Vietnam Government Extends 2% VAT Reduction on Specific Goods and Services till End of 2026

Vietnam’s National Assembly recently approved the extension of the 2 percent reduction on value-added tax (VAT) until December 31, 2026. Goods and services subject to the 10 percent VAT rate will continue to enjoy the 8 percent rate until the end of next year.

On June 17, 2025, Vietnam’s National Assembly approved Resolution No. 204/2025/QH15, officially extending the reduced VAT rate to December 31, 2026. Following the resolution’s approval, the government released Decree No. 174/2025/ND-CP, dated June 30, 2025, which provides specific guidelines on the VAT reduction plan. The decree is effective from July 1, 2025, to December 31, 2026.

Previously, the 15^th National Assembly passed the Resolution of the 8th Session, which determined to continue to reduce the value-added tax (VAT) for groups of goods and services specified in Point a, Section 1.1, Clause 1, Article 3 of Resolution No. 43/2022/QH15 on fiscal and monetary policies to support the Socio-Economic Recovery and Development Program. Accordingly, the VAT reduction was extended to the end of June 2025.

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Understanding the scope of the 2-percent VAT reduction

Under the new resolution, VAT reduction will apply uniformly across all stages – importation, manufacturing, processing, and trading – for eligible goods and services outlined in Point 3, Article 9 of Law No. 48/2024/QH15 on Value Added Tax, excluding:

• Telecommunications;
• Financial and banking services;
• Securities;
• Insurance;
• Real estate business;
• Metal production and production of prefabricated metal products;
• Mining (excluding coal mining); and
• Goods and services subject to special consumption tax (excluding gasoline).

The latest resolution expands the tax reduction subjects compared to the provisions in previous extensions. Accordingly, transportation, logistics, goods, and information technology services are now subject to the VAT reduction.

Tax reporting and compliance

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Companies using the deduction method for VAT declaration must indicate “8 percent” as the VAT rate on invoices for goods and services eligible for the reduced rate. In cases where goods or services are subject to different VAT rates, each rate must be clearly stated on the invoice.

If a seller issues VAT invoices for eligible goods or services at the normal VAT rate without applying the 2 percent reduction, both the seller and the buyer are responsible for adhering to invoicing regulations and adjusting output VAT and input VAT accordingly.

Goods and services eligible for the 2 percent VAT reduction must be declared on Form 01 prescribed in the draft Decree, which must accompany VAT returns upon submission.

Rationale behind the tax cut

Since its implementation on January 1, 2024, the 2 percent VAT cut has proven instrumental in alleviating input costs for businesses across various sectors in Vietnam. It has stimulated domestic consumption, bolstered economic growth, and supported macro-economic stability amid ongoing global uncertainties, including slow recovery in major trading partner economies and disruptions in global supply chains.

According to market watchers, the VAT reduction has directly contributed to stabilizing production and business activities, which in turn has led to job creation and improved living standards. By lowering production costs, businesses have been able to offer competitive prices, thereby further stimulating consumer spending. This policy has been particularly beneficial for sectors such as retail, automotive, and manufacturing.

Financial implications

The latest tax cut is estimated to reduce the state budget’s revenue by about VND 26.1 trillion (US$1.03 billion) when being implemented. Therefore, in the resolution, the National Assembly assigned the Government to be responsible for ensuring revenue and balancing the state budget in 2025.

Strategic considerations for businesses

For businesses in Vietnam, especially those in consumer-facing industries, the extended VAT reduction presents opportunities for strategic pricing and cost management. It is crucial to review pricing structures, supply chain dynamics, and financial planning strategies to maximize the benefits of this fiscal policy measure.

It is advisable for businesses to continuously monitor Vietnam legislative developments and plan for related tax reporting and compliance requirements.

Should you have any questions or require further clarification on how Vietnam’s tax policies may impact your business, please do not hesitate to contact us at vietnam@dezshira.com. We remain committed to assisting you in navigating the complexities of Vietnam’s fiscal policy and optimizing your tax strategy.

This article was originally published June 13, 2024. It was last updated June 19, 2025.

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