In 2021, the situation in Vietnam regarding the COVID-19 outbreak grew more complex and negatively affected trade and production activities across the country, resulting in slow economic growth in 2021. To support the socio-economic development recovery program, an extraordinary session of the National Assembly of Vietnam on 11 January 2022 issued and adopted Resolution 43 on fiscal and monetary policies.
Among the policies, the tax exemption and reduction policy included a 2% reduction in value-added tax (VAT) for 2022, applicable to goods and services currently subject to 10% VAT.
This article provides information on the VAT reduction and the other fiscal policies according to Resolution 43, which will take effect from February 1, this year.
Value-added Tax to be cut to 8% from February 2022
VAT for applicable goods and services will be reduced to 8% in 2022 (down 2% from the current standard rate), but excludes goods and services in the following areas: telecommunications, information technology, finance activities and banking, insurance, stock trading, real estate business, metal production and mining industries (except coal), petroleum coke production, petroleum, chemicals, and commodities and services that are subject to special consumption tax.
Invoicing and calculation methods
Accordingly, when issuing VAT invoices, businesses that are eligible for the VAT reduction and use the deduction method for calculating VAT, are required to write the 8% VAT rate specifically on the invoice. Consequently, the invoice will also be used by other businesses as input invoices, and they will declare the deductible VAT based on the new VAT rate.
Where businesses use the direct method for calculating VAT, they are eligible for 20% reduction of added value of goods/services sold that are subject to VAT. When issuing the sales invoice, businesses are required to write both ‘total amount before reduction’ and ‘20% reduction according to Resolution 43/2022/QH15’ on the invoice.
If there are multiple goods/ services, separate invoices must be issued for items that are eligible for VAT reduction.
Other mentioned support policies
Businesses are now allowed to include expenses aimed at supporting and financing the epidemic prevention and control activities in Vietnam into deductible expenses when calculating income subject to corporate income tax (CIT) in 2022.
The authorities have discussed other support policies such as:
- Interest rate reduction for loans made through commercial banks to support businesses, cooperatives and business households
- Increased financial support to workers with rent in industrial areas, disadvantaged and poor students
- State budget increase for infrastructure development etc, which will be applicable in 2022 and 2023
The Government is responsible for guiding and executing this Resolution and making year-end reports in 2022 and 2023, with a final report in 2024 to the National Assembly.
We advise all our clients to take note of the mentioned changes on the VAT rate and calculations which will take effect from February 1st, 2022, and ensure they remain compliant with the current regulations on invoice preparation and VAT deductions and submissions. We also encourage taxpayers review their accounting software to ensure that the VAT changes will not cause issues prior to 1 February implementation. For more information on these matters of any other compliance provisions relevant for businesses active in Vietnam, please reach out to our experts.
Contact our teams for expert support and further information on managing corporate compliance in Vietnam.
Thao Do, Accounting Director
Matthew Lourey, Managing Partner