Vietnam’s government has implemented a value-added tax (VAT) cut on goods and services, effective today, July 1, until December 31, 2024. The government reduced the VAT rate from 10 percent to 8 percent. However, this reduction excludes certain sectors including telecommunications, finance, banking, security, insurance, real estate, certain chemicals, and goods subject to special consumption tax. Vietnam’s government, however, will implement the VAT cut to imports, exports, production and trade activities.
Fees reduced
In addition to the VAT cut, Vietnam’s finance ministry issued a circular reducing various fees and charges until year-end to support businesses and stimulate business activity across the country.
The circular reveals a 50 percent decrease in fees for:
- Establishing and operating banks and non-bank credit institutions.
- Issuing citizen identification cards.
- Registration of intellectual property protection.
- Appraisal and approval of fire prevention and fighting designs.
- Use of railway infrastructure, among others.
In addition, Vietnam will reduce fees for issuing licenses and permits for civil aviation operations, entry and exit permits for restricted airport areas, and customs fees for foreign flights landing in Vietnam by 10 to 30 percent.
Meanwhile, the country’s securities industry will see a 50 percent reduction in most fees and charges, except for licensing fees of securities professionals and supervision fees for securities activities.
This decision marks the 4th time the ministry has imposed fee reductions of 10-50 percent, which is estimated to have a budgetary impact of about VND700 billion ($27.5 million).
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VAT cut’s impact on Vietnam’s economy
Vietnam’s economic growth slowed to 3.3 percent in Q1 of 2023 from 5.9 percent in Q4 of 2022.
In light of the COVID-19 pandemic, exports to the rest of the world significantly declined, which was a major factor that impacted growth. Therefore, in February 2022, Vietnam started cutting VAT in an effort to boost internal consumption to balance the decline in growth.
On November 29, 2023, Vietnam approved a government plan to extend the existing 2 percent VAT cut until June 30, 2024. Amid the COVID-19 pandemic and global uncertainties, Vietnam’s economy has now stabilized.
Economic growth hit over 5 percent in Q3 of 2023, making Vietnam one of the fastest-growing economies. However, this growth was below an earlier government target of 6.5 percent and slower than a low-base expansion of 8.02 percent last year.
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