Implementation of the VAT Reduction Policy

On 17 June 2025, the National Assembly of Vietnam officially passed Resolution 204/2025/QH15 on Value Added Tax (VAT) reduction (Resolution 204), extending and broadening the scope of the temporary VAT reduction policy aimed at stimulating domestic consumption and supporting businesses. Pursuant to this, on 30 June 2025, the Government of Vietnam issued Decree 174/2025/ND-CP (Decree 174), specifying this VAT reduction policy. These regulations took effect on 1 July 2025 and will remain in force until 31 December 2026, aligning with the effective date of the Law on Value Added Tax No. 48/2024/QH15 (the Law on VAT). 

Accordingly, the standard VAT rate is reduced by 2%, from 10% to 8%, for groups of goods and services listed in Article 9.3 of the new Law on VAT. However, there are sectors that are not subject to this incentive, including telecommunications, financial, banking, securities, insurance services, real estate trading, metal and mining products (excluding coal), and goods and services subject to special consumption tax (excluding gasoline). It is also important to note that goods and services not being subject to VAT under the current regulation will not benefit from this reduction.

The VAT reduction is designed to encourage economic activity by lowering consumer costs and business expenses. While the measure may result in a temporary reduction in state budget revenues, it is expected to have positive effects that could generate increased revenues from other taxes and economic growth.

Additionally, the Minister of Finance emphasised that the Government would strengthen coordination across ministries, central agencies, and local authorities to implement proactive fiscal policies. The goal is to remove difficulties for businesses, with the ambition of achieving GDP growth of at least 8% in 2025 and possibly higher under favourable conditions, thereby ensuring fiscal sustainability for the state.

Click here to download: Legal Alert (EN) - Implementation of the VAT Reduction Policy - August 2025.pdf

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