VAT reduction by 2% in 2024

On November 29, 2023, the National Assembly passed the Resolution on the 6th Session, term XV, which includes the content of continuing to reduce value added tax by 2% for groups of goods and services currently applying the Tax rate from 10% to 8% from January 1, 2024 to June 30, 2024. In the following article, Viet An Law Firm will provide more information about VAT reduction by 2% in 2024.

Legal basis

• Law on Value Added Tax 2008, as amended and supplemented in 2013, 2014, 2016.
• Law on Tax Administration 2023.

Update policy to reduce Value Added Tax (VAT) by 2% in 2024

In section a, point 4, Notice 399a/TB-VPCP dated September 29, 2023 of the Government Office announcing the Conclusion of the Standing Government at the meeting on the socio-economic situation in September and 9 months early 2023; at Point c, Clause 3, Section I of Resolution 164/NQ-CP dated October 4, 2023 of the Government on the regular Government Meeting in September 2023 and the Government’s online conference with localities assigned to the Ministry of Finance.

Regarding content, the Government proposes to continue implementing the policy of reducing the VAT rate by 2% for groups of goods and services currently applying the tax rate of 10% (to 8%), which has been implemented stably and brought many positive things for the economy in the two previous years of application, 2022 and 2023, according to Resolution 43/2022/QH15 and Resolution 101/2023/QH15.

According to Official Dispatch 10830/BTC-CST, the Ministry of Finance reported to the Prime Minister to continue reducing VAT and Official Dispatch No. 11239/BTC-CST dated October 13, 2023 on asking for opinions on VAT reduction 2 % in the first 6 months of 2024, tax reduction except for some groups of goods and services: telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, products metal production and manufacture of fabricated metal products, mining (excluding coal mining), coke production, refined petroleum, chemical and chemical products production, commodity products and services subject to special consumption tax.

On November 3, 2023, the Government issued Resolution 182/NQ-CP on the National Assembly’s Resolution project on VAT reduction. On November 29, 2023, the National Assembly finalized a 2% VAT reduction with the application period from January 1, 2024 to June 30, 2024. Assign the National Assembly Standing Committee to consider and decide on continuing to reduce VAT after June 30, 2024 if the economic situation, businesses and people are still difficult, and report to the National Assembly at the upcoming session.

Policy of VAT reduction by 2% in 2024 in Vietnam

Consequences of the Covid-19 pandemic

The Covid-19 pandemic has caused severe and lasting consequences, affecting all aspects of life, economy, and society, along with climate change, natural disasters, storms, and floods that have made the our country’s socio-economy faces many great difficulties and challenges severely with most sectors being seriously affected.

Specifically, since the Covid epidemic took place until now, the total value of solutions for exemption, reduction, extension of taxes, fees, charges and land rent (corporate income tax, personal income tax, VAT, special consumption tax, import tax, environmental protection tax, fees, charges and land rent) have amounted to about 700 trillion VND. In 2023, about 196 trillion VND and as of September 2023, about 152.2 trillion VND has been implemented.

However, focusing on implementing financial policy solutions at the same time has had a positive impact in supporting businesses and people to stabilize production and business, people’s lives have returned to normal, creating favorable conditions to promote economic recovery and growth in recent times. In the light of that, the GDP growth rate in 2021 reaches 2.56%, in 2022 it increases by 8.02% and in the first 9 months of 2023 it increases by 4.24%.

However, due to the long period of economic crisis, domestic enterprises are in the process of recovery, so production and business activities continue to face difficulties. According to statistics, in the general 9 months of 2023, export turnover decreased by 8.2% over the same period last year, import turnover decreased by 13.8%, state budget revenue is estimated to reach 1,223.8 trillion VND, equal to 75.5% of the year’s estimate.

It is forecast that the world situation will continue to become complicated and unpredictable.

According to the June 2023 “Global Economic Outlook” Report of the World Bank (WB) and the June 2023 Economic Outlook Report of the Organization for Economic Cooperation and Development (OECD), both commented that The global economy remains precarious, with persistent inflation amid serious risks despite improvements in the first months of 2023.

Domestically, although many industries and fields continue to recover and have positive prospects; Many policies and solutions to remove difficulties and obstacles have been effective; But the difficulties and challenges outweigh the opportunities and advantages. Aggregate domestic consumption demand is considered an important driving force to promote economic growth. When export activities decline, increasing total domestic consumer demand will be an important measure to help consume goods for manufacturing enterprises and support growth recovery.

Therefore, it is necessary to continue to have financial policy solutions to promote aggregate domestic consumption demand.

The necessity of economic recovery and development policies

In 2022, the National Assembly issued Resolution 43/2022/QH15 dated January 11, 2022 on fiscal and monetary policies to support the socio-economic recovery and development program, which proposed solutions 2% VAT reduction for some groups of goods and services subject to 10% VAT rate from February 1, 2022 to December 31, 2022.

In 2023, facing the difficulties of the economy, the National Assembly continues to implement the VAT reduction policy according to Resolution 43/2022/QH15 from July 1, 2023 to December 31, 2023 in Resolution 101/ 2023/QH15 dated June 24, 2023 of the National Assembly on the 5th Session, 15th National Assembly.

From there, it shows that solutions to reduce VAT along with other tax, fee and charge solutions are creating great conditions to help businesses reduce production costs, increase profits, and increase the ability to stimulate demand.

After 3 months of implementation (July, August and September 2023), the VAT reduction policy according to Resolution 101/2023/QH15 has supported businesses and people with a total of about 11.7 trillion VND, having contributing to reducing the cost of goods and services, thereby promoting production and business and creating more jobs for workers, contributing to stimulating consumer demand and promoting production and business development.

The implementation of policies to exempt, reduce, and extend taxes, fees, charges, and land rent, including the VAT reduction policy according to Resolution 101/2023/QH15, has contributed to economic growth, including GDP in the November 2023 quarter and the third quarter of 2023 is higher than the first quarter of 2023 (the first quarter increased by 3.28%, the second quarter increased by 4.05%, the third quarter increased by 5.33%).

In fact, since July 2023, the index of total retail sales of consumer goods and services has increased by 7.1%, in August by 7.6% and in September by 7.5% (dot ending the decline of this index since January 2023 compared to the same period in 2022 increased by 20%; February decreased to 13.2%; March was 13.4%; April and May decreased to 11.5%; in June decreased to 6.5%).

To promptly respond to developments in the socio-economic situation, and at the same time consider and calculate in accordance with actual conditions, it is necessary to drastically and effectively deploy support solutions on taxes, fees and charges. fees and land rent issued in 2023 and research and propose a number of solutions to reduce taxes, fees and charges for 2024 such as:

• Continue to consider reducing VAT by 2% and consider reducing the environmental protection tax on gasoline and oil as applied in 2023;
• Continue to review and reduce export and import tax rates to support domestic production and business;
• Reduce the collection of some fees and charges.

Based on the assessment of the results achieved by the 2% VAT reduction solution according to Resolution 101/2023/QH15, the Ministry of Finance believes that further VAT reduction for 2024 is necessary at the present time.

Clients who need advice on value added tax, please contact Viet An Law Firm for the best support.