Official: Decree 94/2023/ND-CP on 2% VAT reduction in Vietnam as of January 1, 2024

Official: Decree 94/2023/ND-CP on 2% VAT reduction in Vietnam as of January 1, 2024 (Internet image)

Regarding this issue, LawNet would like to answer as follows:

On December 28, 2023, the Government of Vietnam issued Decree 94/2023/ND-CP stipulating the value added tax reduction policy according to Resolution 110/2023/QH15.

Official: Decree 94/2023/ND-CP on 2% VAT reduction in Vietnam as of January 1, 2024

VAT on goods and services that are currently subject to 10% VAT shall be reduced, except the following goods and services:

- Telecommunication, financial activities, banking activities, securities, insurance, trading of real estate, metal and precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products. Further details are provided in Appendix I enclosed herewith.

- Goods and services subject to excise tax. Further details are provided in Appendix II enclosed with Decree 94/2023/ND-CP.

- Information technology products and services as prescribed in the Law on information technology. Further details are provided in Appendix III enclosed with Decree 94/2023/ND-CP.

- VAT on goods and services of specific type as specified in Clause 1 of Article 1 of with Decree 94/2023/ND-CP shall be reduced consistently in all stages, including import, production, processing and trading. Coal products mined for sale (including coal products mined and then washed, sieved and classified under a closed process before they are sold) are eligible for VAT reduction.

Coal products in Appendix I enclosed with Decree 94/2023/ND-CP are not eligible for VAT reduction in any stages other than the mining stage.

Coal products produced under a closed process of economic corporations or groups shall be also eligible for VAT reduction.

In case any of the goods and services in Appendixes I, II and III enclosed herewith is not subject to VAT or is subject to 5% VAT in accordance with the Law on value-added tax, VAT on that good or service shall be paid in accordance with the Law on value-added tax and shall not be reduced.

Regarding VAT reduction rates in Vietnam

- Business establishments that pay VAT using the credit-invoice method shall pay 8% VAT on the goods and services specified in Clause 1 of Article 1 of with Decree 94/2023/ND-CP.

- Business establishments (including household businesses and individual businesses) that pay VAT using the direct method (as a percentage (%) on revenue) shall be eligible for 20% reduction in the rate (%) used as the basis for calculating VAT when issuing invoices for the goods and services eligible for VAT reduction specified in Clause 1 of Article 1 of with Decree 94/2023/ND-CP.

Decree 94/2023/ND-CP takes effect on January 1, 2024 to June 30, 2024.

Ministries, within the ambit of their assigned functions and tasks, and Provincial People’s Committees shall direct relevant agencies to disseminate, instruct and inspect the implementation of regulations on VAT reduction in Article 1 of Decree 94/2023/ND-CP, especially solutions for stabilizing supply and demand for goods and services eligible for VAT reduction so as to ensure stable market prices of goods and services (prices exclusive of VAT) for the period from January 01, 2024 to June 30, 2024 inclusively.

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