Vietnam Reduces Taxes on Goods and Services with a 10% Tax Rate in 2024

Effective January 1, 2024, the Vietnamese government will implement a VAT rate reduction for goods and services currently subject to a 10% rate, in accordance with Decree No. 94/2023/ND-CP and National Assembly Resolution No. 110/2023/QH15. This new fiscal policy aims to stimulate economic growth, boost domestic consumption, and create a more favorable operating environment for businesses.

Under the new policy, goods and services previously subject to a 10% VAT rate will see a 2-percentage-point reduction to 8%. This adjustment applies across various business sectors including import, manufacturing, processing, and trading. The measure aims to alleviate corporate tax burdens and stimulate market vitality.

The VAT reduction covers most goods and services previously taxed at 10%, with some exceptions. Specific sectors such as telecommunications, financial activities, real estate, and chemical products are excluded. Goods and services not subject to VAT or taxed at 5% also remain unaffected.

Under the new policy, eligible business establishments (including individual businesses and sole proprietorships) may calculate VAT at the reduced 8% rate when issuing invoices for all applicable goods and services. This means businesses can deduct the 8% VAT rate from the taxable value of goods and services.

Additionally, coal mining operations and certain types of companies implementing closed-loop processes also qualify for VAT reductions, providing additional tax incentives for specific industries.

Decree No. 94/2023/ND-CP will be effective from January 1 to June 30, 2024. This time-bound policy adjustment aims to provide short-term economic stimulus by encouraging business investment and consumer spending.

The new VAT policy will significantly impact both domestic Vietnamese businesses and international companies trading with Vietnam. The rate reduction will lower corporate tax burdens, improve profit margins, and incentivize production and service expansion. It may also boost consumer purchasing power, further driving market demand.

Businesses adapting to the new rates must adjust financial and accounting operations to ensure compliance. Additionally, as rate changes may affect product pricing and market strategies, companies need to reassess their market positioning and sales approaches.

Although this rate adjustment lasts six months, it may have lasting impacts on Vietnams economic development. Through tax reduction, the government aims to stimulate economic vitality, enhance corporate competitiveness, and promote employment and consumption. The policys implementation outcomes will provide important references for future fiscal policies.

Original announcement:Nội Dung Văn Bản ‘Nghị định 94/2023/NĐ-CP’