Vietnam: Shall VAT rate be reduced by 20% in the first six months of 2025?

Vietnam: Shall VAT rate be reduced by 20% in the first six months of 2025?

According to Resolution 218/NQ-CP dated November 12, 2024, the Government of Vietnam assigned the Ministry of Finance to lead coordination with relevant agencies and localities to research, advise, and propose the development of a National Strategy on Anti-Waste, in the spirit of the directives from the General Secretary, to report to the Prime Minister within November 2024.

See the detailed file of Resolution 218/NQ-CP dated November 12, 2024: Here

At the same time, the Ministry of Finance is to promptly summarize, assess, and advise, proposing to issue under its authority or present to competent authorities policies on tax exemption, reduction, and extension of fees and land levies in 2025 to be implemented early in the year, especially the continuation of the VAT reduction in the first six months of 2025 to report to the National Assembly at the 8th session.

Vietnam: Shall VAT rate be reduced by 20% in the first six months of 2025? (Image from the Internet)

Which goods and services are eligible for 8% VAT rate in Vietnam?

The 8% VAT is reduced from the 10% rate as part of the tax reduction policy to support production, business, and consumption as specified in Resolution 142/2024/QH15 (effective from August 13, 2024) and Decree 72/2024/ND-CP.

To be specific, according to Article 1 of Decree 72/2024/ND-CP, the VAT reduction to 8% is applied to groups of goods and services currently subject to a 10% rate, except for the following:

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

- Products and services subject to excise tax. Details in Appendix 2 issued with Decree 72/2024/ND-CP.

- Information technology according to the law on information technology. Details in Appendix 3 issued with Decree 72/2024/ND-CP.

- The VAT reduction for each type of goods and services specified in Clause 1 of this Article is uniformly applied at all stages of import, production, processing, and commercial business. For extracted coal items sold (including coal that is mined and then sorted and classified through a closed process before sale) are subject to VAT reduction. Coal items within Appendix 1 issued with this Decree, at other stages beyond extraction and sale, are not eligible for VAT reduction.

General corporations and economic groups implementing a closed process of sale are also eligible for VAT reduction on extracted coal items.

In cases where goods and services listed in Appendices 1, 2, and 3 issued with Decree 72/2024/ND-CP fall under non-taxable objects or those subjected to a 5% VAT as per the Law on Value Added Tax, they shall comply with the provisions of the Law on Value Added Tax and will not receive the VAT reduction.

Note: The application duration for the 8% VAT is until December 31, 2024.

What are regulations on VAT reduction in Vietnam before January 1, 2025?

Based on the regulations in Clause 3, Article 1 of Decree 72/2024/ND-CP regarding procedures for implementing VAT reduction:

- For businesses that calculate VAT using the deduction method:

When issuing VAT invoices for goods and services qualifying for VAT reduction, the VAT rate should be stated as "8%"; VAT money; the total amount the buyer must pay.

Based on the VAT invoices, selling businesses declare their output VAT, and purchasing businesses declare their input VAT deduction according to the reduced tax amount shown on the VAT invoice.

In cases where selling goods and providing services with various tax rates apply, the VAT invoice must clearly indicate the tax rate for each good and service.

- For businesses calculating VAT based on a % rate on turnover:

When issuing sales invoices for goods and services qualifying for VAT reduction, the "Amount" column should state the full price before reduction.

In the "Total goods and services" line, state the reduced amount by 20% of the % rate on turnover, and note: "reduced by... (amount) corresponding to 20% of the % rate for VAT according to Resolution 142/2024/QH15".

In cases where goods and services are sold, the sales invoice must clearly state the reduced amount.

If a business has issued invoices and declared according to the pre-reduction tax rate or percentage for VAT not yet reduced per this Decree, the seller and buyer must handle the issued invoice following legal provisions on invoices and documentation. Based on the processed invoice, the seller declares output tax adjustments, and the buyer declares input tax adjustments (if any).