In order to stimulate
growth and recover the economy after the impact of the Covid-19 pandemic, the
Government has issued a policy to reduce value added tax. The reduction of
value-added tax is an effective solution and tool to stimulate consumption and is
expected to create a driving force for rapid development to help businesses
restore business and production.
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Trade and Tax in Vietnam
The value-added
tax reduction policy has been promulgated by Decree
15/2022/ND-CP stipulating the tax exemption and reduction policy according to
the National Assembly’s Resolution No. 43/2022/QH15 on fiscal and monetary
policies currency to support the program of socio-economic recovery and
development. Accordingly, value added tax will be reduced from 10% to 8%. This
reduction will create conditions for consumers to increase spending, through
which businesses will sell more products.
The value-added tax reduction will be applied to groups of goods
and services currently subject to the 10% tax rate, except for the following
groups of goods and services: (i) Telecommunications, financial and banking
activities commodities, securities, insurance, real estate trading, metals and
prefabricated metal products, mining products (excluding coal mining), coke,
refined petroleum, chemical products; (ii) Products, goods and services subject
to excise tax; (iii) Information technology under the law on information
technology. However, if the goods and services are not subject to value-added
tax or subject to value-added tax of 5% according to the provisions of the Law
on Value-Added Tax, the provisions of the Law on Value-Added Tax shall be
applied and not entitled to value added tax reduction.
It is important to note the value-added tax calculation method to
apply. Accordingly, if the enterprise calculates value-added tax by the
deduction method, the value-added tax rate of 8% shall apply; and in case the
enterprise calculates value-added tax according to the percentage method on
sales, collected, it will be reduced by 20% of the percentage rate for
calculating value-added tax when issuing invoices for goods and services
eligible for value-added tax reduction as prescribed.
The value-added tax reduction will be implemented quickly and
businesses and consumers will immediately benefit. This tax reduction is
expected to help reduce the cost of products and services, thereby stimulating
consumer demand. Besides, it will help increase production output of
enterprises and create more jobs for workers. Therefore, the reduction of value
added tax is considered necessary solutions to promote the economy to recover
soon after a long time affected by the pandemic.
The value-added tax reduction policy will be effective from
February 1st, 2022 to the end of December 31st, 2022.
Previously, value-added tax was only reduced for a few specific products, but
with this policy, the object of tax reduction has been expanded in most fields
of business and production. Therefore, the impact of this policy on the economy
in the future is very large. However, in order for the value-added tax
reduction to reach consumers, tax authorities need stricter inspection and
control to meet the set goals. When in doubt, it is important to consult with tax lawyers
in Vietnam for solutions and advice.
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