More groups and individuals to benefit from long-standing VAT rate reduction

More groups and individuals to benefit from long-standing VAT rate reduction

The government has asked the National Assembly to expand the beneficiaries of the current VAT rate until late next year, in a bid to help them prosper.

Last week, Minister of Finance Nguyen Van Thang presented a proposal on the National Assembly’s (NA) draft resolution on VAT reduction. The resolution, to be valid until the end of 2026, is to be applied to many groups of goods and services that have been enjoying an 8 per cent VAT rate since 2022, including telecommunications, financial activities, banking, securities, insurance, real estate business, metal products, mining products (except coal), and goods and services subject to the special consumption tax (except petrol).

At the same time, the draft resolution also expands the beneficiaries of a 2 per cent VAT decrease for a number of groups of goods and services currently subject to a 10 per cent rate.

They include IT products and services such as washing machines, microwaves, data processing services, leasing and related activities, and prefabricated metal products such as tanks and boilers.

Other products that are proposed to be subject to a 2 per cent cut also consist of refined petroleum, chemical products, and imported coal as well as coal sold in the commercial business stage.

“These are goods used in the production process of input materials for the production of goods for direct consumption of the people,” the Ministry of Finance (MoF) said.

The NA will assign the government to enact a guiding decree on the issue. According to Minister Thang, the VAT rate will lead to a reduction of the state budget revenue but will also help spur on production and business activities, thereby contributing to creating additional revenue for the budget.

Under the MoF’s calculations, this policy will result in a reduction in the state budget revenue of $4.87 billion from July 1, 2025 to the end of 2026, including $1.58 billion in the second half of this year, and $3.29 billion across 2026.

“In addition, the VAT rate will contribute to decreasing the prices of goods and services, thereby helping to promote production and business activities, creating more jobs for labourers, and contributing to stabilising the macroeconomy and economic growth for the period,” the MoF stated.

“Individuals will be the direct beneficiaries of this policy, which will help to directly reduce their costs for consuming goods and services,” Minister Thang stressed. “For businesses, the 2 per cent VAT reduction will contribute to reducing production costs, lowering product prices through businesses with production and business activities of goods and services providing VAT reduction.”

This will result in a decrease in the selling price of goods and services for consumers, thereby helping businesses increase their products’ competitiveness, consume goods and services, and expand production and business activities, contributing to generating more employment, he added.

If the resolution is passed, it will be the sixth time the initiative has been carried out since 2022.

It is also in line with Vietnam’s international commitments and aligns with commitments in international treaties to which Vietnam is a member, according to a government report on VAT submitted to the NA.

In 2022, the implementation of the VAT reduction policy provided support worth just over $2 billion for businesses and individuals, contributing to stimulating domestic consumption, with total goods retail and consumer service revenue increasing 19.8 per cent on-year.

The following year, similar assistance was valued at $936 million, with total goods retail and consumer service revenue climbing 9.6 per cent on-year.

Last year, the same support came in at $1.96 billion, with total goods retail and consumer service revenue ascending 9 per cent on-year.

According to the National Statistics Office, also in 2024, Vietnam’s GDP was estimated to have increased 7.09 per cent compared to 2023, with GDP per capita reaching $4,700. Inflation was controlled, with the average consumer price index climbing 3.63 per cent on-year.

The turnover of trade, export, and import rose 15.4, 14.3, and 16.7 per cent, respectively, as compared to 2023, and the trade surplus was estimated at $24.77 billion. Total state budget revenue hit $13.46 billion, exceeding the estimate by 19.8 per cent and up 16.2 per cent compared to the implemented figure in 2023.

In the first four months of this year, total goods retail and consumer service revenue was estimated at $91.42 billion, up nearly 10 per cent on-year. Total goods export and import turnover was estimated to have stood at 276.89 billion – up 15.7 per cent on-year – including export up 13 per cent and import up 18.6 per cent. The trade surplus came in at $3.79 billion. Meanwhile, total state budget revenue totalled over $37.76 billion – up 26.3 per cent on-year.

“These achievements have reflected the fact that the VAT reduction initiative has been contributing to lowering costs for those businesses with production and trading activities of goods and services that receive the rate,” the MoF stated.

VIR