Banking and real estate services continue to not receive VAT reduction

The Government has just issued a Decree regulating the policy of reducing value-added tax (VAT) according to the previous Resolution of the National Assembly. Accordingly, goods and services will maintain the preferential VAT rate of 8% (ie reduced by 2%) until the end of this year.

According to the government, this tax reduction is a measure to support businesses and people. Because the economy still faces many challenges due to unpredictable developments in the world.

However, some products continue to not be in the group of tax incentives, including telecommunications; finance – banking; securities, insurance, real estate business; metals and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemicals.

At the same time, goods and services subject to special consumption tax and information technology are also not eligible for tax reduction.

Previously, the Vietnam Federation of Commerce and Industry (VCCI) proposed a 2% reduction in VAT on all goods and services. In fact, many businesses have encountered difficulties in applying this policy, mainly due to the classification of which goods are subject to 10% tax and which are reduced to 8%.

VAT reduction for each type of goods and services is applied uniformly at all stages of import, production, processing, and commercial business. For sold coal products, they are subject to VAT reduction. Corporations and groups that carry out a closed process to sell are also subject to tax reduction on sold mined coal.

In case of goods and services that are not subject to VAT or subject to 5% tax, the regulations shall apply and no reduction shall be allowed.

Business establishments that calculate value-added tax using the deduction method when selling goods and services that apply different tax rates must clearly state the tax rate of each type on the VAT invoice.

Business establishments (business households, business individuals) calculating tax according to the percentage method on revenue will receive a 20% reduction on the percentage to calculate tax when issuing invoices.

Unlike other taxes, VAT has the important characteristic that the tax burden is shared between businesses and consumers, so when reduced, both groups will benefit.

Extending the 2% tax reduction period for another 6 months, according to previous calculations by the Government, is expected to reduce budget revenue in the second half of this year by about 24,000 billion VND (equivalent to 4,000 billion VND a month). Overall, the budget is estimated to decrease by nearly 47,500 billion VND for the whole year.