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Ministry of Finance proposed to reduce VAT by 2% in the first 6 months of 2025

Source: Internet

On November 12, 2024, the Government issued Resolution No. 218/NQ-CP on the regular Government meeting in October, in which the Ministry of Finance was assigned to preside over and coordinate with agencies and localities to promptly summarize, evaluate and advise, propose to issue under its authority or submit to competent authorities to issue policies on exemption, reduction, extension of taxes, fees, land rents, etc., including continuing to extend VAT reduction in the first 6 months of 2025 to report to the National Assembly at the 8th Session.

On this basis, while closely following the Party's guidelines and orientations and the National Assembly's resolutions, the Ministry of Finance has drafted a proposal to develop a resolution on VAT reduction.

Accordingly, the draft proposes to reduce the VAT rate by 2% for a number of groups of goods and services currently subject to the VAT rate of 10%, except for a number of groups of goods and services in telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metal production and production of prefabricated metal products, mining (excluding coal mining), coke production, refined petroleum, production of chemicals and chemical products, goods and services subject to special consumption tax.

The Ministry of Finance proposes the implementation period in the first 6 months of 2025, applicable to organizations and individuals producing, importing goods and providing services subject to VAT; tax administration agencies, state agencies, other relevant organizations and individuals.

According to the Ministry of Finance, the current VAT Law stipulates two VAT rates of 5% and 10% (excluding the 0% rate applicable to exported goods and services; subjects not subject to VAT). The amount of payable tax is equal to the output VAT - input VAT.

For goods and services subject to 5% VAT, the output VAT is basically smaller than the input VAT, so businesses usually do not incur payable VAT. For goods and services subject to 10% VAT, payable VAT will arise (output VAT is greater than input VAT).

Therefore, the Ministry of Finance proposed a plan to reduce VAT by 2% for a number of goods and services in the draft, keeping the same content as stipulated in Resolution No. 43/2022/QH15, Resolution No. 101/2023/QH15, Resolution No. 110/2023/QH15 and Resolution No. 142/2024/QH15; assigning the Government to guide, organize implementation, ensure transparency, efficiency, and ease of implementation to facilitate taxpayers.

According to the drafting agency, the 2% VAT reduction promptly meets immediate and long-term needs, closely linked to the 5-year Socio-Economic Development Plan 2021 - 2025, the Annual Socio-Economic Development Plan, and the Economic Restructuring Plan for the period 2021 - 2025.

The tax reduction contributes to reducing the cost of goods and services to promote production and business and create more jobs for workers.

Extending this tax reduction period until the end of June 2025 is expected to reduce budget revenue by about VND 25,000 billion.

Thus, if this VAT reduction proposal is approved, this will be the 5th time Vietnam has reduced VAT to promote consumption, quickly recover production and business, and promote economic growth.