On June 30, 2023, the Government issued Decree No. 44/2023/ND-CP, effective from July 1, 2023 to December 31, 2023, stipulating the policy of reducing Value Added Tax (VAT) to 8% in accordance with Resolution No. 101/2023/QH15 of the National Assembly. This Decree clarifies issues regarding the reduction rate, procedures, and application period of VAT reduction for various groups of goods and services.
1. Groups of goods and services not eligible for VAT reduction.
The VAT reduction policy applies to groups of goods and services currently subject to a 10% tax rate. Except for the following special groups of goods and services:
- Telecommunications services, financial activities, banking, securities, insurance, real estate business, metals and prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products, details at Appendix I issued together with this Decree;
- Products and services subject to excise tax rates are detailed below. Appendix II issued together with this Decree;
- Information technology products and services are governed by information technology laws, details of which can be found here. Appendix III issued together with this Decree;
- Coal is a commodity. Appendix I As stipulated in this Decree, value-added tax (VAT) reductions are not applicable at any stage other than extraction and sale.
Businesses eligible for VAT reduction must declare the goods and services for which VAT is reduced. Form No. 01 in Appendix IV Issued together with this Decree and the Value Added Tax Declaration Form.
For goods and services that are exempt from VAT or subject to only 5% VAT as stipulated in the Value Added Tax Law, the regulations will continue to apply, and the tax reduction policy will not be granted.
2. Regulations on Value Added Tax Reduction Rates
According to Decree No. 44/2023/ND-CP, the value-added tax reduction rates for each tax calculation method are specifically stipulated as follows:
- Businesses that calculate VAT using the deduction method. A 2% reduction in the value-added tax rate will be applied to goods and services.
- Businesses (including household businesses and individual businesses) calculate VAT using the percentage-based method on revenue. A 20% reduction in the percentage rate for calculating VAT is applied when issuing invoices for goods and services.
3. Guidance on the procedures for implementing the VAT reduction policy.
Based on the value-added tax reduction rates for each tax calculation method, the Decree also guides businesses on the process and procedures for implementing the value-added tax reduction policy as prescribed:
For businesses that calculate taxes using the deduction method:
- When selling goods or providing services subject to different tax rates, the VAT invoice must clearly state the tax rate for each item or service.
- When issuing a VAT invoice for goods and services eligible for tax 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 and claim input VAT deductions based on the reduced tax amount recorded on the VAT invoice.
For businesses that calculate taxes as a percentage of revenue:
- When issuing sales invoices for goods and services eligible for tax reduction, in the "Total Amount" column, record the full amount of goods and services before the reduction. In the "Total Amount of Goods and Services" line, record the amount after the 20% reduction in revenue, and add a note: "The amount reduced by 20% in VAT calculation has been applied."
- When selling goods or providing services, the sales invoice must clearly state the amount of the discount as stipulated by regulations.
In cases where a business has issued an invoice and declared VAT at a tax rate or percentage rate that has not been reduced as stipulated in this Decree, the seller and buyer shall process the issued invoice in accordance with the law on invoices and documents. Based on the processed invoice, the seller shall declare an adjustment to the output tax, and the buyer shall declare an adjustment to the input tax.
FAQ - Frequently Asked Questions
Reply:
- For VAT invoicesHandling errors in VAT invoices that apply VAT reduction according to Resolution No. 101/2023/QH15 is similar to handling errors in regular VAT invoices.
- For sales invoicesHandling sales invoices with VAT reduction under Resolution No. 101/2023/QH15 errors is similar to handling regular sales invoices with errors. For adjustment/replacement invoices, select the option to apply VAT reduction under Resolution No. 101/2023/QH15.
Reply:
Step 1: Businesses should review and look up the corresponding commodity codes for the names of goods and services for which they need to issue invoices in the Vietnamese Product Classification System.Issued together with Decision No. 43/2018/QD-TTg November 1, 2018, of the Prime Minister).
After the unit has identified the industry codes for the goods and services requiring invoices, they can proceed directly to step 2.
Step 2: Using the retrieved commodity and service industry code, review and compare the industry code of the item requiring an invoice with the information at Appendices I, II, and III are issued together with Decree 44/2023..
If the product code belongs to one of the three appendices above. Then that item is not eligible for VAT reduction, businesses Issue invoices with the same tax rate..
If the product code NOT included in any appendix For that item, the unit is eligible for a VAT reduction, and the business... Issue a tax-reduced invoice with a tax rate of 8%..
Reply:
In cases where a business has sold goods or provided services (eligible for VAT reduction under Decree No. 44/2023/ND-CP) but only issues invoices for sales revenue from January 1, 2023 to June 30, 2023 after July 1, 2023, the business is considered to have issued invoices at the wrong time. The issued invoices are not eligible for VAT reduction and will be subject to administrative penalties for issuing invoices at the wrong time.
Reply:
- In cases where a business calculates VAT using the deduction method... When selling goods or providing services subject to different tax rates, the value-added tax invoice must clearly state the tax rate for each item or service as prescribed.
- In cases where a business calculates VAT using the percentage-based method on revenue... When selling goods or providing services, the sales invoice must clearly state the amount of the discount as stipulated.