VIETNAM TAX UPDATE 2025: LATEST 2% VAT REDUCTION POLICY – WHAT BUSINESSES MUST KNOW BEFORE 2026

In a significant move to continue economic recovery efforts, the Vietnamese Government has proposed extending the 2% VAT reduction policy until December 31, 2026. This is the latest VIETNAM TAX UPDATE 2025 that businesses and individuals should pay attention to.

LATEST 2% VAT REDUCTION POLICY: WHAT BUSINESSES MUST KNOW BEFORE 2026

1. VAT REDUCTION UNDER DECREE 180/2024/NĐ-CP

From January 1, 2025, to June 30, 2025, the VAT rate will be reduced from 10% to 8% for most goods and services currently subject to the 10% rate. However, some sectors are excluded from this reduction, including:

• Telecommunications, banking & finance, insurance

• Securities, real estate, metals, minerals (excluding coal)

• Refined petroleum, chemical products

• Items subject to special consumption tax

• Selected information technology products.

2. SCOPE OF APPLICATION

The 8% VAT will be consistently applied across the following stages:

• Import, production, processing, and trading

• Coal mined and sold (including cases processed through a closed screening and classification system)

3. PROCEDURES FOR VAT REDUCTION

Depending on your tax calculation method, the procedure for applying the reduced VAT rate differs:

🔹 For VAT credit method (input-output):

• On VAT invoices, show 8% tax rate, VAT amount, and total payment

• Output tax declared at 8%, and input VAT can be credited accordingly

🔹 For direct tax method (on revenue):

• “Amount” column on sales invoice: original price before discount

• “Total” line: record price after reducing 20% of the VAT rate applied

• Add a note:“Reduced by ... (amount) equivalent to 20% of the VAT calculation rate under Resolution 174/2024/QH15.”

4. WHAT BUSINESSES NEED TO DO RIGHT NOW

To stay compliant and benefit from the VAT reduction, businesses should take these steps immediately:

✅ Verify legal business status

• Do you have a valid tax code and bank account?

• Are your business activities eligible for the 2% VAT reduction?

✅ Update business license if needed

• Add or adjust business lines to meet the new policy criteria

✅ Review accounting and invoicing systems

• Ensure systems can differentiate between 8% and 10% VAT rates

✅ Comply with tax declaration and payment obligations

• Follow updates from the General Department of Taxation

• Avoid declaration mistakes that could lead to back taxes

✅ Register for support from legal–accounting services

• Contact Vinex to review your business scope, license, and accounting software to ensure you're ready

The proposed 2% VAT reduction extension until the end of 2026 is a strategic move to support business recovery and growth. However, to fully benefit from this VIETNAM TAX UPDATE 2025, companies must proactively review their legal documents, update their accounting systems, and comply with all tax procedures. Don’t let tax changes become a risk—turn them into an opportunity to streamline and strengthen your business operations now.

Source: www.qdnd.vn