Vietnam to impose value-added tax waiver from February

The value added tax (VAT) will be reduced by 2 percentage points to 8 percent starting this February as part of measures helping taxpayers tackle difficulties.

Customers look at clothes at a mall in Ho Chi Minh City, November 26, 2021. Photo by VnExpress/Nhat Thuc

The policy of reducing VAT from 10% to 8%, or reducing VAT by 2%, was promulgated by the National Assembly on January 11, 2022 through Resolution 43/2022/QH15 on fiscal and monetary policies to support the Program on socio-economic recovery and development with the approval rate of 424/426 participants.

The Government assesses that economic growth in both years 2020-2021 is very low in recent years, production and business activities face many difficulties, especially in 2021 when many fields are severely affected.

“The epidemic not only affects in the short term, but also in the medium and long term, the 5-year and 10-year growth targets. If there are no solutions to support the economy, the average growth rate forecast for the period 2021 – 2025 will only reach 5.4%/year, lower than the set target.

Vietnam will cut its value-added tax by 2 percentage points to 8 percent starting Feb. 1 to boost recovery after two years of Covid-19 impacts.

The tax break will last until the end of other year, according to a government decree issued Friday.

However, the VAT rate reduction from 10% to 8%, but not applied to all items, caused businesses to face a lot of confusion in the early days of application.

Some sectors that will not be eligible for the tax break are communications, information and technology, finance, banking, securities, insurance and real estate, which have not been affected by the pandemic.

In addition, Article 4 of Decree 15 also stipulates that business establishments must make separate invoices for goods and services eligible for value added tax reduction. In case a business establishment does not issue a separate invoice for goods and services eligible for value-added tax reduction, it is not entitled to a reduction of value-added tax. This invisibly gave the accounting department of enterprises a large amount of work at the beginning of the year.

Effect of VAT reduction to 8%: Uniqlo, Muji, Grab… all announced the discount, Highlands Coffee has not seen any action!

Uniqlo and Muji have just announced a 2 percentage point reduction in VAT on each product, applicable to both online and direct purchases. This move complies with the provisions of Resolution 43 on reducing VAT rates, in order to restore and develop socio-economics.

Muji also announced automatic discount on the system for all products to adjust the selling price according to the new VAT policy.

Car-hailing and food-delivering apps have started to apply VAT reduction policies

Some ride-hailing and food delivery applications such as Grab and Baemin said they would apply a new VAT rate to services after the tax reduction policy takes effect.

As soon as the VAT reduction policies took effect, a number of ride-hailing applications announced the application of the new tax policy.

Grab announces the time to apply the reduction of VAT rate according to the provisions of Resolution 43 and Decree 15 will officially take effect for GrabCar, GrabCar Protect, GrabCar Plus, GrabCar Economy, GrabCar Rent, GrabBike services from February 1.

However, due to the application period taking place during the 2022 Lunar New Year holiday, Grab announced on the homepage of this application that it will start updating the change of VAT rates applied under Decree 15 and Resolution 43 from February 15th.

Meanwhile, delivery services such as GrabExpress, GrabFood, GrabMart, GrabKitchen… currently have not applied the VAT reduction policy. Grab said it was waiting for official instructions from the management agency on the application of the above policies.

On the other hand, Baemin will apply a new policy for services from February 1, when Decree 15 of the Government takes effect. Baemin will deduct 8% VAT on the entire shipping revenue of his food delivery service instead of 10% as before.

In fact, separating in the same business line of 10% and 8% taxable items is not easy, even for experienced accountants.

The first working day in 2022 of accountants became especially busy with the question of 8% or 10%, because if not carefully applied the wrong tax rate, the company may be questioned, sued or complained by customers. fined by the tax authority.

Walking around tax and accounting groups, instead of celebrating the beginning of spring like every year, questions related to the application of new tax rates became common. “My side sells cameras but the appendix says it’s a television camera, what should I do?”, “Does mechanical processing and metal coating make 8% or 10%?” “Goods are still subject to 10% VAT but the accompanying shipping service is taxed at 8%, how to issue an invoice?”

While waiting for the tax authority to have more detailed instructions in specific cases, it is suggested that for unclear cases, the tax rate of 10% will be applied, then when there are instructions, if necessary. An adjustment invoice will be issued.

The tax break is set to reduce government revenue by VND49.4 trillion ($2.18 billion).

The reduced VAT is part of the VND350 trillion stimulus package that lawmakers approved earlier this month to revive the economy.

The proposed 3 percent tax waivers and deferrals for businesses and 2 percent cut in value-added tax would help encourage consumption, and this could help the country bounce back from the “massive shock” of the third quarter last year, said Dorsati Madani, senior economist, World Bank Vietnam.

The bank forecasts Vietnam’s GDP growth this year at 5.5 percent, against the country’s target of 6-6.5 percent.

The urgent dispatch is to implement the Government’s Decree No. 15/2022/ND-CP, issued on January 28, which details the execution of the tax exemption and reduction policy. This policy is being carried out under the National Assembly’s Resolution No. 43/2022/QH15, released on January 11, on fiscal and monetary policies supporting the socio-economic recovery and development programme./.

According to the assessment from the management agency, the above regulation will have the impact of reducing budget revenue in 2022 by about 51,400 billion VND. In which, the VAT reduction policy is VND 49,400 billion and does not include CIT with the cost of supporting and sponsoring Covid-19 prevention and control activities of VND 2,000 billion.

However, this tax amount will help businesses, organizations and people overcome difficulties caused by the impact of the pandemic, thereby recovering and developing production and business. In addition, the policy also has the effect of stimulating consumption and investment, thereby contributing to the recovery of the economy after the epidemic and the implementation of social security.

Credit: Quynh Trang (VnExpress)

 

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