Proposed policy to reduce VAT by 2% in 2024 in Vietnam

Proposed policy to reduce VAT by 2% in 2024 in Vietnam (Internet image) 

Proposed policy to reduce VAT by 2% in 2024 in Vietnam

The Ministry of Finance issued Official Dispatch 11239/BTC-CST in 2023, asking for opinions on reducing value-added tax in the first 6 months of 2024.

Accordingly, the content of the 2% VAT reduction policy in 2024 is as follows:

The implementation of VAT reduction for a number of groups of goods and services applying the 10% VAT rate has been stably implemented in 2022 and 2023.

Therefore, in official dispatch 10830/BTC-CST, the Ministry of Finance reported to the Prime Minister to continue reducing VAT as stipulated in Resolution 43/2022/QH15 and Resolution 101/2023/QH15, specifically:

- 2% reduction in VAT rate, applied to groups of goods and services currently applying the tax rate of 10% (to 8%), except for some of the following groups of goods and services: telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metal production and production of prefabricated metal products, mining industry (excluding coal mining), coke production, refined petroleum, chemical and chemical product production, and goods and services subject to special consumption tax.

- Application period: From January 1, 2024, to June 30, 2024. Assign the National Assembly Standing Committee to consider and decide on continuing to reduce VAT after June 30, 2024. If the economic situation for businesses and people is still difficult, report to the National Assembly at the nearest session.

Assessing the impact on state budget revenue when reducing VAT by 2% in Vietnam

The implementation of the 2% VAT reduction policy in the first 6 months of 2024 is expected to reduce state budget revenue by about 25 trillion VND (about 4.175 trillion VND/month, of which a reduction in domestic revenue is 2,700 billion VND; a reduction in import revenue is about 1,475 billion VND).

The above data is calculated based on the expected reduction in state budget revenue at the domestic stage in the last 6 months of 2023 (average monthly revenue is about 2,550 billion VND). Assuming GDP growth in 2024 is about 6–6.5%, the state budget revenue growth rate in 2024 is about 5–7%.

To overcome and offset impacts on state budget revenue in the short term as well as ensure proactiveness in managing state budget estimates, the Ministry of Finance will coordinate with relevant ministries, branches, and localities to focus on directing and effectively implementing Tax Laws; continue to reform and modernize the tax system, simplifying tax administrative procedures; and, at the same time, drastic state budget revenue management, focusing on the timely and effective implementation of revenue management solution groups, preventing revenue loss, transfer pricing, and tax evasion.

In addition, the Ministry of Finance requests your research agencies to have your opinions on: (i) the proposed content of the 2% VAT reduction policy in the first 6 months of 2024; and (ii) Document form: add this content to the Report on State Budget Implementation in 2023 and the State Budget Estimate in 2024 to submit to the National Assembly for a General Resolution (no separate Resolution on VAT reduction will be issued) .

“In order to promptly respond to developments in the socio-economic situation, and at the same time consider and calculate in accordance with actual conditions, it is necessary to drastically and effectively deploy support solutions on taxes, fees, fees and land rent issued in 2023 and research and propose a number of solutions to reduce taxes, fees and charges for 2024, such as: continuing to consider reducing VAT by 2% and considering reducing the environmental protection tax on gasoline and oil as applied in 2023; continuing to review and reduce export and import tax rates to support domestic production and business; and reducing the collection of some fees and charges. Based on the assessment of the results achieved by the 2% VAT reduction solution according to Resolution No. 101/2023/QH15, continuing to implement VAT reduction in the first 6 months of 2024, it is necessary to support businesses and people.”

More details can be found in Official Dispatch 11239/BTC-CST 2023.

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE