VAT cut from 10% to 8% on essentials prolonged to 30 June 2024
Vietnam’s Parliament on 29 November approved a government plan to extend the existing 2% VAT cut until 30 June 2024.
Whilst the economy has now stabilised since the COVID crisis, there are still global uncertainties. Growth hit over 5% in quarter 3 of 2023, making Vietnam one of the fastest growing major economies. This is below an earlier government target of 6.5 per cent and slower than a low-base expansion of 8.02 per cent last year.
2022 COVID VAT cut
Parliament had agreed to extend a 2% VAT cut on essential goods and services until 31 December 2023. The aim is to support the economy which has suffered from a global economic slowdown. The country’s growth rate slowed to 3.3% in Q1 2023 from 5.9% in Q4 2022. Falling exports to the rest of the world have been much of the cause of the slump. The VAT cut is aimed at boosting internal consumption to balance this.
The 2% cut was originally introduced in February 2022 and meant to end 31 December 2022.
The sectors to benefit: aviation, transport, tourism, accommodation, catering services, education and training, agriculture, processing and manufacturing, and social housing. Certain supplies will be excluded, including: IT; production and mining; real estate; chemicals; and financial services. Any special consumption taxes will remain at full rate.
The country’s economic growth has now dropped to just above 5%.
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