Reduction of value-added tax in 2024: Notes regarding invoicing for business establishments in Vietnam

Reduction of value-added tax in 2024: Notes regarding invoicing for business establishments in Vietnam (Internet image)

On June 30, 2024, the Government of Vietnam issued Decree 72/2024/ND-CP stipulating the policy of  reduction of value-added tax in Vietnam under Resolution 142/2024/QH15.

Reduction rate of value-added tax in Vietnam in the last 6 months of 2024

According to Clause 2 of Decree 72/2024/ND-CP, the rate of reduction of value-added tax in Vietnam is as follows:

Business establishments that calculate value-added tax using the credit method can apply a value-added tax rate of 8% for goods and services specified in Clause 1, Article 2 of Decree 72/2024/ND-CP.

Business establishments (including business households and individual business entities) that calculate value-added tax using the percentage method on revenue can reduce 20% of the percentage rate used to calculate value-added tax when issuing invoices for goods and services subject to reduction of value-added tax as specified in Clause 1, Article 2 of Decree 72/2024/ND-CP.

Decree 72/2024/ND-CP is effective from July 1, 2024, to December 31, 2024.

Notes on invoicing for business establishments for cases of 2% reduction on value-added tax in Vietnam as of July 1, 2024

According to Clause 3, Article 1 of Decree 72/2024/ND-CP, the procedures for implementing reduction of value-added tax in Vietnam are as follows:

* For business establishments that calculate value-added tax using the credit method and applying an 8% value-added tax rate:

When issuing value-added tax invoices to provide goods and services subject to reduction of value-added tax, at the tax rate line record "8%"; the amount of value-added tax; and the total amount payable by the buyer.

Based on the value-added tax invoice, the business establishment selling goods and services declares output value-added tax, and the business establishment purchasing goods and services declares input value-added tax according to the reduced tax shown on the value-added tax invoice.

For business establishments (including business households, individual business entities) calculating value-added tax using the percentage method on revenue and reducing the percentage rate by 20% to calculate tax:

When issuing sales invoices to provide goods and services subject to reduction of value-added tax, record the full amount before reduction in the "Total amount" column, in the "Total amount of goods and services" line record the amount after reducing 20% of the percentage rate on revenue, and additionally note: "reduced… (amount) equivalent to 20% of the percentage rate to calculate value-added tax according to Resolution No. .../2024/QH15."

* Important notes:

• Goods and services invoiced with a 2% VAT reduction must belong to the group of goods and services currently subject to the 10% tax rate and not be included in the groups specified in Annexes I, II, III attached to Decree 72/2024/ND-CP.

• The period for applying the 2% VAT reduction per Decree 72/2024/ND-CP will be from July 1, 2024, to December 31, 2024.

• In the case of business establishments as described in (1) when selling goods or providing services with different tax rates, the value-added tax invoice must clearly state the tax rate for each good or service according to the regulations in Decree 72/2024/ND-CP.

For business establishments described in (2) when selling goods or providing services, the sales invoice must clearly state the amount reduced according to the regulations in Decree 72/2024/ND-CP.

If a business establishment has already issued an invoice and declared under the tax rate or percentage for calculating VAT that was not reduced according to Decree 72/2024/ND-CP, the seller and the buyer will handle the issued invoice according to legal regulations on invoices and documents.

Based on the processed invoice, the seller declares to adjust output tax and the buyer declares to adjust input tax (if any).

(Clauses 3, 4, 5, Article 1 of Decree 72/2024/ND-CP)

More details can be found in Decree 72/2024/ND-CP.

Le Nguyen Anh Hao

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