VAT rate reduction Vietnam

August 23rd, 2022

In January of 2022, the National Assembly of Vietnam passed a tax reduction policy and cut the VAT rate to 8% from February 1 to December 31, 2022, for services and goods that were previously subject to a 10% VAT. According to the Vietnam government, the Covid-19 pandemic negatively affected many trade and production activities, resulting in weak economic growth in 2020 and 2021. The government of Vietnam stated, “The pandemic does not just cause short-term impacts but also affects the long-term economic plans of five and 10 years. Without appropriate solutions to support the economy, the average economic growth rate of the 2021-2025 period would reach only 5.4% a year, much lower than the target”. With these measures, they aim to promote economic development and socio-economic recovery.

A majority of firms benefit from the VAT cut such as aviation, transport, tourism, accommodation, catering services, education and training, agriculture, processing and manufacturing, and social housing. Certain industries are excluded including telecommunications, information technology, financial activities, banking, securities, insurance, real estate, metal products, mining (excluding coal), refined petroleum, chemical products, and goods and services subject to special sales tax.

The new policy is expected to slash about 51.4 trillion Vietnamese Dồng (VND) of budget collection (US $2.2 billion) including US $2.17 billion of tax break for businesses and 2 trillion VND of taxable corporate income exemption for donations and sponsors made by enterprises and organizations for COVID-19 control efforts in Vietnam.

This tax break is an effort to help businesses, organizations and people overcome difficulties due to the impact of the pandemic, and to aid in the recovery and development of production and business. In addition, the policy also aims to stimulate consumption and investment and overall contribution to the efforts of recovering the economy in the post-pandemic period.

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Sincerely,
Mercy Mildener
Public Relations and Marketing Consultant

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