Vietnam Officially Approved The Proposal To Reduce VAT From 10% To 8% In 2022

On the afternoon of January 11, 2022, the National Assembly of Vietnam finally agreed to reduce the value-added tax rate (VAT) by 2% in 2022, applicable to groups of goods and services currently subject to a 10% VAT tax rate

 

The reduction of VAT tax rate has long been yearned for by businesses across Vietnam territory following the Fiscal and monetary policy scheme to support the program of socio-economic recovery and development recently published. Finally, the National Assembly of Vietnam has approved the proposal to reduce the VAT tax rate, among other key changes.


The reduction of the 2% value-added tax rate is applicable to groups of goods and services currently applying the value-added tax rate of 10% (reduced to 8%)


However, the reduction will not include some groups of goods and services such as Telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metal production, and production of prefabricated metal products, mining industry minerals (excluding coal mining), production of coke, refined petroleum, production of chemicals and chemical products, goods and services subject to excise tax.


In particular, according to the Resolution, to support the overall fight against the Covid-19 pandemic, if businesses conduct expenditures to support and sponsor the COVID-19 prevention and control activities in Vietnam for the tax period 2022, then such expenses will be allowed to be included in deductible reasonable expenses when determining taxable income.


This is part of the Resolution on fiscal and monetary policies to support the Socio-economic Recovery and Development Program.


The Resolution is expected to take effect on February 1, 2022.


Other supporting policies


In addition to reducing VAT by 2%, the National Assembly also agreed to increase development investment spending from the state budget to a maximum of 176,000 billion VND, concentrated in the two years 2022 and 2023.


Accordingly, the interest rate support for businesses, cooperatives, and business households (2%/year) is up to 40,000 billion VND through the system of commercial banks for several important sectors and fields, enterprises, cooperatives, and business households that have the ability to repay debts and recover; loans to renovate old apartments, build social houses, houses for workers to rent and rent to buy.


Regarding social security, labour, and employment, up to 5,000 billion VND is granted to the Social Policy Bank, including interest compensation and a management fee of 2,000 billion VND to implement preferential lending policy under the Program; maximum interest rate support of 3,000 billion VND for borrowers under policy credit programs with current lending interest rates above 6%/year.


Regarding health, a maximum of 14 trillion VND is allocated to invest in building, renovating, upgrading, and modernizing the basic health system, preventive medicine, regional disease control centres, improving epidemic prevention and control capacity of hospitals and central hospitals in association with training and improving the quality of human resources in the health sector, domestic production of vaccines and Covid-19 treatment drugs.


Regarding infrastructure development investment, an additional maximum of 113.55 trillion VND of investment capital is allocated from the state budget for infrastructure development including traffic, information technology, digital transformation, prevention of erosion of riverbanks and coasts, ensuring the safety of water reservoirs, adapting to climate change, and overcoming consequences of natural disasters.


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