The standard Vietnam VAT rate is 10%, however, as a result of the economic hardships brought on by the pandemic and subsequent lockdowns, on January 11, 2022,The National Assembly approved a Resolution on fiscal and monetary policies to support the Socio-Economic Development and Recovery Program, which will be in force until December 31, 2023. In which, Vietnam authorities approves a 2% VAT reduction for 2022, which means the VAT rate in Vietnam now is 8%, and it is expected to stimulate production and accelerate the revitalization of Vietnam’s economy.
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Which goods and services does this VAT cut apply to?
Goods and services in that are currently subject to 10% VAT shall be entitled toa reduced VAT rate of 8% except for the following goods and services:
- Telecommunications, IT services;
- Finance and banking services, securities, insurance;
- Real estate business;
- Metal production and manufacture of prefabricated metal products;
- Mining industry (except coal mining), production of coke from coal, refined petroleum, production of chemicals and chemical products;
- Goods and services which are subject to special sales tax.
When does this VAT reduction take effect in Vietnam?
The Resolution issued to help with the Socio-Economic Development and Recovery Program, in which there is this VAT cut, is announced to start from January 11, 2022. Nevertheless, the cut is said to only apply for 2022, and there has not been any further announcement yet.
What happens when the government lowers the value-added tax?
COVID-19 has surely taken a heavy toll on life in Vietnam in general, and on the economy in particular. Vietnam has been spending its best effort to recover the economic situation in every way possible, one of which is lowering the VAT rate. This is a very strong and timely financial support, playing an important role in maintaining businesses and in ensuring a normal flow of income for the country’s workforce.
Many nations have employed temporary VAT reductions to target specific industries in order to boost demand and support enterprises in badly impacted sectors.
- China: VAT exemption of sales by small-scale taxpayers in Hubei province and reduction of the VAT rate applicable to small-scale taxpayers in other areas by 2% from March 1 to May 31, 2020.
- South Korea: a 70% reduction in VAT on car purchases from March to the end of June, 2020
- Thailand: from March 26 through September 30, 2020, applicable import duties on 66 products classified as medical supplies or those that help treat, diagnose, or prevent COVID-19 will be waived.
And Vietnam, with the reduced VAT rate of 8%, certainly remains a potential and ideal destination for business and investment. The Government has been consistently making amendments to guarantee support, transparency, and growth for the overall economy, and Vietnam will continue doing so, especially during the time of COVID-19.
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