Vietnamese regulations on 0% VAT rate for exported services
The Vietnamese government has issued regulations that allow businesses to apply a 0% value-added tax (VAT) rate on exported services. In order to qualify for this rate, businesses must meet the following conditions:
(i) The services must be directly provided to overseas customers.
(ii) The services must be consumed outside of Vietnam.
(iii) The business must have a contract with the overseas customer.
(iv) The business must have bank receipts for payment of the exported services.
The most critical conditions are (i) and (ii). Condition (ii) is the most controversial, as the term “consumed outside of Vietnam territory” is not defined and can be interpreted in a variety of ways. In practice, businesses often have difficulty proving that the entire service was consumed outside of Vietnam. As a result, local tax offices often challenge businesses that claim the 0% VAT rate for exported services.
Conclusion
Businesses that provide exported services should carefully consider all of the relevant conditions before claiming the 0% VAT rate. If there is any doubt about whether or not a service qualifies for the 0% rate, it is advisable to seek professional advice.