Official regulation to reduce VAT by 2% until the end of 2026

Value Added Tax (VAT) is an indirect tax, calculated on the added value of goods and services arising in the process from production, circulation, to consumption. In order to stimulate production and promote production and business activities, recently, on June 17, 2025, the National Assembly passed the Resolution on reducing value added tax until the end of 2026. Below, Viet An Law will update the official regulation to reduce VAT by 2% until the end of 2026 after reduce 2% in the whole year 2024.

Policies to reduce VAT from 10% to 8% from 2022 to the present

Since 2022, the National Assembly and the Government have continuously issued policies to reduce VAT from 10% to 8% for several groups of goods and services currently subject to a 10% VAT rate. Specifically:

• Resolution 43/2022/QH15 and Decree 15/2022/ND-CP: From February 1, 2022, to December 31, 2022;
• Resolution 101/2023/QH15 and Decree 44/2023/ND-CP: From July 1, 2023, to December 31, 2023;
• Resolution 110/2023/QH15 and Decree 94/2023/ND-CP: From January 1, 2024, to June 30, 2024;
• Resolution 142/2024/QH15 and Decree 72/2024/ND-CP: From July 1, 2024, to December 31, 2024.
• Resolution 174/2024/QH15 and Decree 180/2024/ND-CP: From January 1, 2025, to June 30, 2025.

Current applicable VAT rates

According to Article 8 of the Law on Value Added Tax 2008, amended in 2013, 2014, and 2016, the current VAT rate is as follows:

• 0% tax rate: applies to exported goods and services, international transportation, and goods and services not subject to value-added tax as prescribed in Article 5 of the Law on VAT when exported, except for some cases.
• Tax rate of 5%: applies to goods and services such as clean water for production and daily life; unprocessed agricultural, livestock and aquatic products; fresh food; unprocessed forestry products, except wood; medical equipment and instruments, cotton, medical sanitary napkins; disease prevention and treatment drugs; …
• Tax rate of 10%: applies to goods and services not subject to the above 0% and 5% tax rates.

Note that from July 1, 2024, new regulations will be applied according to the Law on Value Added Tax 2024. Accordingly, the VAT rate applied according to Article 9 of the Law on Value Added Tax 2024 still includes 3 levels: 0%, 5%, and 10%, but there are changes for some goods and services applied according to each of these tax rates.

Latest update on official regulations to reduce VAT by 2% until the end of 2026

On the morning of June 17, continuing the program of the 9th Session, with 452/453 delegates voting in favor (equivalent to 94.56% of the total number of delegates), the National Assembly voted to pass the Resolution of the National Assembly on reducing value added tax.

The Resolution decides: “Reduce the value added tax rate by 2%, applicable to groups of goods and services specified in Clause 3, Article 9 of the Law on Value Added Tax No. 48/2024/QH15 (to 8%), except for the following groups of goods and services: Telecommunications, financial activities, banking, securities, insurance, real estate business, metal products, mining products (except coal), goods and services subject to special consumption tax (except gasoline).”

Thus, according to this new regulation:

• VAT reduction: 2% reduction in value added tax rate.
• Applicable subjects: Applicable to groups of goods and services subject to a tax rate of 10% as prescribed in Clause 3, Article 9 of the Law on Value Added Tax No. 48/2024/QH15.
• Exclusions: groups of goods and services: Telecommunications, financial activities, banking, securities, insurance, real estate business, metal products, mining products (except coal), goods and services subject to special consumption tax (except gasoline) will not be reduced.
• Applicable period: Tax reduction period from July 1, 2025, to December 31, 2026.

Subjects applying regulations to reduce VAT by 2% until the end of 2026

As analyzed, currently, VAT rates include: 0%, 5%, 10% depending on the type of goods and services. According to the Draft Resolution on VAT reduction, only a 2% reduction in VAT rates will be applied to groups of goods and services currently applying a tax rate of 10% (remaining at 8%).

Thus, the goods and services that are subject to VAT reduction include groups of goods and services currently subject to a tax rate of 10%, which will be reduced to 8%. Groups of goods currently subject to a tax rate of 0% or 5% will be subject to the provisions of the Law on Value Added Tax and will not be subject to VAT reduction.

Note that the VAT reduction regulations do not apply to some groups of goods and services, such as:

• Telecommunications ;
• Banking, securities, insurance,
• Real estate business
• Metal products, mining products (except coal),
• Goods and services subject to special consumption tax (except gasoline).

These are fields and industries with special characteristics or high importance to the national economy, so they need to be strictly controlled to avoid negative impacts on the economy. VAT reduction is not applied or these items are not eligible for VAT reduction because they are already subject to strong regulation by special consumption tax.

New points of the Resolution on reducing VAT by 2% until the end of 2026 compared to the previous Resolutions

According to Resolution 174/2024/QH15 on continuing to reduce VAT from January 1, 2025 to June 30, 2022, it is stipulated that: A 2% reduction in value added tax rate will be applied to groups of goods and services currently subject to a value added tax rate of 10% (remaining 8%), except for the following groups of goods and services: telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metals, prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products, goods and services subject to special consumption tax.

Thus, this new Resolution expands the subjects eligible for tax reduction compared to the provisions in previous National Assembly resolutions and extends the tax reduction period until the end of 2026. In particular, transportation, logistics, goods, and information technology services are eligible for tax reduction.

In addition, according to the law on value added tax, teaching, vocational training, and medical services are not subject to tax, so there is no need to reduce tax.

Besides, for services such as finance, banking, securities, and insurance activities, which are not subject to value added tax, there is no need to reduce tax.

Telecommunications and real estate services are industries that have grown in recent times and are also not subject to tax reduction according to the National Assembly’s resolution.

Reason for reducing VAT by only 2% for goods and services subject to a 10% tax rate

The current Law on Value Added Tax 2024 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 tax payable = output VAT – input VAT.

Goods and services purchased by business establishments may be subject to a tax rate of 10%, 5%, or not subject to VAT.

Therefore:

• For goods and services subject to 5% VAT, the output VAT is less than the input VAT, which leads businesses not to incur any VAT payable.
• For goods and services subject to 10% VAT, VAT payable will arise (output VAT is greater than input VAT).

Impact of official regulation to reduce VAT by 2% until the end of 2026

According to the above VAT reduction plan, the expected reduction in state budget revenue in the last 6 months of 2025 and the whole year of 2026 is about 122,000 billion VND (of which: the last 6 months of 2025 will decrease by about 39,540 billion VND, in 2026 it will decrease by about 82,200 billion VND).

• Reducing VAT reduces budget revenue but also stimulates production and promotes business activities, thereby contributing to creating additional revenue for the State budget (including the possibility of increasing revenue from other taxes thanks to the spillover effect of the VAT reduction policy).
• This regulation on reducing value added tax aims to stimulate consumption, in line with the current economic context, thereby supporting people and businesses, promoting production, business, tourism, and domestic consumption development.

Instructions on procedures to follow when receiving a 2% VAT reduction

Currently, the official Resolution to reduce VAT by 2% until the end of 2026 has just been issued. Following the guidance under Decree 180/2024/ND-CP regulating VAT reduction from January 1, 2025, to June 30, 2025. Accordingly, the order and procedures to be implemented when receiving tax reduction are as follows:

• For business establishments calculating value added tax according to the deduction method: When making a value added invoice for providing goods and services subject to value added tax reduction, write “8%” in the value added tax rate line, value added tax amount, and total amount the buyer must pay. Based on the value added invoice, the business establishment selling goods and services declares output value added tax, and the business establishment purchasing goods and services declares input value added tax deduction according to the reduced tax amount stated on the value added invoice.
• For business establishments calculating value added tax according to the % method on revenue: When making a sales invoice to provide goods and services subject to value added tax reduction, in the “Total amount” column, fully record the amount of goods and services before the reduction, in the “Total amount of goods and services” line, record the amount reduced by 20% of the % rate on revenue, and note: “reduced… (amount) corresponding to 20% of the % rate to calculate value added tax according to Resolution No….”.

Above is an update of some notable information about official regulation to reduce VAT by 2% in Vietnam until the end of 2026. If you have any related questions or need tax law advice, please contact Viet An Law for the best advice and support!