On January 11, 2022, the National Assembly of the Socialist Republic of Vietnam issued Resolution No. 43/2022/QH15 on fiscal and monetary policies for supporting the socio-economic recovery and development program (“Resolution 43“). The objective of this policy is to restore and rapidly develop production and business activities; reduce costs, support cash flow for businesses, and help prevent COVID-19 effectively. The Value-Added Tax (“VAT“) reduction policy is one of the fiscal policies detailed in Decree No. 15/2022/ND-CP dated January 28, 2022 on tax exemption and reduction policies pursuant to Resolution 43 (“Decree 15“).
Specifically, the VAT reduction policy is shown as follows:
1. VAT reduction rates
Instead of a VAT rate of 10%, the VAT rate is reduced to 8% for businesses that calculate VAT under the credit – invoice method.
2. Subjects entitled to vat reduction
VAT reduction is applied for groups of goods and services that currently subject to 10% VAT, except for the following groups of goods and services:
– Telecommunications, financial activities, banking, securities, insurance, real estate trading, metals and products from prefabricated metals, mining products (excluding coal mining), coke, refined petroleum, chemical products.
– Products and services subject to excise tax.
– Information technology in accordance with the Law on information technology.
The above-mentioned groups of goods and services are not entitled to VAT reduction policy and are detailed in the Appendixes issued with Decree 15.
Thus, the group of goods and services that are subject to VAT reduction are the groups of goods and services that (i) currently subject to 10% VAT, and (ii) are not in the groups of goods and services that are not entitled to the above-mentioned VAT reduction policy.
3. Application period of VAT reduction policy
VAT reduction policy is applied from February 1, 2022 to December 31, 2022.
4. How to determine the rate of VAT to be entitled?
In order to determine the rate of VAT to be entitled, business establishments need to take the following steps:
Step 1: Determine goods and services provided by the business establishments and are subject to VAT;
Step 2: Compare with the list of goods and services not entitled to VAT reduction policy specified in the attached Appendixes of Decree 15;
Step 3: Determine the VAT rate to be entitled of goods and services provided by the business establishments;
If the goods and services provided by the business establishments are not in the group of goods and services listed in the Appendixes attached to Decree 15, the business establishments are entitled to the VAT rate of 8%. Conversely, if the goods and services provided by the business establishments are in the group of goods and services listed in the Appendixes attached to Decree 15, the business establishments are entitled to the VAT rate of 10% as applicable.
Step 4: Consult with Tax Authorities directly managing business establishments
In case after taking the above steps that the business establishments still does not determine the rate of VAT to be entitled, the business establishments may send a letter to the Tax Authority directly managing for supporting, avoiding embarrassing cases, wrongly or arbitrarily applying the VAT rate.
It can be seen that VAT reduction policy is one of the policies issued during the COVID-19 epidemic, which is complicated and widespread throughout the country, demonstrating the State’s support to businesses, organizations and individuals that have been under crisis pressure from the epidemic. Accordingly, the exclusion method is the method applied when determining the groups of goods and services that are entitled to VAT reduction policy. Businesses establishments and enterprises are pleased to take note of the above issues to ensure their legitimate rights and interests in the field of taxation.
Best regards,
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