To the frequent traveler, Vietnam may be associated with weaving through Hanoi's bustling streets, cruising in a colorful basket boat in Hoi An, or simply enjoying the mesmerizing beauty of Ha Long Bay. However, beneath the seemingly idyllic surface, there’s a simmering pressure experienced by local businesses after a few challenging economic years.
Vietnam’s economic slowdown has largely been attributed to global headwinds and internal constraints. One of the most significant reasons being a weaker domestic demand and a decline in export demand. In an attempt to lessen some of the burdens of businesses in Vietnam and to improve some of the consumer’s purchasing power, a 2% VAT reduction has been approved and implemented from July 2023 to December 2023.
Fortunately, with the right guide by your side, navigating the new landscape doesn’t have to be a bumpy ride. Here’s what you need to know about the upcoming changes to VAT in Vietnam, including lowered rates and updates to hotel and accommodation VAT treatment.
Vietnam has reduced its VAT rate from 10% to 8% from July 2023 to December 2023. After dealing with an economic slowdown, this 2% reduction aims to bolster stimulus measures to support consumption and business growth. Goods and services currently subject to the VAT rate of 10% will benefit from a reduced VAT rate of 8%.
Products and services excluded from receiving the 2% reduction include the following three groups.
One of the fundamental reasons behind the reduced VAT rate is to give Vietnam a much-needed economic boost. Here’s how it plans to do so:
Although the reduced VAT rate is designed and implemented to help boost business growth, it can quickly become an administrative challenge if not properly managed. The VAT rate change for most goods and services requires businesses to closely evaluate and monitor their prices and make the needed adjustments when charging VAT. Regarding the reclaim opportunity, companies must also consider the VAT rate change within the recordkeeping and submission process to ensure that their invoices reflect the current rate and comply with the latest regulations.
Fortunately, you can reap the rewards of a reduced VAT rate without allowing the challenges of maximizing and administering VAT to hinder the process.
At VAT IT, we provide one centralized solution for all your VAT needs. Whether it's staying compliant, maximizing your return yield, lessening the administrative burden, or navigating the Vietnamese VAT landscape - we’ve got you covered.
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