Which decree prescribes value-added tax reduction from 10% to 8% in Vietnam in 2025?

Which decree prescribes value-added tax reduction from 10% to 8% in Vietnam in 2025?

The Government of Vietnam issued Decree 180/2024/ND-CP, stipulating the policy to reduce VAT from 10% to 8% according to Resolution 174/2024/QH15, in which it clearly defines the goods and services that continue to have VAT reduced from 10% to 8% from January 1, 2025, to June 30, 2025.

Based on Article 1 of Decree 180/2024/ND-CP, the regulation on goods and services eligible for VAT reduction for the first six months of 2025 is as follows:

(1) VAT reduction for groups of goods and services currently subject to a 10% VAT rate, except for the following groups:

- Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and products from fabricated metals, mining products (excluding coal mining), coke, refined petroleum, and chemical products. Details in Annex 1 of Decree 180/2024/ND-CP.

- Products and services subject to special consumption tax. Details in Annex 2 of Decree 180/2024/ND-CP

- Information technology as per the law on information technology. Details in Annex 3 of Decree 180/2024/ND-CP.

- VAT reduction for each type of goods and services specified in Clause 1, Article 1 of Decree 180/2024/ND-CP is uniformly applied at importation, production, processing, and commercial business stages. For coal extraction and sale (including the case where extracted coal undergoes sorting and classification through a closed process before sale), it is subject to VAT reduction. Coal products under Annex I of Decree 180/2024/ND-CP, except for exploitation and sale stages, are not eligible for VAT reduction.

Corporations and economic groups following a closed process before selling are also eligible for VAT reduction for extracted coal sales.

In cases where goods and services mentioned in Annexes 1, 2, and 3 issued with Decree 180/2024/ND-CP are either VAT-exempt or subject to a 5% VAT rate as per the Law on Value-Added Tax 2008, they must comply with the VAT Law and are not eligible for a VAT reduction.

According to the regulation in Article 8 of the Law on Value-Added Tax 2008 (amended by Clause 3, Article 1 of the Law on Value-Added Tax Amendment 2013, Clause 2, Article 3 of the Law on Amendments to Laws on Taxation 2014, and Clause 2, Article 1 of the Law on Value-Added Tax, Law on Special Consumption Tax, and Law on Tax Administration Amendments 2016), the 10% VAT rate applies to typical goods, services not subject to 0% and 5% rates.

(2) Amount of VAT reduction:

- Business establishments calculating VAT using the deduction method apply an 8% VAT rate to goods and services specified in (1).

- Business establishments (including business households and individuals) calculating VAT using the percentage on revenue method receive a 20% reduction of the percentage to calculate VAT when issuing invoices for goods and services subject to the VAT reduction as stated in (1).

Which decree prescribes value-added tax reduction from 10% to 8% in Vietnam in 2025? (Image from the Internet)

What is the procedure for applying VAT reduction from 10% to 8% in Vietnam according to Decree 180?

According to Clause 3, Article 1 of Decree 180/2024/ND-CP, the procedure for implementing the VAT reduction is as follows:

- For business establishments specified in point a, Clause 2, Article 1 of Decree 180/2024/ND-CP, when issuing VAT invoices for goods and services eligible for VAT reduction, the VAT rate line should state “8%”; VAT amount; total amount payable by the buyer.

Based on the VAT invoice, the selling business declares output VAT, and the purchasing business declares input VAT deduction as per the reduced tax on the VAT invoice.

- For business establishments specified in point b, Clause 2, Article 1 of Decree 180/2024/ND-CP, when issuing sales invoices for goods and services eligible for VAT reduction, in the “Total amount” column, list the full price of goods and services before reduction, in the line “Total amount of goods and services” record the amount after the 20% reduction of the percentage on revenue, and note: “a reduction of... (amount) equivalent to 20% of the percentage to calculate VAT according to Resolution 174/2024/QH15”.

Which entities are the VAT taxpayers in Vietnam?

According to Article 3 of Circular 219/2013/TT-BTC, VAT taxpayers are organizations and individuals producing and trading goods and services subject to VAT in Vietnam, irrespective of industry, form, or business organization (hereinafter referred to as business establishments) and organizations, individuals importing goods, purchasing services from abroad subject to VAT (hereinafter referred to as importers), including:

- Business organizations established and registered under the Law on Enterprises, Law on State Enterprises (now Law on Enterprises), Law on Cooperatives, and specialized business laws;

- Economic organizations of political organizations, political-social organizations, social organizations, socio-professional organizations, people's armed forces units, institutions, and other organizations;

- Foreign-invested enterprises and foreign participants in business cooperation under the Law on Foreign Investment in Vietnam (now Law on Investment); foreign organizations, individuals doing business in Vietnam but not establishing legal entities in Vietnam;

- Individuals, households, independent groups engaged in business activities and other entities involved in production, business, import activities;

- Organizations, individuals producing or conducting business in Vietnam purchasing services (including those coupled with goods) from overseas organizations without permanent establishments in Vietnam, non-resident foreign individuals, where the organization or individual purchasing the service is the taxpayer, except as stated under Clause 2, Article 5 of Circular 219/2013/TT-BTC.

Provisions on permanent establishment and non-resident tax subjects follow the law on corporate income tax and personal income tax.

- Branches of export processing enterprises established to trade goods and conduct activities directly related to the sale of goods in Vietnam according to the regulations on industrial parks, export processing zones, and economic zones.