Differences Between the Japanese and Vietnamese VAT Systems and Their Impact on Business Operations
2025/10/15
- I-GLOCAL CO., LTD.
- Certified Public Accountant (US)
- Katsuki Kumagai
Introduction
Both Japan’s consumption tax and Vietnam’s value-added tax (VAT) are taxes applied to the transactions of goods and services, and their basic structures are similar.
However, there are many differences in their operations and procedures.
This report organizes the differences between the Japanese and Vietnamese systems in five key areas: 1) payment methods, 2) declaration frequency, 3) methods of payment, 4) refund mechanisms, and 5) the period until refunds are received.
Additionally, in light of the revised VAT law coming into effect in July 2025, we have also summarized important points to consider for each industry.
I hope this will be of some help for companies operating businesses in Vietnam to prepare for tax procedures and cash flow management.
Main Differences between Japanese and Vietnamese VAT Systems (5 Items)
The main differences between Japanese Consumption Tax and Vietnamese VAT are summarized below according to five items.
| Item | Japan (Consumption Tax) | Vietnam (VAT) |
| Payment Methods | Both cash and non-cash payments are accepted. | Non-cash payments are required for transactions of 5 million VND or more. |
| Declaration frequency | Annual tax return once a year | Declaration on a monthly or quarterly basis |
| Payment method | Advance payment based on the previous year’s actual results | Taxes incurred during the reporting period are paid in the following month. |
| Refund system | Automatic refund at the time of final tax return | Separate application required |
| Period until refund | About two months | Several months to several years (varies greatly depending on region, time, and case) |
The following will provide detailed explanations for each item.
1. Differences in payment methods (cash / non-cash requirements)
In Japan, there are no restrictions on payment methods for consumption tax deductions, and both cash and non-cash payments are eligible for deduction. On the other hand, in Vietnam, non-cash payment is the basic rule, and especially for transactions of 5 million VND (about 30,000 yen) or more, payment by non-cash means such as bank transfer is required for deduction. This reflects the practice that, in addition to a formal VAT invoice, proof such as bank transfer records is required for input tax deductions to be recognized. In addition, if an appropriate VAT invoice has not been obtained or there are deficiencies such as an incorrect company name on the invoice, there is a high possibility that the deduction will be denied. Therefore, in Vietnam, it is required to check the invoice details for each transaction and ensure non-cash payments are strictly enforced.
Note: Previously, the transaction amount requiring non-cash payment was set at 20 million VND (about 120,000 yen) or more, but due to a legal revision, it has been lowered to 5 million VND (about 30,000 yen) including VAT.
2. Differences in declaration frequency (annual declaration vs. monthly/quarterly declaration)
In Japan, as a general rule, a final consumption tax return is filed once a year at the end of the business year. On the other hand, in Vietnam, filing and payment are required either monthly or quarterly. Newly established companies less than 12 months old or small-scale enterprises with less than 50 billion VND (about 300 million yen) in sales in the previous year can file quarterly, but all other companies are required to file monthly.
Therefore, in Vietnam, it is essential to have a system in place to aggregate transactions on a monthly basis and promptly prepare tax returns, as well as secure the necessary personnel for this purpose. If you try to handle everything at the end of the fiscal year as is common in Japan, you won’t make it in time, so it is necessary to set up your accounting and tax schedules according to the local reporting frequency.
3. Differences in payment methods (such as the presence or absence of provisional tax payments)
In Japan, there is a system in which interim (provisional) tax payments are made according to the previous year’s consumption tax amount, and the final settlement is carried out at the end of the fiscal year. On the other hand, in Vietnam, there is no provisional payment system; VAT is calculated on an actual basis each month or quarter and paid in the following month. Since taxation is completed each time, it is always necessary to keep up-to-date with the latest tax amount and secure tax payment funds in a planned manner. Especially for companies that do not have plenty of cash flow, it is important to put in place an internal management system to prevent missed tax payments.
4. Differences in Refund Mechanisms (Automatic Refund vs. Application Required)
In Japan, if the input tax amount exceeds the output tax amount at the time of final tax return, the difference is automatically refunded. For companies with many export transactions, it is common to plan financing based on expected refunds, since they can receive a refund simply by filing their tax return.
On the other hand, in Vietnam, you cannot receive a refund simply by filing a VAT return; a separate refund application and a strict review process are required. Detailed documents such as contracts, invoices, and export/import-related records are required for the application, and on-site inspections and inquiries by tax authorities are also unavoidable. In particular, it is customary for a tax audit to always be conducted for the first application, and refunds are regarded as a special procedure that requires approval from the authorities.
Moreover, the conditions for refunds are becoming stricter every year, and it has become common for many companies to carry forward excess purchases to the next period as an adjustment. One should keep in mind that the threshold for receiving refunds in Vietnam is high and that the procedures require a considerable amount of time and effort.
5. Differences in the period until refund (promptness vs. prolongation)
Due to the differences in the systems mentioned above, there is a significant gap between Japan and Vietnam regarding the time required to receive tax refunds. In Japan, it is common for the refund to be deposited about one to two months after filing the tax return. On the other hand, in Vietnam, the review process after a refund application often takes a long time, and the period required for a refund ranges from several months to several years depending on the case and region. For example, in Hanoi, refunds are processed in as little as 2 to 10 months in relatively quick cases, whereas in Ho Chi Minh City, it is not uncommon for the process to take two to three years. These required periods are merely trends at the present time, and may vary greatly depending on the region and time due to changes in administrative policies or how officials respond. Due to these institutional differences, there is a significant discrepancy between Japan and Vietnam in the time it takes to receive the refund. In Japan, it is common for the refund to be deposited about one to two months after filing the tax return. On the other hand, in Vietnam, examination after the reimbursement application often takes a long time, so the period required until the refund is issued can vary from several months to several years, depending on the case and location. For example, in Hanoi, refunds are generally processed in a relatively short period of about 2 to 10 months, whereas in Ho Chi Minh City, it is not uncommon for the process to take 2 to 3 years. These processing times are only current trends, and may vary significantly by region and period depending on the authorities’ operating policies and the officials in charge. Therefore, in Vietnam, it is recommended to avoid financial planning that assumes VAT refunds and to prepare a conservative budget. Although the law stipulates that processing should be completed within a specified period, in practice, delays occur due to the discretion of responsible officials or requests for additional documents, so refunds are not always made according to the statutory timelines. When conducting business in Vietnam, it is crucial to plan cash flow on the assumption that VAT refunds will require time.
Points to note about VAT by industry
In addition to the general differences mentioned above, there are specific points of caution for each industry. The main points to keep in mind for the three industries of manufacturing, trading, and services are outlined below.
- Manufacturing industry
When there are large input VAT costs due to major pre-operation investments such as bringing in factory facilities and machinery, it is possible to apply for a refund if certain conditions are met. Previously, if the accumulated VAT during the investment phase exceeded 300 million VND, it was considered possible to apply for a refund, and many companies used this standard as a guideline for refunds. However, attention must be paid to the fact that the revised VAT law now stipulates a new application deadline of “within one year after the start of sales recognition.” Even if the refund amount exceeds the standard amount, there is a risk that you will not be able to apply for a refund if more than one year has passed since the start of sales. As a result, it has become difficult to flexibly adjust the timing of refunds as in the past, making it necessary to plan your application schedule in advance from the investment stage. In addition, under the amended VAT law, VAT refunds for expansion investments—such as improving production capacity or upgrading equipment in existing businesses, which used to be unclear in the previous regulations—are now explicitly permitted. If it qualifies as an investment for increased production, it is advisable to proceed with the procedures while confirming the applicability with an expert.
- Trading business
In the trading business, which handles imports and exports of goods, the more export transactions there are, the more likely it is to result in an excess purchase VAT situation. However, due to the revision of the VAT law, VAT refunds will no longer be allowed for transactions where imported goods are exported as-is. This marks a shift in policy to disallow refunds for business models that merely pass goods through, such as triangular transactions. On the other hand, sales to bonded zone enterprises (EPEs) continue to be eligible for rebates. Therefore, the VAT burden varies greatly depending on the transaction type and buyer, making it essential to review pricing and business plans.
In addition, even when a 0% rate is applied to export transactions, the submission of proper export documents is required. To avoid risks due to incomplete paperwork, it is important to establish a thorough system for managing import/export-related documents.
- Service Industry
In the service business, when services are provided to overseas customers or export processing enterprises (EPE), a VAT rate of 0% may be applied in some cases. Traditionally, a wide range of services such as accounting, auditing, and office leasing have been categorized as ‘export services’ eligible for the 0% rate. However, under the revised VAT law, it has been clearly stipulated that services provided to EPEs that are not directly involved in manufacturing activities are not eligible for the 0% rate. Services not directly related to the manufacturing process are likely to be subject to tax in the future, so caution is required. However, the scope of ‘directly involved services’ has not been clearly defined and remains fluid, so it will be necessary to carefully review contract terms (such as whether prices are before or after tax) while keeping an eye on future guidelines and notices.
Additionally, it should be noted that when providing services to overseas customers, the treatment of VAT may differ depending on the location of service provision and consumption. Including electronic services, there are increasing cases in Vietnam where transactions are subject to taxation, so it is important not to easily assume such transactions are subject to 0% exemption based on practices in Japan, but rather to verify the applicable tax rates and invoicing requirements individually for each transaction.
In conclusion
Understanding the differences between the VAT systems in Japan and Vietnam is essential to ensure tax compliance and avoid unexpected issues with cash flow when running a business in Vietnam. In particular, the complexity of procedures and the lengthy time required for VAT refunds can have a significant impact on business activities, so it is important to respond carefully while keeping abreast of any institutional changes.
There is also a possibility that the way Vietnamese authorities operate will continue to change, and in practice, uncertainty remains, such as being asked to submit additional materials at the discretion of the officials in charge. If it is difficult to address the issue with only your own company’s resources, it is recommended to proceed with proper process development and application procedures while consulting accounting and tax professionals who are well-versed in the latest trends, from the perspective of risk mitigation and ensuring reliability.
Related reports can be found here.
We introduce reports related to this topic below. Please take a look at these as well.
・ベトナムの付加価値税（VAT）還付の概要と法改正による影響
・Overview of Vietnam’s Value Added Tax (VAT) and Key Points of Legal Revisions
・新投資プロジェクトに対する付加価値税(VAT)還付手続きの留意点
