Value-Added Tax (VAT)

1.Purpose and Applicability Scope

Decree No. 180/2024/ND-CP, issued by the Government on December 31, 2024, regulates the reduction of VAT on certain goods and services from January 1, 2025, to June 30, 2025.

Accordingly, the Government has decided to reduce the Value-added tax (VAT) rate from 10% to 8% for certain types of goods and services. This tax reduction applies to businesses calculating tax using the credit method as well as those calculating tax based on a percentage of revenue.

2.Groups of Goods and Services excluded for VAT Reduction

According to Decree No. 180/2024/ND-CP on the reduction of value-added tax (VAT) for goods and services currently subject to the 10% tax rate, the following groups of goods and services are excluded from this reduction:

  • Telecommunications: Telecommunications services such as internet and telephone services.
  • Financial, Banking, Securities, and Insurance Services: Activities related to financial, banking, securities, and insurance.
  • Real Estate Business: Services related to the sale and lease of real estate.
  • Metals and Fabricated Metal Products: Metal products and those processed from metals.
  • Mining Products (excluding coal mining): Mining products other than coal, such as petroleum, coke, and chemicals.
  • Products and Services Subject to Special Consumption Tax: Items such as alcohol, beer, tobacco, luxury automobiles, etc., as detailed in Appendix II attached to Decree No. 180/2024/ND-CP.
  • Information Technology: Goods and services related to information technology, as detailed in Appendix III attached to Decree No. 180/2024/ND-CP.

Additionally, goods and services that are exempt from VAT or already subject to a 5% VAT rate under the provisions of the Law on Value-Added Tax are not eligible for this tax reduction.

  1. Specific Provisions on VAT Reduction:
  • Tax Reduction for Enterprises Using the Credit Method:
    Enterprises applying the credit method for VAT calculation (i.e., large enterprises or organizations capable of deducting input VAT) are entitled to a reduced VAT rate of 8% for goods and services within the scope specified in Decree No. 180/2024/ND-CP.
  • Tax Reduction for Enterprises Calculating VAT Based on a Percentage of Revenue Method

Small enterprises establishments, including enterprise households and individual enterprise entities calculating VAT based on a percentage of revenue, shall be entitled to a 20% reduction in the applicable percentage rate used for VAT calculation when issuing invoices for goods and services eligible for VAT reduction.

  1. Procedures for Issuing Invoices with Reduced VAT Rates:

As stipulated in Clause 3, Article 1 of Decree No. 180/2024/ND-CP, the procedures for implementing the VAT reduction are as follows:

  • For Enterprises Using the Credit Method:
    When issuing invoices for goods or services eligible for VAT reduction, the “VAT rate” line on the invoice must state “8%” instead of the previous 10%. Additionally, the invoice must clearly specify the VAT amount and the total amount payable by the buyer.
    (As prescribed in Point a, Clause 2, Article 1 of Decree No. 180/2024/ND-CP)
  • For Enterprises Calculating VAT Based on a Percentage of Revenue Method:
    When issuing invoices, these enterprises must clearly indicate the pre-reduction amount for goods and services and explicitly note on the invoice the application of a 20% reduction in the percentage rate used to calculate VAT. The invoice should also specify the amount reduced, equivalent to the 20% reduction in the VAT percentage rate, as per the provisions of Resolution No. 174/2024/QH15.
    (As prescribed in Point b, Clause 2, Article 1 of Decree No. 180/2024/ND-CP)
  1. Regulations on Adjusting Invoices Issued with Incorrect VAT Rates:

In cases where enterprises have issued invoices and declared VAT based on the previous, unreduced rate (10%), adjustments must be made in accordance with regulations on invoices and documents. Specifically:

    • The seller must correct the invoice and adjust the output VAT declaration.
    • The buyer must adjust the input VAT if applicable.

These adjustments are necessary to ensure compliance with the VAT reduction policy and maintain accurate tax records.

  1. VAT Declaration:

Enterprises are required to declare VAT for goods and services eligible for the reduced VAT rate using Form No. 01 provided in Annex IV of Decree No. 180/2024/ND-CP. This declaration must be submitted alongside the periodic VAT return to ensure accuracy and compliance with legal requirements.

  1. Key Considerations:

When enterprises sell goods or services with different VAT rates (e.g., an invoice includes both items subject to VAT reduction and items not eligible for reduction), it is essential to clearly specify the VAT rate for each type of good or service on the invoice to avoid confusion. (As stipulated in Clause 3, Article 1 of Decree No. 180/2024/ND-CP.)

Enterprises must strictly adhere to the procedures for issuing invoices and declaring taxes as prescribed in this Decree to prevent irregularities or tax violations.

  1. Conclusion:

Decree No. 180/2024/ND-CP is a significant measure aimed at supporting the economy during the post-COVID-19 recovery phase. Its objective is to alleviate the tax burden on enterprises and household enterprises while facilitating production and consumption activities. Enterprises should fully understand the regulations on tax reduction and strictly comply with the procedures for invoicing and tax declaration to ensure the VAT reduction is implemented correctly and transparently.