses calculate and deduct VAT, particularly for input costs from VND 5 million or more not paid via non-cash methods. Therefore, businesses must prepare adequate payment documentation and comply with the new tax regulations to avoid legal and tax risks in the future.

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Viet Australia Auditing Company is an independent auditing organization licensed and established in 2007 in the Socialist Republic of Vietnam.