Good News: Vietnam Government Extends 2% VAT Reduction on Specific Goods and Services till End of June 2025

Good News: Vietnam Government Extends 2% VAT Reduction on Specific Goods and Services till End of June 2025

The Vietnamese government has officially extended its 2% Value-Added Tax (VAT) reduction policy on specific goods and services until June 30, 2025. This initiative aims to support economic recovery, ease financial burdens on businesses and consumers, and stimulate growth across various sectors.

Scope of the VAT Reduction

The VAT reduction in Vietnam applies uniformly across all stages of economic activity—from importation to manufacturing, processing, and trading—for eligible goods and services. Businesses involved in these stages can expect to benefit from reduced tax rates, which, in turn, will likely lead to cost savings and potentially lower prices for end consumers.

Excluded Goods and Services for VAT reduction in Vietnam

Similar to previous VAT reduction policies, certain goods and services are not eligible for the 2% VAT reduction. These include:

• Telecommunications

• Information technology

• Financial and banking services

• Securities

• Insurance

• Real estate business

• Metal production and prefabricated metal products

• Mining (excluding coal mining)

• Coke production

• Refined petroleum

• Chemicals and chemical products

• Goods and services subject to special consumption tax

The government has maintained this exclusion list to focus tax relief on sectors that require the most support.

Decree 94/2023/ND-CP: Detailed Guidance

The implementation of this VAT reduction is guided by Decree 94/2023/ND-CP. This decree not only confirms the 2% VAT reduction for goods and services that were previously subject to a 10% VAT rate but also provides a comprehensive list of exceptions. The decree meticulously outlines specific product categories and Harmonized System (HS) codes for goods and services excluded from the VAT reduction.

This level of detail ensures transparency and clarity for businesses, enabling them to accurately assess their eligibility for the reduced VAT rate and avoid potential compliance issues.

Implications for Businesses

Positive Economic Impact

Businesses operating in sectors eligible for the VAT reduction stand to gain significantly. The reduction can alleviate financial strain, improve cash flow, and create opportunities for reinvestment in growth initiatives. Companies in manufacturing, processing, and trading are particularly well-positioned to benefit.

Compliance Challenges

While the policy offers clear advantages, businesses must remain vigilant in understanding the nuances of the decree. Ensuring compliance with the exclusions and properly applying the reduced VAT rate requires a careful review of the detailed list of exceptions provided in Decree 94/2023/ND-CP.

Implications for Consumers

For consumers, this VAT reduction translates to potential price reductions for goods and services in eligible sectors. This measure is expected to boost purchasing power and encourage consumption, contributing to the overall economic recovery.

Conclusion

The extension of the 2% VAT reduction policy reflects the Vietnamese government’s commitment to fostering economic stability and growth. By targeting key sectors while maintaining exclusions for others, the policy balances between supporting businesses and preserving fiscal discipline. However, businesses must stay informed and ensure compliance with the detailed provisions of Decree 94/2023/ND-CP to fully leverage this tax relief's benefits.

As the deadline approaches in mid-2025, both businesses and consumers will likely see the tangible impacts of this policy on Vietnam’s economic landscape. In case you need any consult about VAT Tax regarding import products, please feel free to contact us at info@tronchan.com. We wish you and your family the best New Year.