The reduction of the value-added tax (VAT) from 10% to 8% is an important policy by the government aimed at supporting the economy in the recovery phase after the pandemic and reducing the financial burden on businesses and consumers. This policy will be implemented from January 1, 2025, and will last until June 30, 2025, with the goal of reducing costs for businesses, especially in the manufacturing and consumer services sectors. The 8% VAT rate will help stimulate domestic consumption, reduce the price of goods, and create a more favorable environment for businesses struggling with post-pandemic recovery. This is an economic measure to support businesses in overcoming difficult times and restoring production and service activities.
What is the 8% VAT Reduction in 2025?
What is 8% VAT?
8% VAT is a tax rate applied to certain goods and services, replacing the previous 10% VAT rate. This means that products and services listed for tax reduction will have a lower VAT rate, from 10% to 8%, helping reduce input costs for businesses, lower prices for consumers, and stimulate domestic consumption. This VAT rate will be applied for 6 months (from January 1, 2025, to June 30, 2025), allowing businesses to reduce costs, thus saving on production expenses and boosting competitiveness in the market.
Duration of the 8% VAT in 2025
The VAT reduction policy from 10% to 8% will take effect from January 1, 2025, to June 30, 2025. The implementation period is determined based on the domestic economic recovery situation and the need to support businesses and consumers during the post-pandemic economic recovery phase. The tax reduction during this time is a timely measure aimed at helping businesses maintain production, enhance business efficiency, and promote domestic consumption of goods.
Benefits of the 8% VAT Reduction
The 8% VAT reduction will help businesses ease their financial burden by reducing production and input goods costs. This not only supports businesses in lowering product costs but also stimulates domestic consumption, especially in consumer goods and services. When taxes are reduced, consumers benefit from lower prices, which increases their purchasing and consumption capacity. This policy also encourages businesses to grow sustainably and fosters investment in areas with long-term development potential.
List of Goods and Services Subject to the 8% VAT Reduction
Industries Applying the 8% VAT Reduction
According to the new regulations, the 8% VAT rate will apply to several groups of goods and services that were previously subject to the 10% VAT rate. The sectors that benefit from the 8% VAT reduction mainly include production and consumption fields, such as food, essential consumer products, transportation services, education, and healthcare. Businesses operating in these sectors will benefit from the tax reduction, which helps lower input costs and creates favorable conditions for competition and development. The government expects that this policy will increase consumers’ purchasing power and aid in economic recovery.
Goods and Services Not Subject to the 8% VAT Reduction
Not all industries will benefit from the 8% VAT reduction. Some sectors, such as telecommunications, banking, securities, insurance, real estate, metals and fabricated metal products, mining products (excluding coal mining), and refined petroleum products will not receive the tax reduction. These sectors will continue to apply the previous 10% VAT rate. Therefore, businesses in these industries will not benefit from the 8% VAT reduction policy and will still face the higher tax rate.
How to Classify Goods and Services Eligible for VAT Reduction
To ensure the correct application of the 8% VAT rate, businesses need to correctly identify the groups of goods and services eligible for the tax reduction. This requires businesses to clearly categorize their products and verify the industry and tax rate information. Accurate classification will help avoid mistakes in tax declarations and invoicing, ensuring the legality of commercial transactions.
Important Notes When Applying the 8% VAT
Businesses need to pay attention to which groups of goods and services can apply the 8% VAT rate. Additionally, changes in tax policies may affect the application of tax reductions, so businesses should regularly monitor announcements from the tax authorities. Keeping up with and promptly updating policies will help businesses comply fully and accurately with tax regulations, minimizing the risk of legal violations.
Guidelines for Applying the 8% VAT for Businesses
Invoice Procedure When Applying the 8% VAT
When applying the 8% VAT, businesses must adjust their invoicing procedure to reflect the new tax rate. Specifically, when selling goods or services eligible for the tax reduction, the invoice must clearly state that the VAT rate is 8%, instead of the previous 10%. For products not eligible for the tax reduction, the VAT rate remains at 10%. This ensures that tax authorities can easily check and verify, and also helps businesses avoid mistakes in tax declarations.
How to Calculate the 8% VAT for Goods and Services
Businesses need to accurately calculate the VAT amount payable after applying the 8% tax rate. For goods and services subject to the 8% VAT, the amount of tax payable will be lower than when the VAT was previously set at 10%. However, businesses must ensure that they make correct calculations and fully and accurately declare taxes in their tax returns, avoiding any underreporting or errors.
Steps to Apply the 8% VAT Reduction on Invoices
To apply the 8% VAT reduction on invoices, businesses must clearly state the VAT rate applicable to the products and services on the invoice. In addition to indicating the 8% VAT rate, businesses should specifically note that the tax reduction is being implemented according to government regulations regarding tax cuts. This ensures transparency in transactions and makes it easier to verify when requested by tax authorities.
Important Notes for Declaring the 8% VAT
Businesses should be careful when declaring taxes to ensure they record the correct tax reductions and apply the 8% VAT rate. Tax authorities may require businesses to provide supporting documents to verify the reduced VAT rate. Therefore, accurate tax declarations and strict adherence to regulations are essential to avoid fines and legal penalties.
Regulations on VAT Invoices with 8% Tax Rate
Regulations for Issuing Invoices When Applying the 8% VAT
When applying the 8% VAT under the new policy, businesses must adhere to strict regulations when issuing invoices. Sales invoices or service provision invoices must clearly indicate that the VAT rate is 8% for goods and services eligible for the tax reduction. Correctly recording this VAT rate on the invoice is crucial to avoid errors and ensure the legality of business transactions. Additionally, the invoice must fully reflect all relevant information about the product or service, as well as specific tax reduction amounts. If businesses violate these regulations, they may face penalties or be required to adjust the invoices.
Notes to Include When Issuing Invoices with 8% VAT Reduction
When issuing invoices, in addition to stating the 8% VAT rate, businesses must also include a specific note regarding the application of the 8% VAT reduction policy as per the government’s decree. These notes must be transparent and accurate to help the buyer understand the VAT application. For example, the note on the invoice could state: “2% VAT reduction according to Decree No. 180/2024/ND-CP.” This helps to easily confirm that the tax reduction has been applied in accordance with legal regulations and can be used for reference if requested by tax authorities.
How to Record Tax Reduction Information on Invoices
When recording tax reduction information on invoices, businesses need to ensure that the amounts for the tax and the goods/services before applying the tax reduction are clearly stated. For example, in the “Total” column, the business should list the full value of the goods or services before the tax reduction, and in the “Total Goods/Services Price” column, the reduced tax amount (2%) should be clearly noted. Additionally, the note must confirm that the tax reduction was applied according to the government’s regulations. This makes it easier to verify and cross-check in case of a tax authority inspection.
Things to Keep in Mind When Issuing 8% VAT Invoices
When issuing invoices with the 8% VAT, businesses should pay attention to the following points to ensure accuracy and legality:
- The invoice must follow the standard format required by the tax authority.
- The tax reductions must be recorded fully and accurately.
- Businesses should retain all invoices in proper form for tax declarations and audits by the tax authority.
- The invoice must clearly show the application of the 8% VAT reduction for eligible goods and services.
- Businesses should implement internal checks to ensure that all transactions subject to the tax reduction are correctly recorded and processed in compliance with regulations.
By adhering to these guidelines, businesses can avoid errors in tax declarations and invoicing, while maintaining transparency and legality in business transactions.
The VAT reduction policy from 10% to 8% in 2025 is an important measure aimed at supporting businesses in recovering after the pandemic, easing financial burdens, and promoting consumption within the economy. This new tax rate not only helps reduce product costs but also creates favorable conditions for businesses to grow stronger in an increasingly competitive environment. However, to ensure accuracy and legality, businesses must thoroughly understand the regulations regarding the tax reduction, especially when issuing invoices and filing taxes. A clear understanding of the process and adherence to regulations will help businesses avoid unnecessary mistakes and ensure transparency in business operations.
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