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The Vietnamese government has recently approved and issued some policies about extension and reduction of the taxes for 2023, including continuing to apply the policy of 2% reduction in the value-added tax (VAT) on goods and services. The reduction to 8% VAT aims to stimulate economic growth and provide support to businesses.
In a recent development, the value-added tax (VAT) reduction policy has been implemented as per the Resolution No.101/2023/QH15 of the National Assembly and Decree No 44/2023/NĐ-CP, effective from July 1, 2023. This article aims to provide you with an important update on the eligibility criteria and proper implementation of the tax reduction within your business operations.
Summary of the Decree
The Decree No. 44/2023/NĐ-CP regulates the policy of value-added tax reduction in accordance with Resolution No. 101/2023/QH15 of the National Assembly. The value-added tax reduction applies to goods and services that currently have a tax rate of 10%, with some exceptions. The exceptions include industries such as telecommunications, financial activities, banking, securities, insurance, real estate, metals and prefabricated products, mining products (excluding coal mining), coke, oil refined mines, chemical products, and goods subject to excise tax. Information technology goods subject to the law on information technology are also eligible for the tax reduction.
The reduction in value-added tax is applied uniformly at all stages of import, production, processing, business, and trade. Coal products that are mined and sold are eligible for value-added tax reduction, but specific coal products listed in the decree are not eligible for tax reduction at stages other than mining and selling. Corporations and economic groups that implement a closed process before selling coal will also benefit from the tax reduction.
The Decree specifies the value-added tax reduction rates for businesses that calculate taxes by the deduction method and for businesses that calculate taxes based on a percentage of revenue. The implementation procedures are also outlined, including the requirements for issuing invoices and declaring taxes.
The Decree is effective from July 1st, 2023, until December 31st, 2023. Relevant ministries and agencies are responsible for propagating, guiding, inspecting, and supervising the implementation of the tax reduction. In case of difficulties, the Ministry of Finance will provide guidance and resolutions. Additionally, we at Viettonkin Consulting are ready to assist your company in this transition. Contact us now!
Eligibility and VAT Rate
Eligibility on goods and services made before July 1st:
The Decree specifies the value-added tax reduction policy for goods and services that are currently subject to a tax rate of 10%. However, the eligibility for tax reduction varies depending on the industry and the specific goods and services. The industries eligible for tax reduction include telecommunications, financial activities, banking, securities, insurance, real estate, metals and prefabricated products, mining products (excluding coal mining), coke, oil refined mines, and chemical products. Goods subject to excise tax and information technology goods subject to the law on information technology are also eligible.
The specific goods and services eligible for tax reduction are listed in appendices issued with the Decree. It is important to refer to the appendices (Appendix I, Appendix II, and Appendix III) for a detailed list of eligible goods and services.
Goods and services listed in the appendices that are not subject to value-added tax or are subject to a 5% tax rate as per the Value-added Tax Law will not be eligible for the tax reduction. The provisions of the Value-added Tax Law will apply in such cases.
For businesses calculating value-added tax by the deduction method, the tax rate to be applied for eligible goods and services is 8%. The Decree No 44/2023/NĐ-CP specifies that CNSVN and CNTVN are subject to the VAT rate of 8% from July 1, 2023, to December 31, 2023. It is essential to ensure that invoices for selling goods or providing services belonging to eligible categories are issued on time and within the effective period of Resolution No.101/2023/QH15.
The infographic below will help you better understand the processes and regulations of the Decree.
Important Considerations
While the tax reduction policy aims to simplify the VAT calculation process, it is important to note that certain situations may arise that require additional attention. To assist you in understanding these situations, we have provided the following hypothetical scenarios and their corresponding VAT rates:
1. Service provided in June 2023 but accepted, handed over to clients in June 2023 and issued sales invoices in July 2023:
- VAT Rate: 10%
- Explanation: According to regulations, the time of invoice issuance for service provision is the time when the service is completed, regardless of whether money has been collected or not. Issuing invoices in July for services provided in June would be considered incorrect, leading to potential fines. Please refer to the relevant legal basis mentioned in the email for detailed information.
2. The service is provided in June 2023 but handed over to the customer in July 2023 and a sales invoice is issued in July 2023:
- VAT Rate: 8%
- Explanation: Since the service is completed in July, the VAT rate of 8% will be applied in this scenario.
3. The contract was signed before July 1, 2023, with the VAT rate of 10%. Handing over services to customers when completed after July 1, 2023:
- VAT Rate: 8%
- Explanation: If the service is completed and the invoice is issued in July, the reduced VAT rate of 8% will be applicable, regardless of the VAT rate stated in the contract signed before July 1, 2023.
Guidance and Updates
As the Decree 44 has recently been issued, specific guiding documents and official dispatches from tax authorities for various cases have not been released yet. It is important to stay updated with the latest guidance on VAT reduction in 2023. The responsible authorities will provide additional instructions during the application process, ensuring clarity and compliance with the tax reduction policy.
Conclusion
Understanding the eligibility criteria and proper implementation of the VAT reduction policy is crucial for businesses. By following the guidelines outlined in the Resolution No.101/2023/QH15, Decree No 44/2023/NĐ-CP, and the relevant legal basis, you can ensure the correct application of VAT rates for eligible goods and services. Stay informed about any updates and seek clarification from the authorities if needed to streamline the implementation process effectively. Contact us now for further assistance on taxations and subscribe to our newsletter to stay up-to-date on the VAT reduction.
