Vietnam's VAT rate to shrink to 8% from February 1

Vietnam’s value-added tax rate for goods and services is set to be cut to 8% from the current 10% from February 1 to the end of 2022 in a bid to support the people affected by the pandemic.

People go shopping at BigC in Hanoi. Photo: The Hanoi Times

The move was revealed in the Government decree No.15 issued on January 28, stipulating policies to waive and cut taxes for businesses and the people.

“Such a policy is only applicable for goods and services currently subject to the VAT rate of 10%,” stated the MoF in a statement.

To ensure the tax cut is in line with Government’s regulations and benefit the people as customers who purchase goods and services, beneficiary businesses would slash 2% VAT directly on the bill.

The MoF expected the VAT cut would cause a decline of VND49.4 trillion (US$2.1 billion) in budget revenue for this year.

According to the MoF, this policy is aimed at supporting businesses, organizations, and people to cope with the pandemic impacts, resume economic operation, and stimulate consumption/investment.

“The ultimate goal is to promote economic recovery in the post-pandemic period and contribute to social welfare,” the ministry added.

The MoF noted that for the past two years, the pandemic has caused a significant slowdown in economic growth, which could hamper the realization of the five-year socio-economic developments in 2021-2025.

“Businesses are facing huge difficulties with rising costs of input materials, disruption of supply chains, not to mention negative impacts on the labor market,” it said.

In an irregular session of the National Assembly held in January, the legislative body ratified resolution No.43 on monetary and fiscal policies to support socio-economic recovery, including a VAT cut.