What are procedures for VAT reduction in Vietnam from January 1, 2025, according to Decree 180?

What are procedures for VAT reduction in Vietnam from January 1, 2025, according to Decree 180?

Based on Clause 3, Article 1 of Decree 180/2024/ND-CP, the procedures for implementing the VAT reduction are as follows:

- For businesses stipulated at Point a, Clause 2, Article 1 of Decree 180/2024/ND-CP: when issuing a VAT invoice for goods and services subjected to a tax reduction, the VAT rate recorded should be "8%"; VAT amount; total amount payable by the purchaser.

Based on the VAT invoice, the business providing goods and services declares the output VAT, and the purchasing business declares input VAT deduction according to the reduced tax amount recorded on the VAT invoice.

- For businesses stipulated at Point b, Clause 2, Article 1 of Decree 180/2024/ND-CP: when issuing a sales invoice for goods and services that have VAT reduced, the "Total Amount" column should show the total of goods and services before the reduction, and the "Total Goods and Services Amount" line shows the amount with a 20% reduction in the percentage rate on revenue. It should also be noted: “reduced... (amount) corresponding to 20% of the percentage rate to calculate VAT according to Resolution No. 174/2024/QH15”.

What are procedures for VAT reduction in Vietnam from January 1, 2025, according to Decree 180? (Image from Internet)

How much is the VAT reduction rate in Vietnam in the first 6 months of 2025?

Based on Clause 2, Article 1 of Decree 180/2024/ND-CP, the reduction rate of VAT in the first 6 months of 2025 is stipulated as follows:

- Businesses calculating VAT by the deduction method are applied a VAT rate of 8% for goods and services specified in Clause 1, Article 1 of Decree 180/2024/ND-CP.

- Businesses (including business households and individuals) calculating VAT by the percentage method on revenue are reduced by 20% of the percentage rate for calculating VAT when issuing invoices for goods and services subject to VAT reduction stipulated in Clause 1, Article 1 of Decree 180/2024/ND-CP.

Which entities are eligible for a 20% reduction of VAT rate?

Based on Clause 1, Article 1 of Decree 180/2024/ND-CP, the entities qualifying for a reduction of VAT are stipulated as follows:

- A reduction of VAT is applied to groups of goods and services currently subjected to a 10% tax rate, except for the following groups:

+ Telecommunications, finance, banking, securities, insurance, real estate business, metal production and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products. Details in Appendix 1 attached to Decree 180/2024/ND-CP.

+ Goods and services subject to special consumption tax. Details in Appendix 2 attached to Decree 180/2024/ND-CP.

+ Information technology products according to IT law. Details in Appendix 3 attached to Decree 180/2024/ND-CP.

+ The VAT reduction for each type of goods and services specified in Clause 1, Article 1 of Decree 180/2024/ND-CP is uniformly applied to import, production, processing, and commercial stages. For coal extraction sold (including cases where extracted coal is subsequently screened, classified through a closed process before being sold), is reduced VAT. Coal products belong to Appendix 1 attached to Decree 180/2024/ND-CP, at other stages besides the extraction stage, VAT is not reduced.

- Corporations and economic groups implementing closed processes before selling are also subjects of VAT reduction for extracted coal sold.

- In the case that goods and services specified in Appendices 1, 2, and 3 attached to Decree 180/2024/ND-CP fall into non-VAT subjects or VAT 5% subjects under the Law on VAT, the provisions in the Law on VAT are applied, and VAT reduction is not available.

When is the time for determining VAT in Vietnam?

Based on Article 8 of Circular 219/2013/TT-BTC, the time for determining VAT is prescribed as follows:

- For the sale of goods, it is the time of transferring ownership or rights to use goods to the buyer, regardless of whether the payment has been received.

- For services provided, it is the time of completing the service provision or the time of issuing a service provision invoice, regardless of whether payment has been received.

- For telecommunications services, it is the time of finalizing billing data for telecommunications service connection charges according to the economic contract between telecom service providers, but no later than 2 months from the month in which connection charges arise.

- For electricity and clean water supply activities, it is the date recorded for electricity and water consumption on the meter for invoice calculation.

- For real estate business activities, infrastructure construction, housing construction for sale, transfer, or rental, it is the time of money collection as per the project implementation or payment schedule in the contract. Based on the collected amount, the business shall declare output VAT arising in the period.

- For construction and installation, including shipbuilding, it is the time of acceptance and handover of construction works, completed construction items, and installed volumes, regardless of whether payment has been received.

- For imported goods, it is the time of customs declaration registration.