Vietnam’s VAT on Low-Value Imported Goods: One Month into Implementation

Posted by Written by Ayman Falak Medina Reading Time: 2 minutes

Vietnam’s decision to impose a value-added tax (VAT) on low-value imported goods has now been in effect for over a month, reshaping the landscape of cross-border e-commerce and import dynamics. The regulation, which came into force on February 18, 2025, applies to goods valued at less than VND1 million (US$39.40) and sent via express delivery services. The move marks a significant policy shift as it eliminates the long-standing tax exemption that previously benefited small-scale imports.

Why Vietnam imposed VAT on low-value imports

The key rationale behind the policy change is to ensure fair competition between domestic products and imported goods. Previously, local manufacturers faced a competitive disadvantage, as their products were subject to VAT while low-value imports remained tax-exempt. By closing this loophole, the government aims to promote domestic consumption and level the playing field for Vietnamese businesses.

Additionally, Vietnam’s booming e-commerce sector has led to a surge in small-value imports, particularly from China, which accounts for millions of shipments daily. Authorities have been concerned about potential tax revenue losses and the impact on local businesses. The new VAT policy helps the government recover lost tax revenue while addressing the rapid growth of cross-border online shopping.

Early impact and challenges

The General Department of Customs (GDC) estimates that VAT collection on these imports could generate an additional VND 2.7 trillion (US$105.6 million) annually. However, the first month of enforcement has not been without challenges.

Adjustment period for businesses and consumers

E-commerce platforms, logistics companies, and importers have had to adapt quickly to the new tax requirements. Some businesses have experienced delays due to adjustments in customs procedures, while others have been working to integrate VAT charges into their pricing structures.

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Consumers, particularly those accustomed to tax-free small purchases from overseas, have also faced higher costs, influencing their buying decisions.

Operational challenges for customs authorities

Vietnam’s customs system is still adjusting to handling VAT collection efficiently for millions of small-value imports. Initially, customs officers had to process declarations manually while waiting for system upgrades to streamline VAT collection. This temporary bottleneck has led to some delays in clearing shipments, although improvements are expected as the system becomes more automated.

Comparison with other countries

Vietnam’s approach aligns with international trends, as several countries have removed VAT exemptions on low-value imported goods. Singapore, Thailand, Australia, and the European Union have implemented similar policies to prevent tax revenue losses and ensure fair competition with domestic industries. By adopting this measure, Vietnam joins a growing number of economies tightening regulations around cross-border e-commerce.

Looking Ahead: Long-term implications

As businesses and customs authorities continue adapting to the new tax regime, further refinements in implementation processes are expected. Automation of VAT collection and streamlined declaration processes will likely reduce delays and enhance compliance. In the long run, the regulation is expected to bolster government revenues, protect local industries, and create a more balanced competitive environment.

The new VAT policy requires compliance adjustments and potential price recalibrations for foreign e-commerce platforms and logistics providers operating in Vietnam. While consumers may see increased costs for small-value imported goods, local businesses stand to gain from a more equitable market landscape.

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