On 30 June 2023, the Government of Vietnam issued Decree No. 44/2023/ND-CP stipulating a reduction of the VAT rate by 2% (“Decree 44”). Decree 44 was issued to implement the VAT rate reduction policy passed by the National Assembly in accordance with Resolution No. 101/2023/QH15.
We outline below some of the key points of Decree 44:
- From 1 July 2023 to 31 December 2023, the reduced VAT rate of 8% will apply to goods and services currently subject to the 10% rate. However, the reduced VAT rate of 8% will not apply to the supply of certain goods and services, including:
– Telecommunications, financial services, banking, securities, insurance, real estate trading, metal and products made from prefabricated metal, mining products (except for coal mining), coke refined petroleum, and chemical products;
– Goods and services subject to special consumption tax; and
– Information and technology as provided under the Laws on Information and Technology laws. - The 8% VAT rate will be applied for importation, manufacturing, processing, and trading. This means that importers of imported goods qualified for applying the reduced VAT rate can declare and pay import VAT at 8% on the customs declarations. An exception is coal mining; the 8% VAT rate applies solely at the trading stage.
- Taxpayers filing VAT under the credit method can apply the 8% VAT rate on the output VAT invoices. Taxpayers filing VAT under the direct method can apply a 20% reduction on the current ratio for VAT calculation purposes when issuing VAT invoices.
- Taxpayers can issue a single VAT invoice for goods and services subject to different VAT rates, provided that the VAT rates applicable to each type of such goods and services are specified in the VAT invoice.
- Taxpayers must declare the goods and services that are subject to the 8% VAT rate using Form 01 issued under Decree 44 when filing their VAT returns.
Required procedures to apply the reduced VAT rate
On 30 June 2023, the General Department of Customs issued an official letter no. 3431/TCHQ-TXNK guiding the implementation of the reduced VAT of 8% rate to imported goods (the “OL 3431”). Key notes of OL 3431 are outlined below:
- For customs declarations and customs duties calculation purposes, the HS codes of the imported goods are determined based on the Laws and regulations on customs. The HS codes provided in Decree 44 are for reference only.
- For customs declarations conducted via the VNACCS/VCIS system, goods applying the 8% VAT rate are classified under the code VB205. This VAT rate applies to goods whose customs declarations are registered from 1 July 2023.
For further information, please contact Lan Hua, Tax Director, [email protected] and Dai Le, Tax Consultant, [email protected]
