Vietnam cuts VAT by 2% to stir up demand

The global and local economies continue to face many difficulties and challenges, so the National Assembly has passed a proposal to reduce VAT for most of goods and services which are currently subject to a tax of 10% under Resolution No. 101/2023/QH15 dated June 24, 2023.

On June 30, 2023, the government issued Decree 44/2023/ND-CP (Decree 44) on VAT reduction following the resolution.

The decree reduces VAT for groups of goods and services which are currently subject to the tax rate of 10% to 8%, except for the following groups:

̶ Telecommunications, financial activities, banking, securities, insurance, real estate trading, metals and prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products (details stipulated under Appendix I issued together with Decree 44);

̶ Goods and services subject to special consumption tax (details stipulated under Appendix II issued together with Decree 44);

̶ Information technology in accordance with the regulations on information technology (details stipulated under Appendix III issued together with Decree 44).

The VAT reduction applies to all stages including imports, manufacturing, processing and trading.

The VAT cut is applicable to business establishments that adopt the VAT credit method and business establishments, including business households and business individuals, that declare and pay VAT at a deemed rate (%) of revenue.

Decree 44 takes will take effect from July 1, 2023 until December 31, 2023.

* Please contact KPMG for further consultation on your ongoing queries.