Vietnam economic recovery program 2022: what it offers firms

Vietnam economic recovery program support for firms rests on two documents signed in January 2022. On 11 January, the National Assembly approved Resolution 43/2022/QH15. The Government followed on 30 January with Resolution 11/NQ-CP, which turns the plan into tasks for ministries. This article explains each measure in plain terms and what a business can do now.

Sources: Resolution 43/2022/QH15, National Assembly of Vietnam (English translation, LuatVietnam); Resolution 11/NQ-CP, Government of Vietnam (summary, Expertis).

What the program is and how big it is

The plan is called the Socio-Economic Recovery and Development Program. It mainly covers 2022 and the year after it. The aim is to restart growth after the COVID-19 waves of 2021.

The resolution does not give one single total. It lists amounts for each policy instead. The budget deficit may rise by up to VND 240 trillion in total. The Government says about VND 64 trillion of that goes to tax and fee cuts. Up to VND 176 trillion goes to direct spending on development. The Government also counts about VND 135 trillion in deferred taxes and land rent.

The five year targets are average growth of 6.5 to 7 percent a year and urban unemployment below 4 percent.

Sources: Resolution 43/2022/QH15 (LuatVietnam); Resolution 11/NQ-CP (Expertis).

Tax relief: the VAT cut and deferrals

The VAT cut is the measure most firms will feel first. The rate falls by 2 points, from 10 percent to 8 percent, for goods and services now taxed at 10 percent. Decree 15/2022/ND-CP, signed on 28 January 2022, sets the rules. The cut runs from 1 February to 31 December 2022.

Some sectors are left out. These include telecoms, information technology, finance, banking, securities, insurance, real estate, metals, mining products other than coal, coke, refined petroleum, chemicals and goods that carry excise tax.

How a firm applies it depends on how it pays VAT.

• Credit method: write 8 percent on the VAT rate line of the invoice. Issue separate invoices for goods that qualify and goods that do not.
• Direct method: the percentage used to work out VAT falls by 20 percent. The invoice shows the amount before the cut, then the reduced total, with a note that cites Resolution 43/2022/QH15.
• Returns: list the qualifying goods and services on Form 01 in Appendix IV and attach it to the VAT return.

Resolution 11/NQ-CP adds other 2022 relief. Land rent falls by 30 percent for firms that had to stop work because of COVID-19. The environmental protection tax on jet fuel falls by 50 percent. Companies may also defer corporate income tax, VAT, personal income tax, excise tax and land rent payments. Gifts to COVID-19 prevention are tax deductible in 2022.

Sources: Decree 15/2022/ND-CP, Government of Vietnam (English translation, LuatVietnam); Resolution 43/2022/QH15 (LuatVietnam); Resolution 11/NQ-CP (Expertis).

Cheaper credit through the banks

The second big measure helps with loan costs. The state budget will support a 2 percent a year interest cut on eligible bank loans over two years. The cap is VND 40 trillion. It covers important sectors and enterprises, cooperatives and household businesses that can repay and recover. Loans for renovating old apartment blocks and for social and worker housing also count.

The State Bank of Vietnam has a second task. It should push lending rates down by 0.5 to 1 percent over the same two years, with priority sectors first. It should also keep restructuring repayment terms and keep debt groups unchanged. Banks may waive or cut interest for customers hurt by COVID-19.

One point is still open. The resolutions set the cap and the rules in outline. The State Bank has to issue the detailed guidance on who qualifies and how to apply. A firm should ask its bank now which loans it expects to put forward and what papers it will need.

Sources: Resolution 43/2022/QH15 (LuatVietnam); Resolution 11/NQ-CP (Expertis).

Money for jobs, workers and infrastructure

Some spending reaches firms through workers and public projects.

• Rent support: about VND 6.6 trillion for workers in the first half of 2022. Workers returning to the labour market get VND 1 million a month for three months. Workers in firms get VND 500,000 a month for three months.
• Wage loans: the Vietnam Bank for Social Policies can lend to employers so they can pay wages when work stops.
• Health: up to VND 14 trillion for clinics, hospitals and vaccines.
• Infrastructure: up to VND 113.55 trillion more for transport, digital transformation, climate adaptation and disaster repair.
• Tourism: up to VND 300 billion for the Tourism Development Support Fund.

The infrastructure money matters for contractors, suppliers and logistics firms. Projects must follow the normal investment steps. Ongoing national projects and those in the medium term public investment plan come first. The resolution also lets the Prime Minister allow special contractor appointment for some listed projects.

Sources: Resolution 43/2022/QH15 (LuatVietnam); Resolution 11/NQ-CP (Expertis).

Who runs it, and what a business should do now

The Ministry of Planning and Investment leads and tracks the program. The Ministry of Finance handles tax and bonds. The State Bank handles rates and credit. Other ministries, such as Health, Transport and Labour, carry out their own tasks. Ministries must report progress to the Ministry of Planning and Investment by the end of August 2022. The State Audit Office will audit the program every year.

A business can take four steps.

1. Check each product and service against the VAT exclusion list, and update invoices from 1 February.
2. List which loans may qualify for the 2 percent interest support, and talk to the lending bank.
3. Look at which tax and land rent payments could be deferred in 2022.
4. If you bid for public work, follow the new infrastructure projects as ministries publish them.

Rules can still change as ministries issue guidance. Read the decree and the bank notices for your own case, and ask an accountant where you are unsure.

Sources: Resolution 11/NQ-CP (Expertis); Resolution 43/2022/QH15 (LuatVietnam); Decree 15/2022/ND-CP (LuatVietnam).