Vietnam: Shall VAT rate be reduced by 20% from January 1, 2025, to June 30, 2025?

Vietnam: Shall VAT rate be reduced by 20% from January 1, 2025, to June 30, 2025?

Recently, the Ministry of Finance released a draft Decree regulating the policy of reducing value-added tax according to the Resolution of the National Assembly passed on November 30, 2024 (Draft Decree on reducing VAT by 2% in 2025).

Draft Decree on reducing VAT by 2% in 2025...Download

Accordingly, the draft has proposed to reduce the VAT rate in the first 6 months of the year (from January 1, 2025, to June 30, 2025) to 8% for groups of goods and services currently subject to a 10% tax rate.

Note: No reduction for certain groups of goods and services including telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metal production and fabricated metal products, mining (excluding coal mining), coke production, refined petroleum production, chemical and chemical products production, and goods and services subject to special consumption tax.

Vietnam: Shall VAT rate be reduced by 20% from January 1, 2025, to June 30, 2025? (Image from the Internet)

Which goods and services are eligible for VAT reduction in Vietnam until December 31, 2024?

Based on Article 1 Decree 72/2024/ND-CP stipulating the reduction of value-added tax for groups of goods and services currently applying a 10% tax rate to 8% from July 1, 2024, to December 31, 2024, excluding the following groups:

- Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum products, chemical products. Details in Appendix 1 issued with Decree 72/2024/ND-CP.

- Goods and services subject to special consumption tax. Details in Appendix 2 issued with Decree 72/2024/ND-CP.

- Information technology as per information technology laws is detailed in Appendix 3 issued with Decree 72/2024/ND-CP.

Note:

- The VAT reduction for each type of goods and services mentioned above applies universally in import, manufacturing, processing, and commercial business steps. For extracted coal sold (including instances of coal being extracted and then screened and classified by a closed process before selling), it is subject to VAT reduction. Coal items in Appendix 1 issued with Decree 72/2024/ND-CP, at steps other than extraction for sale, are not exempt from VAT reduction.

Economic corporations, holding companies conducting a closed-selling process also qualify for VAT reduction for extracted coal sold.

If goods and services listed in Appendices 1, 2, and 3 issued with Decree 72/2024/ND-CP fall under categories not subject to VAT or subject to 5% VAT according to the 2008 VAT Law, the regulation of the 2008 VAT Law applies, and no VAT reduction is given.

What are the fines for late submission of VAT declarations in Vietnam?

According to Article 13 Decree 125/2020/ND-CP on penalties for late submission of VAT declarations:

(1) A warning is issued for late submission of VAT declarations from 1 to 5 days with mitigating circumstances.

(2) A fine of 2,000,000 VND to 5,000,000 VND for late submission of VAT declarations from 1 to 30 days, except as specified in Clause 1, Article 13 Decree 125/2020/ND-CP.

(3) A fine of 5,000,000 VND to 8,000,000 VND for late submission of VAT declarations from 31 to 60 days.

(4) A fine of 8,000,000 VND to 15,000,000 VND for any of the following actions:

- Late submission of VAT declarations from 61 to 90 days;- Late submission of VAT declarations over 90 days with no taxes payable;- Non-submission of VAT declarations with no taxes payable;

(5) A fine of 15,000,000 VND to 25,000,000 VND for late submission of VAT declarations over 90 days from the deadline, with due taxes, and the taxpayer has paid all taxes and late payment fees to the state budget before the tax authorities announce tax inspection, auditing decisions or before the tax authorities record a violation per Clause 11, Article 143 Law on Tax Administration 2019.

If the calculated fine according to this provision is higher than the tax arising from the tax declaration, the maximum fine applicable will equal the payable tax on the declaration but not less than the average fine framework as per Clause 4, Article 13 Decree 125/2020/ND-CP.

The offender must additionally undertake the following remedial actions:

- Compulsory payment of tax late payment fees to the state budget for violations in Clauses 1, 2, 3, 4, and 5, Article 13 Decree 125/2020/ND-CP if the taxpayer delayed the VAT declaration leading to late tax payment;

- Obligatory tax declaration, and any annexes, in case of violations at points c and d, Clause 4, Article 13 Decree 125/2020/ND-CP.

Note: The above penalties for late VAT filing apply to violations committed by organizations. For individuals committing the same violations, the fine is half that imposed on organizations (as per Clause 5, Article 5 Decree 125/2020/ND-CP).