Draft Decree on VAT Reduction: What are the new policies on tax reduction in Vietnam?

Policy of 2% VAT reduction to be issued in Vietnam (Internet image)

Draft Decree on VAT Reduction: What are the new policies on tax reduction in Vietnam?

According to the Report of the Draft Decree on VAT Reduction, the Ministry of Finance of Vietnam has assessed the impact as follows:

1. Impact assessment on state budget revenue (state budget) in Vietnam

The implementation of the VAT reduction policy according to Resolution 43/2022/QH15 has supported businesses and people about 44.5 trillion VND in 11 months of application, an average reduction of about 4 trillion VND per month. With the solution to reduce VAT for objects as implemented in 2022 according to Resolution 43/2022/QH15, if applied in the last 6 months of the year, it is expected that the reduction in state budget revenue is equivalent to about 24 trillion VND (for the state budget revenue in 2023, it is expected to reduce by 20 trillion VND because the VAT payable in December 2023 is paid in January 2024).

In order to overcome and offset impacts on state budget revenue in the short term as well as ensure initiative in managing state budget estimates, the Government will direct the Ministry of Finance to coordinate with relevant ministries, branches, and localities. focus on directing the implementation and effective implementation of Tax Laws; continue to reform and modernize the tax system, simplify tax administrative procedures; and at the same time drastically manage the state budget revenue, focusing on the timely and effective implementation of groups of solutions for revenue management, combating revenue loss, transfer pricing, and tax evasion.

The Government will direct efforts to strengthen the management of inspection and examination, reform administrative procedures, urge collection and payment, and strive to increase revenue in areas and fields to compensate for the decrease in revenue due to policy implementation. At the same time, strictly manage state budget expenditures, thoroughly save recurrent expenditures, and cut the assigned estimates, but by the end of June 30, 2023, the ministries and central agencies had not allocated according to the Government's Resolution 50/NQ-CP of April 8, 2023, on the Government-local conference and the Government's regular meeting in March 2023. Actively use reserves and other lawful resources to spend on prevention and control of natural disasters, epidemics, and urgent tasks arising in accordance with regulations.

2. Impact assessment on economic growth in Vietnam

The reduction of VAT will contribute to reducing the cost of goods and services; thereby promoting production and business and creating more jobs for workers, contributing to macroeconomic stability and economic recovery in 2023.

3. Impact assessment on people and businesses

+ For people: This is the object that will directly benefit from this policy; the reduction of VAT on goods and services subject to the 10% VAT rate will contribute to a reduction in selling prices, thereby directly reducing people's costs in consuming goods and services to serve their lives.

+ For enterprises: For enterprises producing and trading goods and providing services subject to VAT at the rate of 10%, they will benefit when the policy is issued. The reduction of VAT will contribute to reducing production costs, lowering product costs, thereby helping businesses increase resilience and expand production and business.

4. Impact assessment on international commitments in Vietnam

Through the review of relevant international treaties to which Vietnam is a signatory, the proposed policy contents are consistent with Vietnam's international commitments and are not contrary to commitments in international treaties to which Vietnam has acceded and is a member.

5. Impact assessment of administrative procedures in Vietnam

The administrative procedures under this Decree have been regulated and implemented according to the Law on Tax Administration and guiding documents; no new administrative procedures have arisen.

More details can be found in the Draft Decree on VAT Reduction.

Duong Chau Thanh

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