Is website design subject to VAT? Exempt or 10%?

As digital transformation gathers pace, demand for website design from businesses and individual sellers keeps growing. But one question many businesses run into when signing a contract for this service is “Is website design subject to VAT?” Getting it wrong can lead to incorrect tax filings, back taxes or penalties from the tax authority. The article below, MONA Media will help you clarify this issue as concretely and clearly as possible.

See more: website design with AI for businesses — AI handles the heavy lifting fast, while MONA's team owns the strategy, the design and the support after handover.

Is website design subject to VAT (GTGT)?

Official Letter No. 22099/CT-HTr dated March 11, 2005 from the Hanoi Tax Department, asking how to apply the VAT rate to website design service and domestic hosting (server rental) services, the General Department of Taxation gave the following opinion:

• Website design is classified as a software service and is not subject to VAT
• Server rental (hosting) services are subject to a 10% VAT rate

Official Letter 22099/CT-HTr began the body of VAT guidance on website design and is still cited in many accounting and tax guides today.

Under Article 4, Clause 12 of Circular No. 219/2013/TT-BTC, the subjects and categories of goods subject to the 0% VAT rate are as follows:

“Computer software, including software products and software services as defined by law.”

What do software products include?

Under Article 9, Clause 2 of Decree No. 71/2007/NĐ-CP guiding the Law on Information Technology, software products fall into 5 types:

• System software
• Application software
• Utility software
• Tool software
• Other software

According to Official Letter 4242/TCT-CS dated September 25, 2014 from the General Department of Taxation, the main points on VAT policy for software programming, website design and some accompanying services are:

• Pure software programming and website design are defined as software services, which fall under the category not subject to VAT (that is, no tax is charged and no VAT is shown on the invoice).
• Related services such as register a domain (domain) and server rental (hosting) for running a website are subject to 10% VAT; these must be itemized separately, invoiced and fully declared for tax.

Taxes payable when completing a website

As mentioned above, when designing a website, hosting and domain names are the two items the state taxes for companies that register for these services. So if you use these two services, you will also have to pay the mandatory 10% tax.

Suppose you buy a complete package from a web design company:

Notes when calculating VAT on website services

When handling VAT for website services, businesses should keep the following key points in mind to comply with regulations and avoid legal risk:

• Classify the services: Identify each type of service clearly so the right tax rate applies. In particular, avoid confusing website interface design services (not subject to VAT) with other website services that are taxed at 10%.
• Keep complete records: Businesses should proactively store and manage all related records, including service contracts, invoices and payment documents. These are an important legal basis for reconciliation when the tax authority carries out an inspection.
• Meet filing and payment deadlines: Businesses must file and pay tax on time as required. Delays can lead to administrative penalties, late-payment interest, and damage to the company's tax compliance standing.

In short, correctly determining VAT obligations for website design not only keeps your business compliant with the law but also avoids unnecessary risks in operations. That is the full answer from MONA Media on paying VAT for website design, and we hope this article is useful for your business.

Sources:

• Decree No. 71/2007/NĐ-CP guiding the Law on Information Technology for the IT industry.
• Circular No. 219/2013/TT-BTC guiding the Law on Value-Added Tax and Decree No. 209/2013/NĐ-CP, issued by the Ministry of Finance;
• Official Letter No. 22099/CT-HTr dated March 11, 2005 from the Hanoi Tax Department on the VAT rate for website design and server rental (renting a server to run a website);
• Official Letter 4242/TCT-CS (2014) on tax policy for software programming and website design.