VAT Reduction in Vietnam from 10 to 8 Percent Expected After Government Approval
The Vietnamese government has proposed a reduction in VAT tax to address the current economic challenges. This could impact foreign firms if approved.
Last week, the Vietnamese government approved a plan from the Ministry of Finance to lower the value-added tax (VAT) from 10 percent to 8 percent. This reduction is expected to provide a much-needed boost to businesses struggling with various domestic and international challenges.
Broadly speaking, the VAT is a consumption tax that applies to transactions in goods and services within Vietnam. Notably, it does not apply to goods for export or services sold to customers abroad.
The VAT reduction could see the cost of most goods come down by two percent. However, it is usually at the discretion of the business to decide whether to pass these savings on to the end consumer.
The cost to the state budget
In February of 2022, the Vietnamese government cut the VAT from 10 to 8 percent to boost the pandemic-hit local economy. The cut, which was in place until the end of December of 2022, cost Vietnam’s state budget an estimated 49.4 trillion VND (US$2.2 billion).
This time around, the VAT reduction is estimated to cost the budget an approximate 5.8 trillion VND or US$246.7 million per month. If the policy is in place by the end of June, this could see the state budget reduced by a total of 34.8 trillion VND or US$1.48 billion in the second half of the year. Read More…
