The National Assembly of Vietnam recently approved an extension of the 2% reduction in value-added tax (VAT) to the end of June 2025. This measure, aimed at supporting economic recovery and development, ensures that goods and services subject to the standard 10% VAT rate will continue to enjoy a reduced rate of 2% during the first six months of 2025. The decision was formalized through the Resolution of the 8th Session of the 15th National Assembly on November 30, 2024.
Key Legislative Developments
The VAT reduction was initially introduced under Resolution No. 43/2022/QH15 as part of fiscal and monetary policies to bolster the Socio-Economic Recovery and Development Program. The measure was extended multiple times, including through Decree 94/2023/ND-CP and Resolution No. 110/2023/QH15, which reduced the VAT rate from 10% to 8% until December 31, 2024. The latest extension, under Resolution 142/2024/QH15 and Decree 72/2024, provides clarity and continuity for businesses and consumers.
Decree 72/2024, effective from July 1, 2024, will continue to guide the implementation of the VAT reduction until the end of 2024. The upcoming extension until mid-2025 emphasizes the government’s commitment to economic stabilization and recovery.
Scope of the VAT Reduction
The 2% VAT reduction applies uniformly across all stages of production and distribution, including importation, manufacturing, processing, and trading. However, certain goods and services remain excluded from this reduction, consistent with previous exemptions. The excluded categories include:
- Telecommunications;
- Information technology;
- Financial and banking services;
- Securities;
- Insurance;
- Real estate business;
- Metal production and prefabricated metal products;
- Mining (excluding coal mining);
- Coke production;
- Refined petroleum;
- Chemicals and chemical products; and
- Goods and services are subject to special consumption tax.
Decree 94/2023/ND-CP provides a detailed list of excluded goods and services, complete with specific product codes and Harmonized System (HS) codes to ensure clarity for businesses.
Compliance Requirements for Businesses
Businesses employing the VAT deduction method must indicate 8% as the VAT rate on invoices for eligible goods and services. In cases where goods or services are subject to varying VAT rates, each rate must be distinctly specified on the invoice. This ensures transparency and compliance with tax regulations.
If a seller issues invoices using the standard VAT rate without applying the reduction, both the seller and buyer are jointly responsible for correcting the discrepancy. This includes adjusting the output VAT and input VAT as necessary to align with invoicing regulations.
The extension of the VAT reduction offers a continued financial reprieve for businesses and consumers, fostering economic activity and recovery. However, companies must adhere to updated invoicing and reporting requirements to avoid penalties and ensure compliance with the applicable tax laws.
As Vietnam’s economy progresses, this VAT reduction highlights the government’s proactive measures to support sustainable development and recovery. Businesses are encouraged to consult with tax professionals to effectively leverage the benefits of the reduced VAT rate.
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