Vietnam Extends 2% VAT Reduction to Support Businesses and Individuals Amid Ongoing Economic Challenges

The Vietnamese Government has recently issued a Decree that maintains the 2% reduction in value-added tax (VAT) for goods and services until the end of the year. This decision was made in an effort to support businesses and individuals facing ongoing economic challenges globally.

However, certain sectors such as telecommunications, finance, securities, insurance, and real estate services will not be eligible for this tax reduction. Additionally, specific products like metals, mining products, and information technology will also not receive this benefit.

Previously, the Vietnam Federation of Commerce and Industry (VCCI) had proposed a 2% reduction in VAT for all goods and services. However, challenges arose when trying to determine which goods would qualify for a reduced 8% tax rate. To address these concerns, clarity is necessary when navigating these tax regulations.

The VAT reduction applies uniformly across all stages of import, production, processing, and commercial business. Different tax rates for various goods and services must be clearly stated on VAT invoices. Businesses using the percentage method for tax calculation will receive a 20% reduction in the tax percentage when issuing invoices.

The VAT reduction benefits both businesses and consumers by sharing the tax burden between them. Extending the 2% tax reduction period for another six months is expected to reduce budget revenue by approximately 24,000 billion VND in the second half of the year, totaling nearly 47,500 billion VND for the whole year.

In summary