Vietnam: Why is the VAT rate of 8% not applied in 2023? What are the VAT rates applied in 2023?
Why is the VAT rate of 8% not applied in 2023 in Vietnam?
In the context of the world economy's recession, and difficulties due to the epidemic, the National Assembly of Vietnam, in the spirit of accompanying the Government, has early taken a comprehensive view to give policies and mechanisms for solving situations and challenges in society, economy, defense, and security of the country in the complicated developments of the COVID-19 epidemic.
On January 11, 2022, the National Assembly of Vietnam passed Resolution 43/2022/QH15 on fiscal and monetary policies to support the socio-economic recovery and development program after the COVID-19 epidemic.
On January 28, 2021, the Government of Vietnam promulgated Decree 15/2022/ND-CP on tax exemption and reduction under Resolution 43/2022/QH15 on fiscal and monetary policies to support the socio-economic recovery and development program.
According to Decree 15/2022/ND-CP, the VAT rate of 8% shall be applicable to goods and services subject to the tax rate of 10% except for some cases specified in Article 1 of Decree 15/2022/ND-CP.
However, according to Article 3 of Resolution 43/2022/QH15 and Article 3 of Decree 15/2022/ND-CP, the VAT reduction shall only be applied in 2022.
So far, the Government of Vietnam has not issued a new legal document on the application of the VAT exemption and reduction for 2023.
Therefore, in 2023, the e shall follow the previous provisions of the Law on Value Added Tax 2008.
What are the VAT rates applied in 2023?
Pursuant to Article 9, Article 10, and Article 11 of Circular 219/2013/TT-BTC, there are 03 VAT rates, including:
- VAT rate of 0%
- VAT rate of 5%
- VAT rate of 10%.
These tax rates are applied depending on the type of goods and services in accordance with the law on value-added tax.
Which goods and services will still be subject to 8% VAT in 2023 in Vietnam?
Pursuant to Article 1 of Decree 15/2022/ND-CP and Article 3 of Decree 15/2022/ND-CP, the subjects of VAT reduction and the application period are as follows:
VAT reduction
1. VAT on goods and services currently subject to 10% VAT shall be reduced, except for the following goods and services:
...
2. VAT reduction rates
a) Business establishments that pay VAT using the credit-invoice method shall pay 8% VAT on the goods and services specified in Clause 1 of this Article.
...
Effect and implementation
1. This Decree comes into force on February 01, 2022.
The provisions in Article 1 of this Decree shall take effect from February 01, 2022 to December 31, 2022 inclusively.
...
Accordingly, the VAT reduction shall be applied to goods and services currently subject to the tax rate of 10% ( the VAT rate of 8% shall be applied).
The application period is from February 1, 2022 to the end of December 31, 2022.
Pursuant to Article 8 of Circular 219/2013/TT-BTC, goods, and services eligible for VAT reduction will depend on the time of calculating VAT as follows:
(1) For goods sale, VAT shall be calculated when the ownership or the right to use goods is transferred to the buyer, whether the payment is made or not.
Thus, if the seller transfers the ownership or the right to use goods (subject to the VAT rate of 8%) to the buyer in 2022, even though the payment is made in 2023, the VAT invoice still applies the VAT rate of 8%.
(2) For service provision, VAT shall be calculated when the service provision is completed or when the invoice for service provision is made, whether the payment is made or not.
In Clause 2, Article 9 of Decree 123/2020/ND-CP, Invoices for the provision of services shall be issued upon completion of the provision of services, whether the payment of the invoiced amount is made or not. In case a service is provided with payments collected in advance or during the provision of that service, an invoice shall be issued when each payment is collected (excluding payments of deposited amounts or advance payments which are made to ensure the execution of contracts for the provision of accounting, audit, financial consulting or taxation services; valuation services; technical survey and design services; supervision consulting services; investment construction project formulation services).
Thus, when the service provider collects money in advance in 2022 and issues an invoice at this time, the time for calculating VAT on service provision is 2022.
If the service is eligible for VAT reduction in Decree 15/2022/ND-CP, even if the service provision and payment are completed in 2023, the service provider shall issue an invoice at the VAT rate of 8%.
(3) For imported goods, VAT shall be calculated when the customs declaration is registered.
At the same time, based on Article 25 of the Customs Law 2014, the time to submit the customs declaration, in case the time of registration of the customs declaration is before December 31, 2022 and the imported goods are subject to tax reduction, even if goods are imported in 2023, the VAT rate of 8% will still be applied.
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