On May 7th, under the delegated authority of the Government, the Minister of Finance signed Proposal No. 191/TTr-CP and submitted it to the National Assembly regarding the draft resolution on the reduction of Value Added Tax (VAT). This draft was presented and approved by the Government in Resolution No. 67/NQ-CP on May 2nd. Accordingly, the Government has instructed the Ministry of Finance to finalize the draft resolution on VAT for the National Assembly, following a streamlined procedure, with the expectation of its approval during the National Assembly's session in May 2023.
Reducing the VAT by 2% for all goods and services.
Over the past 3 years, Vietnam has also implemented various measures to support tax deadline extensions (for corporate income tax, personal income tax, value-added tax, special consumption tax, and land rent), tax reductions (for corporate income tax, personal income tax, value-added tax, import tax, and environmental protection tax on gasoline and oil), and land rent; as well as exemptions and reductions in fees and charges.
According to assessments, the implementation of supportive measures in the past period has been highly effective and has had immediate positive impacts on the activities of businesses and individuals. These measures include tax deadline extensions, reduction of value-added tax (VAT), reduction of environmental protection tax (on gasoline and oil), reduction of land rent, as well as exemptions and reductions in fees and charges. To timely respond to the evolving socio-economic situation and consider appropriate calculations based on practical conditions, in addition to the measures already being implemented for 2023, the Government believes that it is necessary to continue implementing the VAT reduction, as applied in 2022, to support businesses and individuals.
Therefore, the Government proposes to reduce the VAT rate by 2% for all goods and services subject to the 10% tax rate (from 10% to 8%). Additionally, a 20% reduction in the percentage used to calculate VAT is proposed for businesses (including individual businesses and household businesses) when issuing invoices for all goods and services subject to the 10% VAT.
Specifically, the VAT reduction applies to the groups of goods and services currently subject to the 10% tax rate until December 31, 2023. The reduction in VAT for each type of goods and services is applied uniformly at all stages, including importation, production, processing, and commercial trading.
The expected tax reduction is around 35 trillion Vietnamese dong.
The government assesses that the direct beneficiaries of this policy will be the people. By reducing the VAT on goods and services subject to a 10% VAT rate, it will contribute to reducing selling prices and thereby directly reducing the costs for people in their consumption of goods and services for their livelihoods.
Meanwhile, for manufacturing enterprises and businesses that supply goods and services subject to a 10% VAT rate, they will benefit from the policy when it is implemented. The reduction in VAT will contribute to reducing production costs and lowering the cost of goods, thereby helping businesses increase their capacity for recovery and expand their production and business activities.
With this proposal, the Government is expected to reduce state budget revenue by about 5.8 trillion VND each month. If applied for the last 6 months of the year, it will be equivalent to a reduction of about 35 trillion VND.
To overcome and compensate for the short-term impacts on state budget revenues, as well as ensure proactive management of the state budget, the Government will instruct the Ministry of Finance to coordinate with relevant ministries, sectors, and localities to focus on effective implementation of tax laws. Additionally, efforts will continue to be made to modernize the tax system and simplify administrative procedures. There will be resolute actions in the management of state budget revenues, with a focus on timely and effective implementation of solutions to revenue management, anti-tax evasion, transfer pricing, and tax avoidance.
The reduction in VAT will contribute to lowering the cost of goods and services, thereby stimulating production and business activities and creating additional employment opportunities for workers. This measure will also contribute to macroeconomic stability and economic recovery in 2023.
Estimated implementation resources
According to the proposal, the Government stated that the estimated resources will be sourced from the central budget, local budgets, and other lawful funding sources.
The Government requires ministries, agencies under ministries, and government agencies within their functional scope and responsibilities to disseminate and educate the Resolution and related regulations. The Ministry of Finance will develop informational content and conduct timely dissemination of the requirements, contents, and provisions of the Resolution to relevant agencies, organizations, and the general public, aiming to enhance understanding and timely grasp of the laws for effective implementation.
If the National Assembly approves the Resolution, the Ministry of Finance will provide specific instructions and guidance for the Provincial Tax Department and the Provincial Customs Department under the central authority to organize and implement the Resolution effectively.
