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Vietnam VAT cut 8 percent: which goods and services qualify

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Vietnam VAT cut 8 percent is now law for most goods and services. Decree 15/2022/ND-CP, issued on 28 January 2022, lowers the VAT rate from 10 percent to 8 percent. The cut runs from 1 February 2022 to 31 December 2022. It only helps goods and services that normally pay the 10 percent rate. Some sectors are left out, and sellers must show the lower rate on their invoices.

What the decree does

The National Assembly passed Resolution 43/2022/QH15 on a recovery program after the COVID-19 shock. The resolution set out tax and spending steps to help firms and households. The Government then issued Decree 15/2022/ND-CP to explain how the tax steps work in practice.

The main step is simple. Goods and services now taxed at 10 percent will be taxed at 8 percent. That is a cut of two percentage points. Government News reported on 28 January 2022 that the policy is expected to cut budget revenue by about VND 51.4 trillion, or about US$2.2 billion.

The decree also lets firms count some COVID-19 donations and sponsorship as deductible costs for 2022 corporate income tax. That part is separate from the VAT cut.

Sources: Deloitte Vietnam, Tax Alert on Decree 15/2022/ND-CP, 28 January 2022; Viet Nam Government News, "VAT cuts from 10% to 8%," 28 January 2022.

Which goods and services qualify

The cut applies only to items that sit at the 10 percent rate today. Items already taxed at 5 percent or 0 percent do not change. Items that are exempt from VAT stay exempt.

Most everyday business activity at 10 percent should fall under the cut. Check each product line, because one firm can sell both covered and excluded items.

A seller should look at the rate it charged before 1 February. If that rate was 10 percent and the item is not on the excluded list, the new 8 percent rate applies.

Sources: Deloitte Vietnam, Tax Alert on Decree 15/2022/ND-CP, 28 January 2022.

What is left out

Appendix I of Decree 15 lists the goods and services that do not get the cut. Deloitte sums up the main groups like this.

  • Telecommunications and information technology.
  • Financial services, including banking, securities and insurance.
  • Real estate business.
  • Metal production and prefabricated metal products, mining (except coal mining), coke, refined petroleum, and chemicals and chemical products.
  • Goods and services that carry special consumption tax.

Sources describe the list in slightly different words. Some summaries name the sectors in broad terms, and others follow the appendix line by line. The appendix is the final word. A firm in a border sector should read it before it changes its prices or its books.

Sources: Deloitte Vietnam, Tax Alert on Decree 15/2022/ND-CP, 28 January 2022; Viet Nam Government News, 28 January 2022.

How invoices must show the new rate

Firms that use the credit method, also called the deduction method, apply the 8 percent rate to qualifying sales. They make the cut directly on the VAT invoice. The invoice carries the lower rate, so the buyer sees it at the point of sale.

Firms that use the direct method pay VAT as a percentage of revenue. They do not use an 8 percent rate. Instead, they cut their percentage rate by 20 percent for qualifying goods and services. Deloitte also tells readers to follow Decree 15 for the exact rules on writing the invoices.

Clear invoices matter. A wrong rate on an invoice can cause problems for both the seller and the buyer when the tax return is checked.

Sources: Deloitte Vietnam, Tax Alert on Decree 15/2022/ND-CP, 28 January 2022.

What business owners should do now

The cut is short. It ends on 31 December 2022, so plans should not count on it after that date.

  • List every product and service and mark whether it was taxed at 10 percent.
  • Check each one against Appendix I of the decree.
  • Update billing software so that qualifying items print the 8 percent rate from 1 February.
  • Tell customers and suppliers early, so contracts and quotes match the new invoices.
  • Keep records of which items were treated as covered and which as excluded.

Prices are a choice for each firm. The decree changes the tax on the invoice. It does not tell a seller to lower its price by the same amount. Some firms may pass the saving to buyers, and others may keep their prices the same.

Sources: Deloitte Vietnam, Tax Alert on Decree 15/2022/ND-CP, 28 January 2022; Viet Nam Government News, 28 January 2022.

Sources

  • Deloitte Vietnam, "Alert on Decree 15/2022/ND-CP on tax exemption, reduction policies following the Resolution 43/2022/QH15," 28 January 2022.
  • Viet Nam Government News, "VAT cuts from 10% to 8%," 28 January 2022.