Vietnam VAT: Officially Extends 2% Reduction Until the End of 2026

Jun 25, 2025

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Vietnam VAT: Officially Extends 2% Reduction Until the End of 2026

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Vietnam Officially Extends 2% VAT Reduction Until the End of 2026

On June 17, 2025, Vietnam’s National Assembly (15th Legislature) officially approved a resolution to extend the 2% reduction in value-added tax (VAT) with overwhelming support from the majority of delegates. This resolution takes effect from July 1, 2025, and will last until December 31, 2026.

1. National Assembly Agrees to Extend 2% VAT Reduction

With 452 out of 453 delegates voting in favor, the National Assembly passed the resolution to reduce VAT by 2% for specific groups of goods and services. This reduction applies to those listed in Clause 3, Article 9 of the 2024 VAT Law (Law No. 48/2024/QH15).

However, some goods and services are excluded from this VAT reduction. These include telecommunications, financial activities, banking, securities, insurance, real estate business, metal products, mining products (except coal), and goods and services subject to special consumption tax (except gasoline).

2. Expanded Coverage of VAT Reduction

The resolution expands the scope of VAT reduction compared to previous policies in Vietnam. According to Finance Minister Nguyen Van Thang, while some proposed reducing VAT by 2% for all goods, others suggested a higher reduction of 4-5% but targeted only at specific groups needing support.

The government decided to continue the 2% VAT reduction for goods and services currently taxed at 10%, lowering the effective rate to 8%, with certain exceptions. Newly included sectors benefiting from the VAT cut are transportation, logistics, goods, information technology services, gasoline, and coal.

On the other hand, activities such as education, vocational training, healthcare, financial services, banking, securities, and insurance are not subject to VAT and therefore are not eligible for the reduction.

3. Extended Duration to Stimulate Production and Business

During discussions, some delegates proposed extending the VAT reduction period to two years to boost economic recovery and growth. Others felt that maintaining the policy for 1.5 years might reduce its short-term stimulus effect, while some preferred limiting it to the end of 2025.

Finance Minister Nguyen Van Thang explained that extending the VAT reduction for 1.5 years, instead of six-month phases as before, aims to create stronger momentum for economic recovery and growth. This extension also supports the implementation of Vietnam’s socio-economic development strategy for 2021–2030. The goal is to help Vietnam achieve GDP growth of 8% or higher in 2025, laying the foundation for double-digit growth from 2026 to 2030.

However, the minister emphasized that maintaining the 8% VAT rate long-term contradicts the government’s fiscal restructuring goals. According to the tax reform strategy through 2030, Vietnam plans to move toward a unified VAT rate and may increase VAT when conditions allow.

Summary:
Vietnam’s National Assembly has officially extended the 2% VAT reduction, lowering the VAT rate from 10% to 8% on selected goods and services until the end of 2026. This policy expansion includes sectors like transportation, logistics, IT services, and energy products, aiming to stimulate production and business activities amid economic recovery. However, sectors exempt from VAT remain unchanged. The extension supports Vietnam’s ambitious economic growth targets while balancing fiscal sustainability.

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