A 2% reduction in the Value Added Tax (VAT) rate will be applied from February 1st to the end of 2022 to groups of goods and services currently subject to a 10% VAT rate (reduced to 8%), excluding certain groups of goods and services. Details are provided below:
The goal of the policy is to reduce the VAT rate to 8%.
The objectives of the government's policy to reduce VAT from 10% to 8% include:
- To restore and rapidly develop production and business activities, promote growth drivers, prioritize a number of important industries and sectors, and strive to achieve the target for the 2021-2025 period: average GDP growth of 6,5-7% per year.
- Reducing the VAT rate to 5% helps to cut costs, support cash flow, ensure proactive measures, and create favorable conditions for businesses, economic organizations, and the people.
- The policy of reducing VAT from 10% to 8% helps ensure social security and the livelihoods of the people.
Identify goods and services eligible for VAT reduction.
A 2% reduction in the value-added tax rate in 2022 applies to: The groups of goods and services currently subject to a value-added tax rate of 10% (now 8%).
Except for the following categories of goods, the 2% discount does not apply:
- Telecommunication
- Information Technology
- Financial activities
- Bank
- Stock
- Insurrance
- Real estate business
- Metal manufacturing and manufacturing of prefabricated metal products.
- Mining industry (excluding coal mining)
- Coke production
- Refined petroleum
- Manufacture of chemicals and chemical products
- Goods and services subject to excise tax.
Refer to the list of goods and services whose VAT is reduced from 10% to 8% in Decree 15 below:
Decree No. 15/2022/ND-CP stipulates tax exemptions and reductions in accordance with Resolution 43/2022/QH15.
The decree was issued to facilitate the early economic recovery of businesses and individuals after the impact of Covid-19.
Instructions for issuing VAT invoices when reducing VAT from 10% to 8%.
When issuing VAT invoices due to the reduction of VAT from 10% to 8% according to Decree 15/2022/ND-CP, businesses need to pay attention to the following points:
For businesses that calculate VAT using the deduction method:
When issuing a VAT invoice for goods and services eligible for VAT reduction, the VAT rate line should state "8%"; 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 VAT invoice.
For businesses (including household businesses and individual businesses) that calculate VAT using the percentage-based method on revenue, when issuing sales invoices for goods and services eligible for VAT reduction:
+ In the "Total Amount" column: enter the full price of goods and services before the discount;
+ In the line "Total amount of goods and services", record the amount after the 20% reduction in revenue percentage;
+ Also note: “Reduced… (amount) by 20% of the percentage rate for calculating VAT according to Resolution 43/2022/QH15”.
Note: Businesses must issue separate invoices for goods and services eligible for VAT reduction. If a business fails to issue separate invoices for goods and services eligible for VAT reduction, it will not be entitled to the VAT reduction.
In cases where a business has issued an invoice and declared VAT at a rate or percentage that has not been reduced as stipulated in Decree 15/2022, the seller and buyer must prepare a written record or agreement clearly stating the error. Simultaneously, the seller must issue an adjusted invoice to correct the error and provide it to the buyer. Based on the adjusted invoice, the seller declares the adjusted output tax, and the buyer declares the adjusted input tax (if any).
In cases where a business providing goods or services eligible for VAT reduction has issued pre-printed invoices in the form of tickets with unused face value (if any) and wishes to continue using them, the business must stamp the price with the 2% VAT reduction or the 20% reduction next to the pre-printed price to continue using them.
Instructions for declaring when reducing VAT from 10% to 8%
Businesses must declare goods and services eligible for VAT reduction using Form No. 01 in Appendix IV issued with Decree 15/2022, along with their VAT return.
The General Department of Taxation has also announced the upgrade of its VAT invoicing software to comply with the regulations on reducing VAT rates as stipulated in Resolution 43/2022/QH15. Software upgrade announcement 27_TB_TCT
Guidance on special cases arising in the application of VAT reduction.
On March 23, 2022, the Ministry of Finance issued Official Letter 2688/BTC-TCT regarding value-added tax under Government Decree 15/2022/ND-CP.
Accordingly, the Ministry of Finance provides guidance on the timing of invoice issuance to qualify for the VAT reduction policy from 10% to 8% as follows:
– In cases where a business entity signs a service contract with payment received in advance or during service provision, and has issued an invoice at the time of payment before February 1, 2022, with a tax rate of 10%, but the service is completed between February 1, 2022, and December 31, 2022, the portion of the amount invoiced before February 1, 2022, is not eligible for VAT reduction; however, the remaining unpaid amount, invoiced between February 1, 2022, and December 31, 2022, in accordance with the law, is eligible for VAT reduction.
– If a business provides goods or services subject to a 10% tax rate in January 2022 but only issues invoices for the revenue from those goods or services in February 2022, this constitutes issuing invoices at the wrong time and the business is not eligible for VAT reduction.
– For invoices issued before February 1, 2022, with a VAT rate of 10%, if errors arise after February 1, 2022, requiring adjustments to the amount of goods, VAT, or return of goods, the adjusted invoice or return invoice shall be issued with a VAT rate of 10%.
– For specific goods and services such as electricity supply, businesses are entitled to a VAT reduction as stipulated for invoices issued from February 1, 2022 to December 31, 2022.