2% VAT Reduction for All Goods and Services in 2023

The Ministry of Finance drafted a resolution for the National Assembly regarding a 2% VAT reduction (to 8%) in 2023 for all goods and services.

The Government agreed with the Ministry of Finance (MoF)’s proposal on a plan to reduce taxes, fees and charges for 2023, which suggested a 2% reduction in the value-added tax (VAT) on goods and services subject to a 10% VAT

Tax discount to ease hardships for businesses and stimulate consumption

On April 17, the Government Office issued Official Letter 2614/VPCP-KTTH to the Minister of Finance conveying the opinion of Deputy Prime Minister Le Minh Khai on tax, fee and charge exemption and reduction plan for 2023. Accordingly, the Deputy Prime Minister agreed in principle that the Ministry of Finance should report to the Government for submission to the National Assembly and its Standing Committee for consideration and approval of making and issuing a resolution of the National Assembly on VAT reduction according to the simplified order and procedures specified in Clause 1, Article 146 of the Law on Promulgation of Legal Documents.

With regard to the continued fee and charge reduction, the Ministry of Finance will actively prepare documents to this effect, including a report to the Prime Minister for the decision on the application of simplified order and procedures to circulars of the Ministry of Finance.

Previously, on April 14, 2023, the ministry sent a document to the Prime Minister on the tax, fee and charge exemption and reduction plan for 2023. It proposed a 2% VAT reduction for all goods and services subject to the universal VAT rate of 10% (to 8%) in 2023. For business entities (including business households and individuals) that are subject to VAT on revenue, a 20% reduction is applied to invoices of goods and services levied the 10% VAT.

The VAT reduction for each type of goods and services is uniformly applied at the stages of import, production, processing and commercial trading. The reduction is scheduled to last till December 31, 2023.

According to the Ministry of Finance, this move is aimed to stimulate consumption to support the current economic context, thus helping manufacturing and activities recover more quickly and develop more rapidly. This will in turn increase fiscal revenue and boost the economy.

Budget revenue may fall by VND35 trillion

If this plan is approved, the State budget revenue may drop VND5.8 trillion a month and up to VND35 trillion in the last six months of the year.

To overcome and offset impacts on state budget revenue in the short term and well manage budget revenue and spending estimates, the Ministry of Finance will coordinate with relevant ministries, branches and localities to focus on directing the effective implementation of tax laws. Besides, it will continue to reform and modernize the tax system and simplify tax administrative procedures; and drastically manage state budget revenue, with a focus on the timely and effective application of solutions to oversee budget revenue, combat revenue loss, and prevent transfer pricing and tax evasion. To submit it to the National Assembly at its 5th meeting session, the ministry will submit to the Government for permission to draft a resolution of the National Assembly on VAT reduction according to the simplified order and procedures specified in Clause 1, Article 146 of the Law on Promulgation of Legal Documents. The resolution is expected to be passed at this session of the National Assembly.

Hien Nam (Vietnam Business Forum)