According to Resolution No. 6 of the 15th National Assembly, recently passed, the 2% reduction in value-added tax (VAT) will continue to be implemented from January 1, 2024 to June 30, 2024.
1. Official 2% reduction in VAT effective from January 1, 2024 to June 30, 2024.
On the morning of November 29, the National Assembly passed the Resolution of the 6th Session of the 11th National Assembly with 477 out of 477 participating delegates voting in favor (representing 96,56%).
Notably, the National Assembly agreed to reduce the VAT rate by 2% from January 1, 2024 to June 30, 2024. This 2% reduction will apply to goods and services currently subject to a 10% VAT rate (reduced to 8%). The reduction will not apply to goods subject to excise tax, similar to Resolution No. 5 of the 15th National Assembly, which agreed to reduce the VAT rate by 2% from July 1, 2023 to December 31, 2023.
Thus, with the Resolution of the 6th Session of the 6th National Assembly, which has just been passed, after the end of 2023, VAT will continue to be reduced for the first six months of 2024.
The National Assembly assigned the Government to organize timely and effective implementation, without affecting the estimated State budget revenue and deficit in 2024 according to the Resolution of the National Assembly, and report to the National Assembly on implementation results at the Session. Saturday, 7th National Assembly.
The impact of tax reduction policies on the State and businesses.
According to the Ministry of Finance, the implementation of the 2% VAT reduction policy in the first six months of 2024 is estimated to reduce state budget revenue by approximately 25.000 billion VND.
The solution of reducing VAT by 2%, along with other tax, fee, and levy solutions, will help businesses reduce production costs, increase profits, and stimulate demand, thereby helping businesses recover and expand their production and business activities.
For consumers, the policy of reducing VAT by 2% on goods and services subject to a 10% VAT rate will lead to lower selling prices, thereby reducing the cost of goods and services for daily life.
2. What are the VAT tax rates for 2024?
Based on Resolution No. 6 of the 15th National Assembly Session, the 2008 Value Added Tax Law, and Decree 44/2023/ND-CP, the VAT rates for 2024 will be as follows:
VAT rate: 0%
Based on the provisions of Clause 1, Article 8 of the 2008 Value Added Tax Law (amended by Clause 3, Article 1 of the 2013 amended Value Added Tax Law; Clause 2, Article 1 of the 2016 amended Value Added Tax Law, Special Consumption Tax Law and Tax Administration Law), a 0% tax rate applies to exported goods and services, international transport, and goods and services exempt from VAT as stipulated in Article 5 of the 2008 Value Added Tax Law when exported, except for the following cases:
- Technology transfer and intellectual property rights transfer abroad;
- Overseas reinsurance services;
- Credit granting services;
- Capital transfer;
- Derivative financial services;
- Postal and telecommunications services;
- Export products as stipulated in Clause 23, Article 5 of this Law.
Exported goods and services are goods and services consumed outside Vietnam, in free trade zones; and goods and services provided to foreign customers as stipulated by the Government.
VAT rate: 5%
Based on the provisions of Clause 2, Article 8 of the 2008 Value Added Tax Law (supplemented by Clause 3, Article 1 of the 2013 amended Value Added Tax Law; points b, c, and k of this Clause were respectively amended and repealed by Clause 2 and Clause 3, Article 3 of the 2014 Law amending tax laws), a 5% tax rate applies to the following goods and services:
- Clean water for production and daily life;
- Ore for the production of fertilizers; pesticides and growth stimulants for livestock and crops.
- Services include digging and dredging canals, ditches, ponds, and lakes to support agricultural production; cultivating, caring for, and controlling pests and diseases in crops; and processing and preserving agricultural products.
- Unprocessed agricultural, livestock, and aquatic products, except for products specified in Clause 1, Article 5 of this Law;
- Processed rubber latex; processed rosin; nets, ropes and threads for weaving fishing nets;
- Fresh food; unprocessed forest products, excluding wood, bamboo shoots, and products specified in Clause 1, Article 5 of this Law;
- Sugar; by-products of sugar production, including molasses, bagasse, and sludge;
- Products made from jute, sedge, bamboo, reeds, leaves, straw, coconut shells, coconut husks, water hyacinth, and other handicrafts produced using recycled agricultural materials; processed cotton; newsprint paper;
- Medical equipment and instruments; cotton; sanitary pads; preventive and curative medicines; pharmaceutical products; medicinal materials used as raw materials for the production of curative and preventive medicines;
- Teaching aids used for teaching and learning include models, drawings, boards, chalk, rulers, compasses, and various specialized equipment and tools for teaching, research, and scientific experiments;
- Cultural activities, exhibitions, physical education and sports; performing arts, film production; importing, distributing and screening films;
- Toys for children; books of all kinds, except those specified in Clause 15, Article 5 of this Law;
- Scientific and technological services as regulated by the Law on Science and Technology.
VAT rates are 10% and 8%.
According to Decree 44/2023/ND-CP, Resolution 43/2022/QH15 and Resolution 101/2023/QH15, the 8% tax rate applies to groups of goods and services currently subject to a 10% tax rate, except for certain groups of goods as stipulated in Clause 1, Article 1 of Decree 44/2023/ND-CP.
Based on the provisions of Clause 3, Article 8 of the 2008 Value Added Tax Law, a VAT rate of 10% applies to goods and services not subject to the 0%, 5%, and 8% rates.
3. Procedures for implementing VAT reduction.
For businesses that calculate VAT using the deduction method, a VAT rate of 8% applies to the following goods and services:
- When issuing a VAT invoice for goods and services eligible for VAT reduction, the VAT rate line should state "8%"; the VAT amount; and the total amount the buyer must pay.
- Based on the VAT invoice, businesses selling goods and services declare output VAT, while businesses purchasing goods and services declare input VAT deductions based on the reduced tax amount recorded on the invoice.
For businesses (including household businesses and individual businesses) that calculate VAT using the direct method based on a percentage of revenue, a 20% reduction in the percentage used to calculate VAT is applied when issuing invoices for goods and services eligible for VAT reduction as stipulated:
- When issuing sales invoices for goods and services eligible for VAT reduction, the "Total Amount" column should contain the full amount of goods and services before the reduction.
- In the line "Total amount of goods and services," record the amount after a 20% reduction in the percentage rate on revenue, and add a note: "Reduced… (amount) corresponding to a 20% reduction in the percentage rate for calculating VAT according to Resolution No. …/2023/QH15."