Vietnam will implement a tax reduction for goods and services with a tax rate of 10% in 2024.

From January 1,2024,the Vietnamese government will,in accordance with Decree No.94/2023/ND-CP and Resolution No.110/2023/QH15 of the National Assembly,reduce the value-added tax (VAT) rate from the current 10% to other goods and services.This new fiscal policy aims to stimulate economic growth,promote domestic consumption,and provide a more favorable operating environment for businesses.

I.Overview of VAT Adjustment

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.

II.Specific Tax Reduction Scope

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.

III.Implementation of Tax Reduction Policy

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.

IV.Policy Validity Period

The validity period of Protocol No.94/2023/ND-CP begins on January 1,2024 and ends on June 30 of the same year.This time-limited policy adjustment aims to boost the economy in the short term and encourage corporate investment and consumer spending.

V.Impact on Businesses

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.

VI.Long-term Policy Effects

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.

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