Letters of Credit (L/C) is subject to Value Added Tax (“VAT”) The provision of credit (i.e. lending) in Vietnam is VAT exempt (without input credit) for under current VAT regulations. However, the treatment of letters of credit for VAT purpose has been an area of ongoing uncertainty. A letter of credit is a document that guarantees the buyer’s payment to a seller. The question therefore is whether the issue of a letter of credit by a credit institution is in the nature of lending (and exempt from VAT) or the provision of a payment service (and subject to VAT). On 22 April 2020, the General Department of Taxation (“GDT”) issued Official Letter No. 1606/TCT-DNL to provincial tax departments confirming that the letter of credit service is subject to VAT according to the Law on VAT and the Law on Credit Institution.