Resolution 174/2024/QH15: Shall an official 20% reduction in VAT rate apply in Vietnam in the first 6 months of 2025?

Resolution 174/2024/QH15: Shall an official 20% reduction in VAT rate apply in Vietnam in the first 6 months of 2025?

On November 30, 2024, the National Assembly passed Resolution 174/2024/QH15 at the 8th Session of the 15th National Assembly, which agreed to reduce VAT by 2% for the first 6 months of 2025 (applying from January 1, 2025, to June 30, 2025).

Download Resolution 174/2024/QH15

Resolution 174/2024/QH15 specifically stipulates the reduction of VAT as follows:

Continue reducing the VAT rate by 2% for groups of goods and services stipulated at point a, section 1.1, clause 1, Article 3 of Resolution No. 43/2022/QH15 of the National Assembly on fiscal and monetary policies supporting the Socio-Economic Recovery and Development Program from January 1, 2025, to June 30, 2025. Entrust the Government of Vietnam to organize and ensure the revenue tasks and budget balance for 2025 as decided by the National Assembly; immediately terminate the validity of the VAT exemption regulation in Decision No. 78/2010/QD-TTg of the Prime Minister of the Government of Vietnam, providing a legal basis and management sanctions for taxation agencies concerning foreign e-commerce platforms selling goods into Vietnam.

Thus, according to Resolution 174/2024/QH15, the VAT will continue to be reduced by 2% from January 1, 2025, to June 30, 2025.

Resolution 174/2024/QH15: Shall an official 20% reduction in VAT rate apply in Vietnam in the first 6 months of 2025? (Image from the Internet)

Which goods are subject to the 20% reduction in VAT rate in Vietnam under Resolution 174/2024/QH15?

Based on section 8 of Resolution 174/2024/QH15, goods subject to a 20% reduction in VAT rate are groups of goods and services stipulated at point a, section 1.1, clause 1, Article 3 of Resolution No. 43/2022/QH15 of the National Assembly concerning fiscal and monetary policies supporting the Socio-Economic Recovery and Development Program from January 1, 2025, to June 30, 2025.

Additionally, point a, section 1.1, clause 1, Article 3 of Resolution No. 43/2022/QH15 stipulates as follows:

Policy to Support the Socio-Economic Recovery and Development Program

1. Fiscal Policy:

1.1. Tax Exemption and Reduction Policy:

a) Reduce the VAT rate by 2% during 2022, applicable to groups of goods and services currently subjected to a VAT rate of 10% (reduced to 8%), except for certain groups of goods and services such as telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metals, fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products, and goods and services subject to excise tax;

...

Therefore, goods subject to a 20% reduction in VAT rate from January 1, 2025, to June 30, 2025, are groups of goods and services currently subjected to a VAT rate of 10% (reduced to 8%), except for certain goods and services such as:

- Telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metals, fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products, and goods and services subject to excise tax.

Additionally, the Ministry of Finance has updated the Draft Decree on the reduction of VAT by 2% from January 1, 2025, to June 30, 2025 (Draft No. 3).

To be specific, the draft content of the Decree is based on inheriting all stipulated content in Decree 72/2024/ND-CP.

Download Draft Decree on 20% reduction in VAT rate (Draft No. 3)

The Ministry of Finance proposes reducing VAT for groups of goods and services subjected to a tax rate of 10%, excluding the following goods and services:

- Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products. Details in Appendix I attached to the Draft Decree.

- Goods and services subject to excise tax. Details in Appendix II attached to the Draft Decree.

- Information technology under the law on information technology. Details in Appendix III attached to the Draft Decree.

- The reduction in VAT for each type of goods and service aforementioned will be uniformly applied at the import, production, processing, and commercial trading stages.

For coal extracted and sold (including cases where extracted coal is screened, graded according to a closed process before being sold), it is subject to a VAT reduction. Coal items in Appendix I attached to the Draft Decree, at stages other than the extraction and selling stage are not eligible for a VAT reduction.

Corporations and economic groups that implement a closed process and sell extracted coal are also subject to a VAT reduction for the extracted coal sold.

In case goods and services listed in Appendices I, II, and III attached to the Draft Decree fall under the non-taxable or 5% VAT rate according to the Law on Value Added Tax, they shall comply with the provisions of the Law on Value Added Tax and shall not be eligible for VAT reduction.

Which entity is the VAT taxpayer in Vietnam under the current regulations?

According to Article 4 of the Law on Value Added Tax 2008, VAT taxpayers are organizations and individuals producing, trading goods, and services subject to VAT (hereinafter referred to as business establishments) and organizations and individuals importing goods subject to VAT (hereinafter referred to as importers).

Additionally, organizations and individuals in Vietnam purchasing services (including services associated with goods) from foreign organizations without a permanent establishment in Vietnam and non-resident foreign individuals must pay tax, except in cases not required to declare, calculate, and pay value-added tax stipulated at Point b, Clause 3, Article 2 of Decree 209/2013/ND-CP.