According to Resolution No. 5 recently passed by the National Assembly, the value-added tax (VAT) will be reduced by 2% from July 1, 2023 to December 31, 2023.
VAT officially reduced by 2%.
On the afternoon of June 24th, the National Assembly officially passed the Resolution of the 5th Session of the 15th National Assembly with 481 out of 482 delegates voting in favor (representing 97,37%).
According to Resolution No. 5 of the 15th National Assembly Session, the National Assembly agreed to reduce the value-added tax (VAT) by 2% for groups of goods and services currently subject to a 10% VAT rate (to 8%).
The tax reduction does not apply to product groups such as telecommunications, information technology, finance, banking, securities, insurance, real estate, metals, prefabricated metal products, mining products, refined petroleum, chemical products, and items subject to excise tax.
A 2% reduction in VAT will be applied from July 1, 2023 to December 31, 2023.
The resolution states: “The Government is tasked with organizing the timely and effective implementation, ensuring that it does not affect the revenue and budget deficit estimates for 2023 as stipulated in the National Assembly Resolution; and reporting on the implementation results along with the overall review of Resolution No. 43.”
Earlier, on behalf of the Standing Committee of the National Assembly, presenting the report on the explanation, acceptance, and revision of the draft Resolution of the 5th Session of the 15th National Assembly, the Secretary General of the National Assembly, Bui Van Cuong, stated that some opinions suggested expanding the scope of the 2% reduction to apply to all groups of goods and services currently subject to a 10% tax rate, increasing the reduction to 3%, 4%, or 5%, and extending the policy's application period until mid-2024 or the end of 2024.
Regarding this issue, according to Mr. Cuong, if the scope and extent of the value-added tax reduction are further expanded, it will have a significant impact on state budget revenue. The government has not yet fully calculated and assessed the impact of the policy, especially in the context of state budget revenue in the first months of the year being lower than the same period last year.
Therefore, the Standing Committee of the National Assembly requests the National Assembly to retain the scope of application from July 1, 2023 to December 31, 2023 and the 2% reduction in value-added tax as in the draft Resolution. At the same time, it requests the Government to report to the National Assembly at the 6th Session on the results of implementing the 2% value-added tax reduction policy, along with the results of implementing Resolution No. 43, so that the National Assembly can consider and decide on additional solutions to support economic recovery and development (if any).
The impact of policies on the State and businesses.
According to the government's proposal, if a 2% reduction in VAT is applied for the last six months of the year, the projected decrease in state budget revenue would be approximately 24.000 billion VND (for state budget revenue in 2023, the projected decrease would be 20.000 billion VND because the VAT payable for December 2023 would be paid in January 2024).
With a 2% reduction in VAT, the people will be the direct beneficiaries of this policy. Reducing VAT on goods and services currently subject to a 10% VAT rate will contribute to lower selling prices, thereby directly reducing the cost of goods and services for people's daily lives.
For businesses involved in manufacturing, trading goods, and providing services subject to a 10% VAT rate, the policy will benefit. Reducing VAT will help lower production costs and product prices, thereby enabling businesses to recover and expand their operations.