On a single 2026 sales invoice, an FDI company may have to choose among four numbers: 0%, 5%, 8% and 10%. The first three rest directly on VAT Law 48/2024, while 8% is simply the 10% rate temporarily reduced under the economic support policy running to 31 December 2026.
Legal basis
- Article 9 of VAT Law 48/2024/QH15: the 0% rate applies to exported goods and services, international transport and certain services supplied to separate customs areas, subject to statutory conditions.
- Article 10 of VAT Law 48/2024/QH15: the 5% rate covers essential items such as clean water for production and daily life, fertiliser, animal feed, medical services, medical equipment and devices, teaching aids and certain lightly processed agricultural products.
- Article 11 of VAT Law 48/2024/QH15: the 10% rate is the default for every taxable good or service that does not fall into the 0% or 5% groups and is not a non-taxable item under Article 5.
- Resolution 204/2025/QH15 and Decree 174/2025/ND-CP: goods and services taxed at 10% are reduced to 8% from 1 July 2025 to the end of 31 December 2026, except the Appendix I groups such as telecommunications, finance and banking, real estate and prefabricated metal products, and the excise-taxed groups in Appendix II other than petrol.
- Time of supply under clause 1 Article 8 of Law 48/2024: for goods, the moment ownership or the right of use is transferred; for services, completion of the supply or invoice issuance, whichever comes first.
Reading the four-rate map by product group
The 0% rate is not a discretionary incentive; it is tied to the foreign element. Exported goods need a contract, a customs declaration and bank payment, while exported services must be consumed outside Vietnam. Miss one element of that file and the transaction falls back to the corresponding domestic rate instead of keeping 0%.
The 5% rate concentrates on essentials and social services. Note that one product can change rate along the chain: unprocessed farm produce at the self-production stage is non-taxable, yet the same product moving through ordinary trading stages may sit in the 5% or 10% group depending on its nature and the detailed rules.
The 8% rate: a time-limited reduction, not a new bracket
The most common current mistake is treating 8% as a permanent bracket of the system. Legally the goods remain in the 10% bracket of Article 11; 8% is only the outcome of a reduction policy expiring on 31 December 2026. Accounting systems should store two data fields side by side: the statutory rate and the post-reduction rate in force, so that returning to 10% at expiry does not require rebuilding the whole product catalogue.
When checking the reduction, match the product code and the service nature against both appendices of Decree 174/2025. Goods in Appendix I and II keep the full 10% throughout the reduction period; applying 8% to an excluded appendix item is, in professional practice observation, the error most often caught in recent inspections.
Wrong rate: consequences and self-correction
Applying a rate below the correct one understates output tax: the seller files a supplementary declaration, pays the shortfall with late-payment interest and may face the 20% penalty on the shortfall where the act is an incorrect declaration leading to a tax shortfall. Applying a higher rate means the buyer may deduct only at the correct rate of the goods or services, and the difference turns into a commercial dispute between the parties.
A workable self-review is to extract the full sales catalogue, assign each product code to one of four bases (Article 9, Article 10, Article 11, or the exclusion appendices of Decree 174/2025), and lock that mapping inside the invoicing software. Every new product should pass the same classification step before its first invoice is issued.
Frequently asked questions
Which goods do the VAT rates 0%, 5%, 8% and 10% apply to?
The 0% rate serves exported goods, services and international transport meeting Article 9 conditions. The 5% rate serves the essentials in Article 10 such as clean water, fertiliser, animal feed, medical services and equipment. The 10% rate in Article 11 is the default for the remainder, and 8% is that 10% group temporarily reduced under Decree 174/2025 until the end of 31 December 2026, except excluded appendix groups.
How do I know which rate applies to my company products?
Follow three steps: first test whether the product is non-taxable under Article 5; if taxable, compare it with the 0% list in Article 9 and the 5% list in Article 10; if it matches neither, the default is 10%, and only then check the appendices of Decree 174/2025 to see whether it is reduced to 8% or belongs to an excluded group that keeps 10%.
What happens if the wrong rate is applied?
If the applied rate is below the correct one, the seller supplements the shortfall, pays late-payment interest and may be fined 20% of the shortfall under Decree 125/2020. If it is above, the buyer may deduct only at the correct rate and will demand an invoice correction. Both directions require an adjustment or replacement invoice under Article 19 of Decree 123/2020 as amended by Decree 70/2025.
Are goods already at 5% reduced further under the reduction policy?
No. Decree 174/2025 reduces only goods and services currently taxed at 10% down to 8%. The 5% group under Article 10 stays at 5% for the whole reduction period, and the 0% group is unchanged as well. Invoice software configuration should avoid a stacked reduction, meaning a second cut applied to an item that already sits at 5%.
This article has been quality-reviewed by the FLAW AI Legal Council