What is VAT? Overview of value added tax (VAT)

VAT, also known as value added tax (VAT) , is a consumption tax applied to each added value of a product or service in the stages from production to final consumption. VAT is an important source of revenue for the state budget, helping to regulate and manage the economy. More than 170 countries in the world, including Vietnam, have applied VAT .

I. What is VAT?

VAT (Value Added Tax) is a value added tax, levied on the added value of goods or services throughout the stages of production, distribution, and sale. This means that at each step of the supply chain, the value added due to the production and circulation process will be taxed. The final consumer is the one who pays this tax, while the business only plays the role of collecting and paying the tax to the tax authority.

For example, if you buy a product that costs 100,000 VND with a VAT rate of 10%, you will have to pay a total of 110,000 VND , and that 10,000 VND is the VAT .

II. Characteristics of value added tax VAT

1. Indirect tax

VAT is an indirect tax , which means that the seller is responsible for collecting and paying the tax to the State, but the final consumer is the one who actually pays this tax through the purchase of the product/service.

2. Multi-stage, non-duplicated consumption tax

VAT is collected at each stage of production and distribution but only on the value added at each stage, helping to avoid duplication of tax across different stages.

3. Regressive with respect to income

VAT can be seen as regressive because low - income people spend a large proportion of their income on consumption and pay VAT , while high-income people spend a smaller proportion of their income on goods subject to VAT .

4. Destination Principle

VAT is levied on a destination basis – that is, where the product is consumed, not where it is produced. This ensures that countries have the right to tax products/services consumed within their territory.

5. Wide range of regulation

VAT applies to most goods and services, with very few exceptions. Products ranging from agriculture to financial services are subject to the tax , with a few exceptions .

III. The role of VAT

1. In the circulation of goods

VAT helps control product prices on the market, ensuring reasonableness and transparency in product prices, avoiding double taxation . In addition, it helps stabilize prices and provides data for businesses to plan production and distribution appropriately.

2. In State economic management

VAT is a large and stable source of revenue for the State budget , helping to support financial policies and economic development. It is also an effective tool to prevent tax losses and protect domestic production , reducing unfair competition from imported products.

IV. Taxable and non-taxable VAT subjects

1. Subjects subject to VAT

Enterprises and individuals that produce, trade and provide services are subject to VAT . Final consumers will have to pay tax when purchasing taxable goods or using taxable services.

2. Objects not subject to VAT

Some goods and services that are exempt from VAT include unprocessed agricultural products, financial services, life insurance services, education, public health and public utilities. This provision helps support sectors that have a major impact on social life and people's well-being.

V. VAT rates applicable to each industry

1. VAT rate 0%

Applicable to export activities , international transportation and some other cases such as derivative financial services or technology transfer abroad.

2. VAT rate 5%

Applies to essential products and services such as clean water , agricultural products , fresh, unprocessed foods and health care services .

3. VAT rate 10%

This is the most common tax rate, applied to most goods and services. This is the standard tax rate for goods/services that are not exempted or subject to low tax rates.

VI. How to get VAT refund?

Businesses can get a VAT refund when input tax exceeds output tax or in special cases such as exporting goods. This helps avoid double taxation and ensures fairness in the tax system.

VII. Current method of calculating VAT

1. How to calculate VAT by deduction method

VAT payable = Output VAT - Input VAT

This method is popular with large businesses, where they can deduct input tax from purchases of goods and services.

2. How to calculate VAT by direct method

VAT payable = Rate (%) x Revenue

This method applies to small businesses and sole proprietorships, with specific percentages applied by industry.

VIII. Some frequently asked questions about VAT

1. What does 0% VAT rate mean?

The 0% tax rate is applied to encourage exports , helping domestic enterprises compete better in the international market.

2. What is input and output VAT?

• Input VAT : Is the VAT amount of goods/services that a business purchases for production or business.
• Output VAT : Is the amount of VAT that a business collects from selling goods/services.

3. Distinguish between VAT invoice and sales invoice?

• VAT Invoice : Contains details of the VAT amount payable and is used in VAT taxable transactions.
• Sales invoice : Does not include VAT and only reflects the transaction value between the two parties.

VAT is a powerful financial tool that supports the economic development of a country. With the complexity of calculation and management, businesses and consumers need to understand clearly to be able to comply with and make good use of the VAT system . Updating the latest tax regulations will help people not miss important changes in tax policy.

IX. Brand Manager – Specializing in Providing Comprehensive Marketing Services

While VAT directly affects the price of goods and services, building trust and brand value is an important factor in helping businesses maintain their competitiveness in the market. This is an important task of the Brand Manager - the person responsible for building a marketing strategy , helping the brand make an impression on customers.

Role of Brand Manager:

1. Brand building and development: Brand Manager is responsible for designing and managing brand strategy , helping businesses shape a consistent and strong image in the eyes of customers.
   
2. Managing marketing campaigns: They coordinate marketing activities from advertising, communications to promotions, ensuring all activities are aimed at enhancing brand value .
   
3. Analyze and monitor market trends: Brand Managers regularly analyze market data and consumer behavior to update trends, thereby adjusting brand strategies to be most appropriate and effective.
   
4. Enhance customer loyalty: By building long-term marketing strategies, Brand Managers not only help attract new customers but also maintain the loyalty and engagement of existing customers, helping the brand grow sustainably.
   

Brand Manager not only ensures that the brand is managed consistently, but also helps businesses optimize marketing strategies, while enhancing product value in the eyes of consumers, regardless of changes in tax rates or VAT .