What is the eligibility for a reduction in VAT to 8% in 2024 in Vietnam under Decree 72/2024?

What is the eligibility for a reduction in VAT to 8% in 2024 in Vietnam according to Decree 72/2024?

To apply the tax reduction policy under Decree 72/2024/ND-CP for particular goods or services, the following three conditions must be simultaneously met:

Firstly, the goods or services are currently subject to a tax rate of 10%

According to section 1, Article 1 of Decree 72/2024/ND-CP:

1. Reduction in value-added tax for groups of goods and services currently subject to a 10% tax rate

Therefore, the following goods and services will not be eligible for a reduction in value-added tax (they will continue to apply the tax rate as stipulated by the Law on Value-Added Tax):

+ Not subject to VAT

+ Not required to declare and pay VAT

+ Subject to a 0% value-added tax

+ Subject to a 5% value-added tax

Secondly, the group of goods, or services does not fall under any of Appendices I, II, III of Decree 72/2024/ND-CP

This means not falling under the following groups of goods and services:

+ Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and products from ready-made metals, mining products (excluding coal mining), coke, refined petroleum, chemical products.

Details in Appendix I issued with Decree 72/2024/ND-CP.

+ Goods and services subject to special consumption tax.

Details in Appendix II issued with Decree 72/2024/ND-CP.

+ Information technology as per information technology law.

Details in Appendix III issued with Decree 72/2024/ND-CP.

Thirdly, the business sells goods or provides services between July 1, 2024, and the end of December 31, 2024

Since Decree 72/2024/ND-CP takes effect from July 1, 2024, to the end of December 31, 2024.

This means:

+/ Businesses selling goods or providing services during the period from July 1, 2024, to the end of December 31, 2024, will have the tax reduction assessed according to the stipulations of Decree 72/2024/ND-CP

+/ Businesses selling goods or providing services after this period will not apply the VAT reduction policy under Decree 72/2024/ND-CP (From January 1, 2025 onwards, the VAT reduction under Decree 72/2024/ND-CP will no longer apply)

+ Before July 1, 2024, you may refer to the VAT reduction policy under Decree 94/2023/ND-CP.

What is the eligibility for a reduction in VAT to 8% in 2024 in Vietnam according to Decree 72/2024? (Image from the Internet)

What is the appendix on VAT Reduction under Decree 72 in Vietnam?

On June 30, 2024, the Government of Vietnam issued Decree 72/2024/ND-CP on the VAT reduction policy according to Resolution 142/2024/QH15.

In Article 1 Decree 72/2024/ND-CP, a reduction in value-added tax is made for goods and services groups that are applying the 10% tax rate, except for the following goods and services groups:

- Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and products from ready-made metals, mining products (excluding coal mining), coke, refined petroleum, 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 law.

Details in Appendix 3 issued with Decree 72/2024/ND-CP

Additionally, the reduction of value-added tax for each type of goods and services stipulated in section 1, Article 1 of Decree 72/2024/ND-CP is applied uniformly at stages of import, production, processing, and commercial business. For extracted coal sold (including cases where extracted coal is then sifted, classified according to a closed process before selling), it falls under the subject of VAT reduction. Coal products fall under Appendix 1 issued with Decree 72/2024/ND-CP, at stages other than the extraction and sale stage, are not eligible for VAT reduction.

Economic conglomerates and corporations carrying out a closed-loop process for sales are also subjects for VAT reduction concerning extracted coal sales.

For goods and services mentioned in Appendices 1, 2, and 3 issued with Decree 72/2024/ND-CP, if they are not subject to VAT or are subject to the 5% VAT rate as stipulated by the Law on Value-Added Tax, they will follow the provisions of the Law on Value-Added Tax without any reduction.

>> Download Appendix of Decree 72 on VAT Reduction until end of 2024 here

Vietnam: When is the VAT reduction effective under Decree 72?

Based on the regulations in section 1, Article 2 of Decree 72/2024/ND-CP as follows:

Effective Date and Implementation

1. This Decree is effective from July 01, 2024, until the end of December 31, 2024.

2. Ministries by function, tasks, and People's Committees of provinces and centrally-run cities direct the relevant agencies to communicate, guide, inspect, and monitor so that consumers understand and benefit from the VAT reduction policy stipulated in Article 1 of this Decree. Focus is on ensuring supply-demand stability of goods and services subject to VAT reduction to maintain market price stability (exclusive of VAT) from July 01, 2024, until the end of December 31, 2024.

3. During implementation, if issues arise, the Ministry of Finance is assigned to provide guidance and resolution.

4. Ministers, heads of ministry-level agencies, heads of agencies under the Government of Vietnam, Chairpersons of the People's Committees of provinces and centrally-run cities, and relevant enterprises, organizations, and individuals shall be responsible for implementing this Decree.

Decree 72/2024/ND-CP takes effect from July 01, 2024, until the end of December 31, 2024.

This means that the VAT reduction to 8% applies only until the end of December 31, 2024.

From January 01, 2025, the VAT rate for goods and services subject to the reduction will revert to the 10% rate (unless otherwise governed by a different directive).