The value-added tax (VAT) applies to goods and services used for production, trading, and consumption in Vietnam (including goods and services purchased from non-residents), with certain exemptions.
The country will cut VAT to 8% from 10% from February, as part of the country’s efforts to assist businesses hurt by the coronavirus pandemic, Vietnam News Agency reported.
Related: Tax Accounting Services in Vietnam
The standard VAT rate in Vietnam is 10%. There is a 5% reduced VAT rate on certain foodstuffs and a range of exempt goods and services as well as imports.
- 0% rate applies to exported goods/services, including goods/services sold to overseas/non-tariff areas and consumed outside Vietnam/in the non-tariff areas, goods processed for export or in-country export (subject to conditions), goods sold to duty free shops, certain exported services, construction and installation carried out for export processing enterprises, aviation, marine, and international transportation services.
- 5% rate applies generally to areas of the economy concerned with the provision of essential goods and services. These include: clean water, teaching aids, books, unprocessed foodstuffs, medicine and medical equipment, husbandry feed, various agricultural products and services, technical/scientific services, rubber latex, sugar and its by-products, social housing, and certain cultural, artistic, and sport services/products.
- The 10% ‘standard’ rate applies to activities not specified as not subject to VAT, exempt, or subject to the 0% or 5% rate.
The tax reduction is worth 49.4 trillion dong ($2.17 billion), the report said.
Last week, Vietnamese legislators approved a stimulus package worth nearly 350 trillion dong ($15.4 billion) for the 2022-2023 period.
The Southeast Asian country is targeting gross domestic product expansion of 6.0per cent to 6.5per cent this year, up from last year’s decades-low growth of 2.58per cent. Vietnam’s annual GDP growth averaged 6.55per cent over the five years prior to the pandemic.
The latest stimulus package includes measures to reduce value-added tax by 2.0 percentage points, cut loan interest rates by 0.5-1.0 percentage points and increase infrastructure investment.
The package also includes funds for the healthcare system and financial support to cut house rents for workers.