Some goods and services will continue to benefit from a 2% reduction in value-added tax (VAT) until June 30, under a recent decree issued by the government.
| Locals buy vegetables at Bic G Thang Long supermarket. Photo: Hoai Nam/The Hanoi Times |
As with previous reductions, the 2% VAT cut applies to certain groups of goods and services that are subject to the standard 10% VAT rate with the exception of real estate, securities, banking services, telecommunications, information technology, coke, chemical products, and goods or services subject to special consumption taxes.
The VAT reduction is uniformly applied to each eligible product or service at all stages of import, production, processing, and commercial trading stages.
Traders who calculate VAT using the tax credit method will apply an 8% VAT rate to qualifying goods and services. For businesses calculating VAT using the percentage of turnover method, the applicable percentage is reduced by 20% when issuing invoices for qualifying goods and services.
According to the Ministry of Finance, extending the VAT reduction until the end of June is expected to result in a decline in government budget revenues of approximately US$1.04 billion (about $174 million per month). Of this, $104 million per month is attributed to domestic activities and $62 million per month to import-related activities.
However, experts believe that the 2% VAT cut will help consumers save on expenses, thereby boosting demand and increasing consumption. The Ministry of Finance also believes that this measure will accelerate the recovery of production and business activities, which will ultimately contribute to the state budget and the economy as a whole.
The VAT reduction policy has been in place since 2022 to support individuals and businesses in recovering from the impacts of Covid-19. Unlike other taxes, VAT burdens are shared between businesses and consumers, so both groups benefit from the reduction. Over the past three years, the total value of this support has reached approximately $5.15 billion.
