When choosing a plant location in ASEAN, investors often compare VAT rates as a single headline number. But VAT affects a project mainly through two other channels: how completely and how quickly input VAT is credited and refunded during the investment phase, and how stable the rate policy is. This article places Vietnam rates beside its neighbours, then points to the operational differences that matter more than the nominal figure.
Legal basis
- Vietnam — Law on Value Added Tax 48/2024/QH15: a standard rate of 10%, with 0% for exports (Article 9) and 5% for listed essential goods and services (Article 10); the 10% rate is temporarily reduced to 8% until 31 December 2026 under Decree 174/2025/ND-CP, excluding carved-out groups.
- Vietnam — Articles 14 and 15 of Law 48/2024 and Decree 181/2025/ND-CP: input credit subject to non-cash payment evidence from VND 5 million; export refunds and investment-project refunds once uncredited input VAT reaches VND 300 million, with risk-based file classification.
- Singapore: a goods and services tax (GST) at 9% since 2024, with credit and refund mechanics run through a long-established electronic filing system.
- Thailand: VAT currently applied at 7%, a reduced rate extended in stages from the statutory 10%.
- Malaysia: GST was abolished in 2018 and replaced by sales and service taxes (SST) with their own rate frames; Indonesia applies VAT at 11% and the Philippines at 12% — the commonly used reference rates in regional comparisons.
Nominal rates: Vietnam sits in the middle of the region
On headline standard rates, the Philippines at 12% and Indonesia at 11% stand above Vietnam; Singapore at 9% is one point below Vietnam 10% but has no temporary reduction mechanism; Thailand at 7% is the lowest in the comparison set, though that too is a staged extension of a reduction rather than the statutory rate. Through the end of 2026, most transactions in Vietnam actually bear 8%, bringing Vietnam close to the low end of the region.
Yet a credit-method business does not bear VAT as a cost: output tax is collected for the state and input tax is offset, so a one or two point rate gap mainly affects final consumers and the cash advanced as tax, not the profit of an exporting manufacturer. Ranking locations by the nominal rate alone therefore misleads.
The operational gap that matters more: refunds and credits
What manufacturing investors should compare closely is the speed of recovering input VAT during construction. Vietnam allows refunds for new investment projects once uncredited input VAT reaches VND 300 million, and export refunds per period; but a file may be classified inspection-before-refund under risk management, so actual timing depends on file quality and the company compliance history.
Another difference is documentary discipline: Vietnam requires non-cash payment evidence for transactions from VND 5 million and mandatory electronic invoicing, a stricter evidence regime than many regional markets. In return, compliant businesses are placed in the refund-first group. Malaysia is the special case in any comparison model: because it uses SST instead of VAT, a through-chain input credit mechanism does not exist as it does in Vietnam, so a pure rate comparison with Malaysia is not like-for-like.
How investors should use this comparison
Use the rate table to estimate two things: the indirect tax burden carried by consumers in the domestic market, which affects pricing, and the size of input VAT advanced during the investment phase, which affects working capital. For a fully exporting project, the 0% rate and the refund mechanism are the deciding variables; for a project selling domestically, the standard rate and its stability matter more.
Finally, the figures in this article are reference data at the time of writing and must be re-checked when an investment decision is made, because temporary rates are time-bound and can change with annual policy. Location decisions should rest on total tax cost — including CIT, import duties and compliance cost — not on a single tax.
Frequently asked questions
Is Vietnam VAT high or low compared with ASEAN countries?
Vietnam sits in the middle: a standard rate of 10%, temporarily reduced to 8% until the end of 2026, nominally above Thailand 7% and Singapore 9% at the time of writing, and below Indonesia 11% and the Philippines 12%. Malaysia does not levy VAT, using SST sales and service taxes instead, so it is not directly comparable. These figures are reference data at the time of writing and must be re-checked when deciding.
What should investors know about VAT when comparing investment locations?
Look beyond the rate: whether input VAT is fully creditable, at what threshold and how fast investment projects are refunded, how strict the documentary conditions are, and how long temporary rates remain in force. For an export project, the 0% regime and refund mechanism matter more than a one or two point difference in the standard rate.
Is Vietnam VAT refund policy competitive?
Reasonably competitive in design: Vietnam refunds export VAT per period and refunds new investment projects once uncredited input VAT reaches VND 300 million, with refund-first treatment for compliant businesses under Decree 181/2025. The point to manage is that risky files may be inspected before refund, so document quality drives how fast money comes back.
Should the 8% Vietnamese rate be treated as a long-term advantage in an investment model?
No. The 8% rate is a temporary reduction until 31 December 2026 under Decree 174/2025/ND-CP and applies only outside the exclusion groups in Appendices I and II. A long-term financial model should use the 10% standard rate as its base case and treat the reduction only as cash-flow support while it remains in force.
This article has been quality-reviewed by the FLAW AI Legal Council
