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The tax rate of 0% and objects not liable to VAT are both exempted from tax. However, there are some differences between these two types of taxes.
Differentiation of the tax rate of 0% and objects not liable to VAT
Criteria | Non-taxable | Tax rate of 0 % |
Subjects: | In accordance with Article 4, Circular No. 219/2013/TT-BTC, non-taxable objects include: Products of cultivation and husbandry, reared and fished aquatic and marine products which have not yet been processed into other products..... Materials and goods in the industries such as: Encourage agricultural production development; support for materials that cannot be produced domestically; services that relate practically, directly to people's lives and are not business | In accordance with Article 9, Circular No. 219/2013/TT-BTC, The 0% tax rate applies to exported goods and services; construction and installation of works overseas and in non-tariff zones; international transportation; and goods and services not liable to VAT as follows: - Offshore reinsurance; offshore transfer of technologies or intellectual property rights; offshore capital transfer, credit extension or securities investment; derivative financial services; outbound post and telecommunications services.... - Petrol and oil sold to domestically purchased automobiles of businesses in non-tariff zones; - Automobiles sold to organizations and individuals in non-tariff zones. |
Taxable objectives | Non-taxable objectives | Taxable objectives |
VAT declaration | Enterprises and business establishments trading goods and/or services are not required to declare VAT because they are non-taxable objects. | Enterprises and other business establishments are required to declare VAT because they are taxable objects. |
Tax credit and refund | Business establishments that do not have tax credits and refund of input VAT amounts or include them in the historical costs of fixed assets, value of materials or business charges. | Have tax credit and refund of input VAT on goods and services used for the production of or trade in goods and services liable to taxable objectives. |
Meanings | Encourage enterprises to develop necessary sectors for people in the country. | Encourage export enterprises, and promote the consumption of goods and services abroad. |
Policies for goods having a tax rate of 0% and not liable to VAT
- Goods and services subject to the tax rate of 0% or not liable to VAT are included in the State’s policies, so consumers must not pay any VAT amounts.
- Goods subject to the tax rate of 0% to encourage enterprises to export and promote abroad consumption (more competitive selling price, tax credit, and refund (Article 2, Circular No. 25/2018/TT-BTC);
- Non-taxable goods are the policy to encourage enterprises to invest in new industries with high social security (support and encourage domestic consumption).
Note: Goods and services are subject to the VAT rate of 0% for exported goods and services because VAT is calculated by the territory.
Here are the criteria for the differentiation of the tax rate of 0% and objects not liable to VAT. Objectives of application and VAT declaration responsibilities are the differences between these two cases.
