Proposal: Will value added tax be reduced from 10% to 8% in 2023 in Vietnam?
Let me ask: According to the new draft, how much value added tax for groups of goods and services will be reduced in Vietnam? Question from Mr. Nha (Ha Tinh).
Proposal: Will value added tax be reduced from 10% to 8% in 2023 in Vietnam?
On April 14, 2023, the National Assembly issued a Draft Resolution on value added tax reduction in 2023.
In Article 1, the Draft Resolution on value added tax reduction in 2023 stipulates value-added tax reduction expected to apply in 2023 as follows:
1. Reduce value added tax for groups of goods and services that are currently subject to a tax rate of 10%.
2. Value added tax reduction
a) Business establishments are entitled to apply the value added tax rate of 8% for goods and services specified in Clause 1 of this Article.
The value added tax reduction for each type of goods and services specified in Clause 1 of this Article is applied uniformly at all stages of import, production, processing, and commercial business.
b) Business establishments (including business households and individual businesses) that calculate value added tax according to the percentage method on revenue are entitled to a 20% reduction in the percentage rate to calculate value added tax when issue invoices for goods and services eligible for value added tax reduction specified in Clause 1 of this Article
Thus, according to the draft Resolution in Vietnam, there is a proposal to reduce value added tax as follows:
- Reduce the value-added tax rate to 8% for goods and service businesses that are applying the 10% tax rate.
The reduction of value-added tax for each type of goods and services is subject to a tax rate of 10%, applied uniformly at all stages of import, production, processing, and commercial business.
- Business establishments (including business households and individual businesses) that calculate value-added tax according to the percentage method on revenue are entitled to a 20% reduction in the percentage rate to calculate value-added tax upon implementation. Currently issuing invoices for goods and services that are subject to a tax rate of 10%.
Which value-added tax rates are applied to goods and services in Vietnam?
In Article 11, Circular 219/2013/TT-BTC stipulates the tax rate of 10% as follows:
Tax rate 10%
10% tax shall be levied on the goods and services that are not mentioned in Article 4, Article 9 and Article 10 of this Circular.
The rates of VAT mentioned in Article 10 and Article 11 shall be uniformly applied to the each type of goods and services, whether they are imported, manufactured, processed, or traded.
Example 50: 10% tax is levied on apparel. That means the tax rate is always 10% whether such apparel is imported manufactured, processed, or traded.
VAT on the products made of recycled wastes and scrap is the same as VAT on the wastes and scrap when they are sold.
If a taxpayer sells various goods and services that are subject to various rates of VAT, they must be sorted by VAT rates. Otherwise, the highest rate of VAT among which shall apply.
If the rate of VAT in the preferential import tariff schedule is found not conformable with this Circular, this Circular shall apply. If different rates of VAT are applied to the same kind of goods that are imported or manufactured in Vietnam, the local tax authority and customs authority must send a report to the Ministry of Finance for guidance.
Thus, the 10% value-added tax rate is applied to goods and services that are not subject to value-added tax, are subject to the 5% tax rate, and are subject to the 0% tax rate in Vietnam.
In 2023, which will be subject to the 5% value-added tax rate in Vietnam?
In Article 10 of Circular 219/2013/TT-BTC, amended by Clause 6 and Clause 7, Article 1 of Circular 26/2015/TT-BTC and Article 1 of Circular 43/2021/TT-BTC as follows:
10% tax shall be levied on the goods and services below:
1. Clean water serving manufacture and everyday life, except for bottled water and other soft drinks subject to 10% tax.
2. Ores used for fertilizer manufacture; pesticides and growth stimulants for plants and animals, including:
b) Ores used for manufacture of fertilizers such as apatite ore used for manufacture of phosphate fertilizers, humus used as biofertilizers;
b) Pesticides include plant protection drugs on the List of plant protection drugs issued by those in the List of pesticides complied by the Ministry of Agriculture and Rural Development and other pesticides;
c) Growth stimulants for plants and animals.
4. Dredging channels, canals, ponds, and lakes serving agriculture; plant cultivation; preprocessing and preservation of agricultural products (except for dredging in-field trenches mentioned in Clause 3 Article 4 of this Circular).
Preprocessing and preservation of agricultural products include drying, husking, threshing, cutting, grinding, putting into cold storage, salting, and other usual means of preservation mentioned in Clause 1 Article 4 of this Circular.
5. The farming, breeding, aquaculture products that are unprocessed or preprocessed (defined in Clause 1 Article 4 of this Circular), except for the cases in Clause 5 Article 5 of this Circular.
The unprocessed farming products mentioned in this Clause include unhusked rice, husked rice, corn, potatoes, cassava, and wheat.
...
Thus, the value added tax rate of 5% will be applied to the goods and services mentioned above in Vietnam.
Note: The draft Resolution on value-added tax reduction is still in the consultation process and has not yet taken effect.
Best regards!
