Finance ministry proposes 2% VAT reduction for first half of 2025

The Ministry of Finance (MoF) has proposed to build a National Assembly Resolution on reducing the VAT rate by 2% in the first six months of 2025 to support people and businesses as well as stimulate the economy.

Under the proposal, the 2% reduction will be applicable to products and services subject to a 10% tax rate, with exceptions on three groups of products and services: Group 1: telecommunications, financial activities, banking, securities, insurance, real estate business, metals and prefabricated products, mining products (excluding coal mining), coke coal, refined petroleum, and chemical products; Group 2: goods and services subject to special consumption taxes; and Group 3: information technology under information technology laws.

If the policy is applied in the first half of 2025, it would result in a deficit of an estimated VND25 trillion (over $1 billion) in the State budget.

In 2022-2024 period, the National Assembly decided to cut the VAT rate by 2% for products and services subject to a 10% tax rate. The policy, together with other solutions, has supported enterprises to reduce production cost and increase profits. It also proved effective in stimulating demand.

In 2022 and 2023, the implementation of the VAT tax reduction contributed to boosting domestic consumption demand, resulting in a year-on-year increase of 19.8% and 9.8%, respectively, in total retail sales of consumer goods and services.