Accounting and tax knowledge

Summary of important policies on reducing VAT to 8% from July 1, 2023 to December 31, 2023 according to Decree 44/2023/ND-CP.

Giảm thuế GTGT xuống còn 8% từ ngày 1/7/2023: Kế toán, thuế cần biết

The VAT rate was officially reduced to 8% from July 1, 2023. (Source: TVPL)

Goods and services that are and are not eligible for a reduction in VAT to 8% from July 1, 2023.

Businesses that calculate VAT using the deduction method are subject to a VAT rate of 8% for the following goods and services:

(1) Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products. Details in Appendix I issued with Decree 44/2023/ND-CP.

Download: FULL TEXT OF APPENDIX I

(2) Products, goods and services subject to special consumption tax. Details in Appendix II issued with Decree 44/2023/ND-CP.

Download: FULL TEXT OF APPENDIX II

(3) Information technology according to the law on information technology. Details in Appendix III issued with Decree 44/2023/ND-CP.

Download: FULL TEXT OF APPENDIX III

The reduction in VAT for each of the above-mentioned goods and services is applied uniformly at the import, production, processing, and commercial trading stages. For coal sold after extraction (including coal that has been mined and then screened and classified through a closed-loop process before being sold), the VAT reduction applies. Coal listed in Appendix I of Decree 44/2023/ND-CP is not eligible for VAT reduction at any stage other than the extraction and sale stage.

Corporations and economic groups that implement a closed-loop production process are also eligible for VAT reduction on the sale of mined coal.

In cases where goods and services listed in Appendices I, II, and III of Decree 44/2023/ND-CP are exempt from VAT or subject to a 5% VAT rate as stipulated in the Value Added Tax Law, the provisions of the Value Added Tax Law shall apply, and no VAT reduction shall be granted.

VAT reduction rates for households and individual businesses that calculate VAT as a percentage of revenue, according to Decree 44/2023.

Businesses (including household businesses and individual businesses) that calculate VAT using the percentage-based method on revenue are entitled to a 20% reduction in the percentage rate used for calculating VAT when issuing invoices for goods and services eligible for VAT reduction as stipulated above.

Instructions for issuing VAT invoices at 8% according to Decree 44/2023

(1) For businesses calculating VAT using the deduction method:

When issuing a VAT invoice for goods and services eligible for VAT reduction, the VAT rate line should state "8%"; VAT amount; and the total amount the buyer must pay.

Based on the VAT invoice, businesses selling goods and services declare output VAT, while businesses purchasing goods and services declare input VAT deductions based on the reduced tax amount recorded on the VAT invoice.

(2) For business establishments (including household businesses and individual businesses) calculating VAT using the percentage method on revenue:

When issuing sales invoices for goods and services subject to VAT reduction, in the "Total Amount" column, record the full amount of goods and services before the reduction. In the "Total Amount of Goods and Services" line, record the amount after the 20% reduction in revenue, and add a note: "Reduced… (amount) corresponding to 20% of the percentage rate for calculating VAT according to Resolution No. 101/2023/QH15".

Note:

- In cases where a business calculates VAT using the deduction method when selling goods or providing services and applies different tax rates, the VAT invoice must clearly state the tax rate for each item or service as stipulated in Clause 3, Article 1 of Decree 44/2023/NĐ-CP.

- In cases where a business establishment (including household businesses and individual businesses) calculates VAT using the percentage method on revenue when selling goods or providing services, the sales invoice must clearly state the amount of the reduction as stipulated in Clause 3, Article 1 of Decree 44/2023/NĐ-CP.

In cases where a business has issued an invoice and declared VAT at a tax rate or percentage rate that has not been reduced as stipulated in Decree 44/2023/ND-CP, the seller and buyer shall process the issued invoice in accordance with the law on invoices and supporting documents. Based on the processed invoice, the seller shall declare an adjustment to output tax, and the buyer shall declare an adjustment to input tax (if any).

Businesses must declare goods and services eligible for VAT reduction using Form No. 01 in Appendix IV issued with Decree 44/2023/ND-CP along with the VAT return.

Form for declaring goods subject to a 2% VAT reduction according to Decree 44/2023

Declaration form for goods and services eligible for VAT reduction (Form No. 01) according to Decree 44/2023/ND-CP dated June 30, 2023 of the Government .

Accordingly, businesses must declare goods and services eligible for VAT reduction using the VAT reduction declaration form (Form No. 01) in Appendix IV issued with Decree 44/2023/ND-CP, along with the VAT return.

Below is the sample declaration form for goods and services eligible for a 2% VAT reduction:

Download: Sample form for declaring goods eligible for a 2% VAT reduction.

Instructions for declaring the 8% VAT rate on the VNACCS/VCIS system.

On June 30, 2023, the General Department of Customs issued Official Letter 3431/TCHQ-TXNK regarding the implementation of Decree 44/2023/ND-CP on VAT reduction in accordance with Resolution 101/2023/QH15.

Accordingly, the General Department of Customs provides the following instructions for declaring the 8% VAT rate on the VNACCS/VCIS system:

Request the Provincial and City Customs Departments to provide guidance to customs declarants:

- Select the correct code VB205 to declare the VAT tax rate of 8%.

Code VB205 does not apply to the following cases: those not subject to VAT, and those subject to VAT with VAT rates of 0%, 5%, and 10% (as stipulated in the Value Added Tax Law).

- The reduction of the VAT rate from 10% to 8%, and the declaration using code VB205, only apply to customs declarations registered from 00:00 on July 1, 2023 (corresponding to the Registration Date information on the customs declaration form).

In cases where the customs declaration was registered before 00:00 on July 1, 2023 (with the registration date information on the customs declaration form being less than 00:00 on July 1, 2023), the 8% VAT rate (declared using code VB205) is not applicable.

Source