Shall motorcycles under 125cc be eligible for a VAT reduction in Vietnam in the first 6 months of 2025?
Shall motorcycles under 125cc be eligible for a VAT reduction in Vietnam in the first 6 months of 2025?
Based on Article 11 of Circular 219/2013/TT-BTC which stipulates the cases for applying the 10% value-added tax rate as follows:
10% Tax Rate
A 10% tax rate applies to goods and services not stipulated in Articles 4, 9, and 10 of this Circular.
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In conjunction with the regulations in Articles 4, 9, and 10 of Circular 219/2013/TT-BTC, which define the subjects that are exempt from value-added tax and cases applying the 0%, 5% tax rates, motorcycles with engines from 125cc or less will be subject to a 10% tax rate.
However, based on Article 1 of Decree 180/2024/ND-CP which provides for the VAT reduction as follows:
VAT reduction
- Reduce value-added tax for goods and services currently applying the 10% tax rate, excluding the following goods and service groups:
a) Telecommunications, financial, banking, securities, insurance operations, real estate business, metals, and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products. Details in Appendix I attached to this Decree.
b) Goods and services subject to special consumption tax. Details in Appendix II attached to this Decree.
c) Information technology according to information technology law. Details in Appendix III attached to this Decree.
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- Value-Added Tax Reduction Rate
a) Businesses calculating value-added tax by the deduction method may apply the value-added tax rate of 8% for goods and services stipulated in Clause 1 of this Article.
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Additionally, the lists in Appendices 1, 2, 3 of Decree 180/2024/ND-CP do not include motorcycles under 125cc.
And, based on Article 2 of Decree 180/2024/ND-CP regarding the effective date of the VAT reduction decree as follows:
Implementation Effectiveness and Organization
1. This Decree takes effect from January 1, 2025, to the end of June 30, 2025.
- Ministries according to their functions, tasks, and People's Committees of provinces, cities under the central government shall direct relevant agencies to carry out publicity, guidance, inspection, and supervision to ensure consumers understand and benefit from the value-added tax reduction stipulated in Article 1 of this Decree, focusing on solutions to stabilize the supply and demand of goods and services under the tax reduction subject to maintain price stability (excluding the value-added tax) from January 1, 2025, to the end of June 30, 2025.
- In case of difficulties during implementation, the Ministry of Finance is assigned to guide and resolve.
- Ministers, heads of ministerial-level agencies, heads of agencies attached to the Government of Vietnam, Presidents of People's Committees of provinces, cities under the central government, and relevant enterprises, organizations, individuals are responsible for implementing this Decree.
Thus, from the first 6 months of 2025, from January 1, 2025, to June 30, 2025, motorcycles under 125cc will receive a VAT reduction and will be subject to a tax rate of 8%.
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Shall motorcycles under 125cc be eligible for a VAT reduction in Vietnam in the first 6 months of 2025? (Image from the Internet)
What are regulations on value-added tax payers in Vietnam?
Based on Article 3 of Circular 219/2013/TT-BTC, the entities subject to value-added tax include organizations and individuals producing, trading goods, services subject to value-added tax in Vietnam, regardless of the industry, form, or business organization (hereinafter referred to as "business establishments") and organizations, individuals importing goods, purchasing services from abroad subject to value-added tax (hereinafter referred to as "importers") including:
- Business organizations established and registered under the Law on Enterprises 2020, Law on Cooperatives 2023 and other specialized business laws;
- Economic organizations of political organizations, socio-political organizations, social organizations, professional social organizations, people's armed forces units, career organizations, and other organizations;
- Foreign-invested enterprises and foreign parties participating in business cooperation under the Investment Law; foreign organizations, individuals doing business in Vietnam but not establishing a legal entity in Vietnam;
- Individuals, households, independent business groups, and other entities with production, business, import activities;
- Organizations and individuals conducting business in Vietnam purchasing services (including cases of purchasing services attached to goods) from foreign organizations without a permanent establishment in Vietnam, individuals abroad as non-resident in Vietnam, the purchasing organization or individual is the taxpayer, except for cases where tax declaration and payment guidance is not required as per Clause 2 of Article 5 in Circular 219/2013/TT-BTC.
Regulations on permanent establishment and non-resident entities are in accordance with the corporate income tax law and the personal income tax law.
- Branches of export processing enterprises established to trade goods and conduct directly related activities in Vietnam under the laws on industrial parks, export processing zones, and economic zones.
What are procedures for implementing the VAT reduction for motorcycles under 125cc in Vietnam?
Based on Clause 3, Article 1 of Decree 180/2024/ND-CP regarding the procedures for implementing the VAT reduction for motorcycles under 125cc as follows:
- For business establishments stipulated in point a, Clause 2, Article 1 of Decree 180/2024/ND-CP, when issuing a value-added tax invoice for supplying motorcycles under 125cc, indicate “8%” in the VAT rate line; the VAT amount; the total amount the buyer must pay.
Based on the value-added tax invoice, the business establishment selling motorcycles under 125cc declares output value-added tax, and the business establishment buying motorcycles under 125cc declares input value-added tax deduction according to the reduced tax amount indicated on the VAT invoice.
