In an important fiscal move, Vietnam reduces VAT from 10% to 8%, effective from July 1, 2024, until the end of the year. This reduction aims to ease financial burdens on businesses and consumers while stimulating economic activity.

Key Highlights of the VAT Reduction

• A 2% reduction in VAT rates (from 10% to 8%) for businesses applying the input tax deduction method.

• A 20% reduction in VAT payable for businesses (including individual businesses) applying the flat rate method, except for certain excluded sectors such as:

  • Telecommunications

  • Financial activities, securities, and banking

  • Real estate business

  • Insurance

  • Coke, refined petroleum, metals, and prefabricated metal products

  • Mining products (excluding coal mining)

  • Chemical products

  • Goods and services subject to special consumption tax

  • Information technology

The VAT reduction applies uniformly across import, processing, manufacturing, and commercial trading stages.

Coal extracted for sale (including extraction followed by classification and screening under a closed-loop process) is also eligible for the VAT reduction. However, other stages beyond extraction are not eligible.

Coal extracted for sale by state-owned corporations and economic groups following a closed-loop process qualifies for the VAT reduction as well.

Goods and services listed in the annexes of the decree that are already subject to 0% VAT or 5% VAT are not eligible for this reduction.

Effective Date and Duration

Decree 72/2024/NĐ-CP, which confirms that Vietnam reduces VAT until the end of 2024, takes effect from July 1, 2024, and remains valid through December 31, 2024.

Implications for Businesses and Consumers

The VAT reduction is expected to provide much-needed relief to businesses struggling with rising costs and supply chain disruptions. It is also anticipated to boost consumer spending and stimulate economic growth in the second half of 2024.

(Need more tax updates? Check our Expert Insights on Succeeding in Vietnam for the newest changes in Vietnam tax.)

Additional Notes for Businesses

The decree provides detailed guidelines for implementing the VAT reduction, including eligibility criteria, calculation methods, and record-keeping requirements. Businesses should carefully review the decree and consult tax advisors to ensure full compliance with the new VAT provisions.

Overall, this initiative where Vietnam reduces VAT is a positive step by the government to support both businesses and consumers during a challenging economic period.

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