Issue of January 2025 – Policy on reduction of Value Added Tax according to Resolution No. 174/2024/QH15 dated November 30, 2024 of the National Assembly

Dear Valued Clients,

On December 31, 2024, the Government issued Decree No. 180/2024/ND-CP (“Decree 180”), regulating the policy of reducing value-added tax (“VAT”) according to Resolution No. 174/2024/QH15 dated November 30, 2024 of the National Assembly (“Resolution 174”). Decree 180 officially takes effect from January 1, 2025 to June 30, 2025.

In this Legal Update, we will provide an overview and detailed analysis of the significant changes in the VAT reduction policy under Resolution 174 that enterprises should pay special attention to in the near future.

1. Continuation of VAT reduction for goods and services currently subject to a 10% tax rate

Decree 180 specifies a 2% reduction in VAT for goods and services currently subject to the 10% tax rate, except for the following groups of goods and services[1]:

(i)     Telecommunications, financial services, banking, securities, insurance, real estate business, metals and fabricated metal products, mineral products (excluding coal mining), coke, refined petroleum, and chemical products. Details are provided in Appendix I issued with Decree 180.

(ii)     Goods and services subject to special consumption tax. Details are provided in Appendix II issued with Decree 180.

(iii)   Information technology as regulated by the laws on information technology. Details are provided in Appendix III issued with Decree 180.

Decree 180 also specifies that the VAT reduction for each type of goods and services will be uniformly applied across all stages, including import, production, processing, and commercial business. For mined coal sold (including coal mined and subsequently screened, classified through a closed-loop process before being sold), it is subject to VAT reduction. However, coal products listed in Appendix I issued with Decree 180 are not eligible for VAT reduction at stages other than the mining and selling stage.

Major enterprises and economic groups that conduct closed-loop processes before selling coal products are also eligible for VAT reduction for mined coal sales.

For goods and services listed in Appendices I, II, and III issued with Decree 180 that are either exempt from VAT or subject to a 5% VAT rate under the Law on VAT, the provisions of the Law on VAT will apply, and such goods and services will not be eligible for VAT reduction.

2. VAT reduction rate

According to the provisions of Article 1.2 of Decree 180, the VAT reduction rates for business establishments are respectively prescribed as follows:

(i)     Business establishments that calculate VAT using the credit method are entitled to an 8% VAT rate for goods and services specified in Section 1.

(ii)   Business establishments (including household businesses and individual businesses) that calculate VAT using the percentage method on revenue are entitled to a 20% reduction in the percentage rate used to calculate VAT when issuing invoices for goods and services eligible for VAT reduction as specified in Section 1.

3. Procedures and order of implementation

Decree 180 also clearly stipulates the procedures for implementing VAT reduction[2]. Specifically as follows:

(i)      For business establishments specified in Clause (i) Section 2, when issuing VAT invoices for goods and services subject to VAT reduction, the VAT rate line should state “8%,” along with the VAT amount and the total amount payable by the buyer.

Based on the VAT invoice, the business establishment supplying the goods or services declares the reduced output VAT, while the business establishment purchasing the goods or services declares the input VAT deduction based on the reduced tax amount stated on the VAT invoice.

(ii)     For business establishments specified in Clause (ii) Section 2, when issuing sales invoices for goods and services subject to VAT reduction, the “Amount” column should record the full price of goods or services before the reduction. In the “Total goods and services amount” line, the amount should reflect the 20% reduction in the percentage rate on revenue. Additionally, a note must state: “Reduced by… (amount) equivalent to 20% of the percentage rate used for VAT calculation under Resolution No. 174.”

In addition, business establishments should also pay attention to the following cases:

(i)      For business establishments under Clause (i), Section 2, when selling goods or providing services with varying VAT rates, the VAT invoice must clearly specify the tax rates applicable to each item in accordance with Section 3.

(ii)     For business establishments under Clause (ii), Section 2, when selling goods or providing services, the sales invoice must clearly indicate the reduced amount as stipulated in Section 3[3].

(iii)    In cases where business establishments have issued invoices and declared taxes based on VAT rates or percentage rates not reduced under Decree 180, the seller and buyer must handle the issued invoices according to the legal regulations on invoices and documents. Based on the adjusted invoices, the seller declares output tax adjustments, and the buyer declares input tax adjustments (if applicable)[4].

(iv)    Business establishments specified in Article 1 of Decree 180 must declare goods and services subject to VAT reduction using Form No. 01 in Appendix IV attached to Decree 180, along with the VAT declaration form[5].

4. VAT reduction period

Pursuant to Article 2 of Decree 180, the VAT reduction period is stipulated as follows:

“1. This Decree shall be effective from January 1, 2025, to June 30, 2025, inclusive.

2. Ministries, within the scope of their assigned functions and tasks, and Provincial People’s Committees shall direct relevant agencies to disseminate, instruct, and inspect the implementation of the VAT reduction regulations stipulated in Article 1 of this Decree. Particular emphasis shall be placed on solutions to stabilize the supply and demand of goods and services eligible for VAT reduction, ensuring stable market prices for goods and services (exclusive of VAT) during the period from January 1, 2025, to June 30, 2025, inclusive.”

Thus, the VAT reduction period according to Decree 180 officially takes effect from January 1, 2025 to June 30, 2025.

As usual, we hope you find this Legal Update helpful and look forward to working with you in the upcoming time.

Kind regards,

ENT Law LLC

The full version of this Legal Update can be found here.

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[1]  Article 1.1 of Decree 180

[2] Article 1.3 of Decree 180.

[3] Article 1.4 of Decree 180.

[4] Article 1.5 of Decree 180.

[5] Article 1.6 of Decree 180.