Vietnam: Is there 1 month left before the 20% reduction in VAT rate ends in 2024?

Vietnam: Is there 1 month left before the 20% reduction in VAT rate ends in 2024?

Based on Clause 2, Article 1 of Decree 72/2024/ND-CP, the reduction in value-added tax (VAT) is specified as follows:

- Business establishments calculating VAT by the credit method are subject to an 8% VAT rate for goods and services as stipulated in Clause 1, Article 1 of Decree 72/2024/ND-CP.

- Businesses (including business households and individuals) calculating VAT based on a percentage of revenue are entitled to a 20% reduction in the percentage used to calculate VAT when issuing invoices for goods and services eligible for VAT reduction as specified in Clause 1, Article 1 of Decree 72/2024/ND-CP.

According to the provisions in Clause 1, Article 2 of Decree 72/2024/ND-CP, as follows:

Effectiveness and Implementation

1. This Decree shall come into force from July 1, 2024, to the end of December 31, 2024.

2. Ministries according to their functions, duties, and People's Committees of provinces and centrally-run cities shall direct relevant agencies to implement propaganda, guidance, inspection, and supervision so that consumers understand and benefit from the VAT reduction under Article 1 of this Decree, focusing on stabilizing the supply and demand of goods and services belonging to the reduced VAT category to maintain market price stability (excluding VAT) from July 1, 2024, to the end of December 31, 2024.

3. During the implementation, if issues arise, the Ministry of Finance directs, guides, and resolves them.

4. Ministers, Heads of ministerial-level agencies, Heads of agencies belonging to the Government of Vietnam, Chairpersons of the People's Committees of provinces and centrally-run cities, and related enterprises, organizations, and individuals are responsible for the implementation of this Decree.

**** Decree 72/2024/ND-CP is effective from July 1, 2024, to the end of December 31, 2024, meaning that the VAT reduction to 8% will be applied until December 31, 2024.

Thus, it is clear that it is currently November, so there is just over 1 month left before the VAT reduction to 8 percent ends in 2024 (up to December 31, 2024).

Vietnam: Is there 1 month left before the 20% reduction in VAT rate ends in 2024? (Image from the Internet)

Are chemical products eligible for VAT reduction in Vietnam under Decree 72?

According to Article 1 Decree 72/2024/ND-CP regarding VAT reduction policy following Resolution 142/2024/QH15.

[1] VAT Reduction Level

- Business establishments calculating VAT by the credit method are subject to an 8% VAT rate for goods and services specified in Clause 1, Article 1 of Decree 72/2024/ND-CP.

- Businesses (including business households and individuals) calculating VAT based on a percentage of revenue are entitled to a 20% reduction in the percentage used to calculate VAT when issuing invoices for goods and services eligible for VAT reduction specified in Clause 1, Article 1 of Decree 72/2024/ND-CP.

[2] Goods and Services Not Eligible for VAT Reduction

As per Article 1 of Decree 72/2024/ND-CP implementing VAT reduction for groups of goods and services currently subjected to a 10% tax rate, excluding the following goods and services:

- Telecommunications, finance, banking, securities, insurance, real estate business, metals and products made of pre-cast metal, mining products (excluding coal mining), coke, refined petroleum, chemical products.

Details in Appendix 1 attached to Decree 72/2024/ND-CP

- Products and services subject to excise tax.

Details in Appendix 2 attached to Decree 72/2024/ND-CP

- Information technology under the information technology law.

Details in Appendix 3 attached to Decree 72/2024/ND-CP

- The VAT reduction for each type of goods and services specified in Clause 1, Article 1 of Decree 72/2024/ND-CP is applied uniformly at the stages of import, production, processing, and commercial trading. For coal mining products sold (including the case where mined coal is screened, classified, and then sold) are subject to VAT reduction.

Coal items listed in Appendix I attached to Decree 72/2024/ND-CP, in other stages than mining sales, are not eligible for VAT reduction.

Large corporations and economic groups conducting a closed process before selling are also eligible for VAT reduction on coal mining products sold.

For goods and services mentioned in Appendices 1, 2, and 3 attached to Decree 72/2024/ND-CP which are not subject to VAT or subject to a 5% VAT under the VAT Law, the provisions of the VAT Law should apply, and no VAT reduction should be given.

According to the regulation stating that goods and services not eligible for VAT reduction under Article 1 Decree 72/2024/ND-CP implements VAT reduction for groups of goods and services currently subjected to a 10% tax rate, excluding the following:

- Telecommunications, finance, banking, securities, insurance, real estate business, metals and products made of pre-cast metal, mining products (excluding coal mining), coke, refined petroleum, chemical products.

Thus, chemical products will not be eligible for VAT reduction according to Decree 72.

What has been the proposal from voters in Ho Chi Minh City regarding the continuation of VAT reduction until the end of 2025?

On October 29, 2024, the Ministry of Finance issued Official Dispatch 11631/BTC-CST in 2024 Download in response to voter petitions submitted prior to the 8th session, the XV National Assembly.

The Ministry of Finance received a petition from Ho Chi Minh City voters in Report 514/BC-ĐĐBQH in 2024 regarding the summary of Ho Chi Minh City voters' petitions before the 8th session, XV National Assembly.

Petition Content:

Voters requested that the National Assembly and the Government of Vietnam consider continuing to reduce the 2% VAT rate for some groups of goods and services from January 1, 2025, to the end of December 31, 2025, to stimulate more consumer spending and contribute to economic recovery after the pandemic.

The Ministry of Finance responds to the request to continue reducing 2% VAT as follows:

Regarding the request to continue reducing the 2% VAT rate for some groups of goods and services from January 1, 2025, to the end of December 31, 2025.