On December 28, 2023, the Government issued Decree 94/2023/NĐ-CP, outlining the value-added tax reduction policy in accordance with Resolution 110/2023/QH15.
Subjects of Value-Added Tax Reduction
Specifically, Article 1 of Decree 94/2023/NĐ-CP specifies that the value-added tax reduction will be applied to groups of goods and services subject to a tax rate of 10%, excluding the following groups:
a) Telecommunications, financial activities, banking, securities, insurance, real estate business, pre-cast metal and metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products.
b) Goods and services subject to special consumption tax.
c) Information technology as defined by information technology laws.
The reduction of value-added tax for these goods and services applies uniformly across the stages of import, production, processing, and commercial business. In the case of goods and services listed in Appendices I, II, and III accompanying Decree 94, if they fall into the category of either not subject to value-added tax or subject to a 5% value-added tax according to the provisions of the Value-Added Tax Law, they will be governed by the Value-Added Tax Law and not eligible for value-added tax reduction.
Rate of Value-Added Tax Reduction
Business entities calculating value-added tax using the deduction method will apply a tax rate of 8% for goods and services specified in Article 1, Clause 1 of Decree 94.
For business entities (including sole proprietors and individual businesses) calculating value-added tax based on a percentage of revenue, the percentage used to calculate value-added tax is reduced by 20% for invoicing goods and services eligible for value-added tax reduction as stipulated in Article 1, Clause 1 of Decree 94.
To apply the modified VAT rate, businesses providing reduced-tax goods and services need to indicate an 8% value-added tax rate on the value-added tax invoice, along with specifying the value-added tax amount and the total amount the buyer must pay.
For businesses providing goods and services with a 20% reduction in the percentage used to calculate value-added tax, when issuing an invoice, the “Total” column should include the full amount of goods or services before the reduction. In the “Total of Goods and Services” line, record the reduced amount by 20% of the percentage on revenue, and include a note: “Reduced by… (amount) corresponding to a 20% reduction in the percentage used to calculate value-added tax.”
In cases where a business sells goods or services with different tax rates, for example, goods subject to an 8% reduced tax rate and goods retaining the 10% tax rate, the tax rate and the reduced amount for each type of goods or services should be clearly stated.
Decree 94 is effective from January 1, 2024, to June 30, 2024. Therefore, the reduced tax rate will be applicable for the first six months of 2024. If the authorized agency issues a document extending or reducing the period of tax reduction, corresponding adjustments will be made.