Vietnam - Temporary VAT Rate Remains Reduced

On December 28, 2023, Decree 94/2023/ND-CP was issued following Resolution No. 110/2023/QH15, implementing a 2% VAT reduction on goods and services previously subject to a 10% VAT rate, with certain exceptions. 

The Decree provided a detailed list of goods and services not eligible for the 2% VAT reduction, which was to be in effect from January 1, 2024, to June 30, 2024.

On June 30, 2024, the government issued Decree No. 72/2024/ND-CP (Decree 72), outlining the VAT reduction policy under Resolution No. 142/2024/QH15, dated June 29, 2024, of the National Assembly, and extending the VAT rate at 8% from July 1, 2024, through December 31, 2024.

Application of the VAT Reduction

The VAT reduction is uniformly applied across the import, production, processing, and commercial trading stages.

Decree 72 specifies a 2% reduction in VAT for goods and services currently subject to a 10% VAT rate, with exceptions for goods and services specified in Appendices I, II, and III, which include:

• Telecommunications, banking and financial services, securities, insurance, real estate, metals and prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, and chemical products;

• Goods and services subject to excise tax; and

• Information technology as defined by the Law on Information Technology.

The VAT reductions are implemented as follows:

1. VAT payers using the credit method will apply an 8% VAT rate on the output invoice or

2. VAT payers using the direct method, calculating VAT payable as a percentage of sales revenue, will apply a 20% reduction in sales revenue for VAT calculations.

Businesses must report any purchases or sales of goods and services eligible for the reduced rate using Form No. 01, as outlined in Appendix IV of Decree 72, in addition to their regular VAT declaration.

Conclusion

Since its implementation on January 1, 2024, the 2% VAT reduction has significantly lowered input costs for businesses across various sectors in Vietnam. Tax reliefs like this usually encourage domestic consumption, support economic growth, and maintain macroeconomic stability. 

Because the Vietnamese government decided to extend this policy, it can be assumed that it has positively affected businesses and consumers.

Source: Decree 72/2024/ND-CP