Which goods and services shall not be entitled to a 8% VAT in Vietnam in the first six months of 2025?

What is the Draft Decree on a 8% VAT in Vietnam for the first 06 months of 2025?

The Ministry of Finance has announced a draft decree stipulating the policy for reducing value-added tax as per the National Assembly's resolution passed on November 30, 2024 (hereinafter referred to as the Draft Decree).

The 2% reduction in VAT for the first six months of 2025 is as follows:

Download the draft decree on 8% VAT for the first six months of 2025

Which goods and services shall not be entitled to a 8% VAT in Vietnam in the first six months of 2025?

According to Article 1 of the Draft Decree, the goods and services proposed for exclusion from the 8% VAT include:

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

- Goods and services subject to special consumption tax.

- Information technology according to the law on information technology.

Furthermore, the Draft Decree also stipulates that the reduction of value-added tax for each type of goods and services specified in Clause 1 of Article 1 of the Draft Decree is uniformly applied at import, production, processing, and commercial business stages.

For coal products sold after extraction (including coal processed through closed screening and sorting before sale), a VAT reduction is applicable. Coal products listed in Annex I attached to the Draft Decree at stages other than post-extraction are not eligible for VAT reduction.

Corporations and economic groups that implement closed processes before sale are also eligible for VAT reduction on extracted coal products.

In cases where goods and services listed in Annexes I, II, and III attached to the Draft Decree are non-VATable or subject to a 5% VAT rate according to the Value Added Tax Law, they shall follow the provisions of the Value Added Tax Law and are not eligible for VAT reduction.

What is the VAT reduction rate in Vietnam according to the Draft Decree?

Pursuant to Clause 2 of Article 1 of the Draft Decree, the proposed VAT reduction is as follows:

- Business entities calculating VAT by the credit method are applied a VAT rate of 8% for goods and services as prescribed.

- Business entities (including business households and individuals) calculating VAT by the percentage method on revenue will receive a 20% reduction in the percentage rate used to calculate VAT when issuing invoices for goods and services eligible for VAT reduction as prescribed.

Who are the VAT taxpayers under current regulations 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, regardless of their fields, forms, or forms of business organization (hereinafter referred to as business establishments) and organizations, individuals importing goods, or purchasing services from abroad subject to VAT (hereinafter referred to as importers), including:

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

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

- Enterprises with foreign investment and foreign parties participating in business cooperation under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals conducting business in Vietnam without establishing legal entities in Vietnam;

- Individuals, households, independent groups of individuals, and other parties conducting production, business, and import activities;

- Organizations and individuals conducting business in Vietnam purchasing services (including purchasing services associated with goods) from foreign organizations without a permanent establishment in Vietnam, and non-resident foreign individuals in Vietnam. In such cases, the organization or individual purchasing the service is the taxpayer, except where VAT is not to be declared, calculated, and paid.

Regulations on permanent establishments and non-resident parties shall be implemented as per corporate income tax law and personal income tax law.

- Branches of export processing enterprises established to carry out goods trading and activities directly related to goods trading in Vietnam according to the laws on industrial parks, export processing zones, and economic zones.