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 rates for businesses (including individual businesses) applying the flat rate method, excluding the following goods and services:
  • 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 before sale) is eligible for the VAT reduction. However, other stages beyond extraction are not eligible.

• Coal extracted for sale by state-owned corporations and economic groups that follow a closed-loop process is also eligible for the VAT reduction.

• Goods and services listed in the annexes of the decree that are not subject to VAT or are subject to a 5% VAT rate are not eligible for the VAT reduction.

Effective Date and Duration

Decree 72/2024/NĐ-CP takes effect from July 1, 2024, and remains in force until 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 activity in the second half of 2024.

Additional Notes

• 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 with tax advisors to ensure they are fully compliant with the new VAT provisions.

Overall, the VAT reduction is a positive step by the Vietnamese government to support businesses and consumers during a challenging economic period.