Further six month extension of cut to 8% on key sectors
A 2% VAT rate cut on essentials first brought in by the Vietnamese Ministry of Finance in February 2022 has been given a new prolongation. This time from 30 June 2024 until 31 December 2024.
The latest Vietnamese government notification (Decree 72/2024) applies this VAT reduction to the end of 2024 but does not expand the scope of goods and services eligible for the reduced tax rate.
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.
Companies using the deduction method for VAT declaration must indicate “8 percent” as the VAT rate on invoices for goods and services eligible for the reduced rate. In cases where goods or services are subject to different VAT rates, each rate must be clearly stated on the invoice.
Nov 2023: VAT cut from 10% to 8% on essentials prolonged to 30 June 2024
Vietnam’s Parliament on 29 November 2023 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 country’s economic growth has now dropped to just above 5%.
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