A contractor headquartered in Hanoi but executing a project in Hai Phong: where must VAT be filed? Since 1 July 2026, a new legal framework (Tax Administration Law 108/2025, Decree 252/2026, Circular 89/2026) has changed how VAT allocation works for out-of-province construction. The key point: file with the tax authority of each province where the project is located using form 05/GTGT, consolidate at the head office — and this mechanism applies only until 31 December 2026.
1. Short answer: where and on which form?
A contractor that contracts directly with the project owner and works in a province other than its head-office province must declare out-of-province VAT with the tax authority of each province where the project is located, using form 05/GTGT (Appendix I of Circular 89/2026/TT-BTC) — point b.2 of the construction allocation section of Circular 89/2026. At the same time, revenue from out-of-province projects must be consolidated in the filing at the head office; tax already paid in each province is automatically circulated by the tax authorities’ system to offset the tax payable at the head office (point b.3). In other words: pay into the state budget of the project province, but never pay twice.
2. Scope and the VND 1 billion threshold
The VAT allocation mechanism applies to construction activities (under the national economic sector classification / construction law) where the contract value — including VAT — is VND 1 billion or more (Decree 252/2026, Article 15.2.a.2). Excluded:
- Construction inside non-tariff zones;
- Consulting, survey, design, accounting and insurance activities related to construction;
- By implication of the threshold: contracts below VND 1 billion (including VAT) are not subject to allocation — verify against the original text before applying to near-threshold contracts.
3. Formula: non-VAT revenue × 1%
Under point b.1 of Circular 89/2026, VAT payable to each province = revenue exclusive of VAT in that province × 1%, with revenue determined by the contract. Where a project spans multiple provinces and revenue per province cannot be determined, allocate by the ratio (%) of investment value in each province to total investment value. Note: the 1% rate is specific to construction; do not confuse it with the 2%/1% rates (for 10%/5% VAT rates) that apply to production establishments.
4. Where the State Treasury has already withheld
Where the State Treasury has withheld tax as prescribed, the contractor does not have to pay again the withheld amount (point b.2). The contractor is also not required to file form 05/GTGT for projects in the same province as its head office when the State Treasury performs the withholding (point dd, clause 4 of Circular 89/2026).
5. ⚠️ Mandatory milestone: this mechanism ends on 31 December 2026
Under Article 74.2 of Decree 252/2026 and, correspondingly, Article 100.2 of Circular 89/2026, the rules on allocating VAT payable in points a.2–a.6, clause 2 of Article 15 (except allocation of shared input VAT) apply only until 31 December 2026. From 1 January 2027, VAT-payable allocation is abolished for construction, real estate transfers, dependent units/production establishments, inter-provincial hydropower plants and post-paid telecommunications — leaving only allocation of shared input VAT and computerized lottery.
Practical advice: tax filing plans after 31/12/2026 must await new guidance; do not commit in contracts that the allocation mechanism will continue after 2026. We do not speculate on the replacement mechanism — businesses should monitor the forthcoming guidance.
6. The old mechanism before 1 July 2026 (for context)
Previously, the framework comprised Circular 156/2013 (amended by Circular 26/2015) and Circular 80/2021: the VND 1 billion threshold (including VAT); form 05/GTGT filed per occurrence or monthly in the province where the project was located; provisional rates of 2%/1%; out-of-province VAT already paid could be deducted at the head office. Since 1/7/2026, the filing method and rates have changed as described above under Circular 89/2026.
7. Practical filing notes
- Transition period: from 1/7/2026 until the tax system upgrade is complete, taxpayers may continue using the Circular 80/2021 forms (per Decision 1934/QD-BTC). When filing, check the latest notice from the managing tax authority to determine which form applies.
- Practical example: a Hanoi-headquartered contractor builds a bridge in Hai Phong under a VND 50 billion contract (including VAT): file 05/GTGT with the Hai Phong tax authority (tax = non-VAT revenue × 1%), and consolidate revenue in the Hanoi filing.
- Contracts signed before 1/7/2026 with ongoing works: check the transitional provisions of Circular 89/2026 before determining how to file subsequent periods.
8. Frequently asked questions
Does an VND 800 million construction contract trigger out-of-province VAT filing?
Under the threshold in Article 15.2.a.2 of Decree 252/2026, contracts below VND 1 billion (including VAT) are not subject to allocation. Verify the original text when applying to near-threshold contracts.
Must tax be paid twice — once in the project province and once at the head office?
No. Tax paid in the project province is automatically circulated by the tax system to offset the amount payable at the head office.
What if a project spans two provinces and the contract cannot split revenue?
Allocate VAT by the ratio (%) of investment value in each province to total investment value (point b.1, Circular 89/2026).
How to file after 31 December 2026?
VAT-payable allocation for construction ends from 1/1/2027 under Article 74.2 of Decree 252/2026. The replacement mechanism awaits new guidance; do not speculate.
Sources
- Tax Administration Law 108/2025/QH15 — effective 1/7/2026: framework for allocating/filing tax where activities arise;
- Decree 252/2026/ND-CP — effective 1/7/2026: Article 15.2.a.2 (construction ≥ VND 1 billion subject to VAT allocation), Article 74.2 (VAT-payable allocation only until 31/12/2026);
- Circular 89/2026/TT-BTC — effective 1/7/2026: points b.1 (1% formula), b.2 (form 05/GTGT filed at the project province), b.3 (head-office consolidation; automatic offset), Article 100.2 (until 31/12/2026);
- Previous framework for reference: Circulars 156/2013, 26/2015, 80/2021 (no longer the current basis).
For reference only; not legal advice. This content was drafted by AI and will be quality-checked by the AI Legal Council of FLAT Law Firm before publication review; it is not legal advice from a human lawyer. Regulations may change; please check the current legal texts before relying on this information.
Is your company executing out-of-province projects and needs to review its VAT filing obligations? Contact FLAT Law Firm for advice.