Vietnam to cut down VAT tax and allow for CIT deduction claims

After the passing of a VNĐ350 trillion (approximately US$15 billion) economic recovery package, the government has also issued Decree 15/2022/ND-CP (Decree 15) on guiding the implementation and reduction of value-added tax (VAT) and corporate income tax (CIT) supporting the country’s post-pandemic recovery. Decree 15 implements the National Assembly’s Resolution No 43/2022/QH15 on fiscal and monetary policies for the recovery of the economy from the pandemic.

VAT reduced to 8%

According to the degree, VAT will be cut down to 8% for the rest of 2022 (a reduction of 2% compared to the current 10% rate). This reduction will be applied to several goods and services, including goods involved in import, manufacturing, processing as well as trade. There are certain goods and services however that are not eligible for the VAT reduction, which includes telecom services, financial services, banking, securities, metals, chemical and mining products, real estate, IT goods and services, and goods and services subject to special consumption tax (SCT). Products and services that were not required to pay VAT tax or at 5 per VAT tax or under special VAT tax are also not affected by the cut. A full list can be found in Appendix I, II, and Appendix III of Decree 15. Furthermore, in order to get the reduction, taxpayers are required to issue a separate invoice for goods and services that are eligible for the reduction. In addition, they must declare these goods under Form 01 as per Decree 15. The VAT reduction is applicable on both the deduction method and the direct method.

The move has been said to amount to a VND49.4 trillion (US$2.17 billion) tax break for businesses, nearly three times the tax cut they received throughout 2021, according to finance minister Hồ Đức Phớc. Also according to Minister Phớc, the Government favoured VAT reduction over income tax reduction because a VAT cut will help all businesses, not just those who reported profit.
 

CIT deduction

Businesses can claim a CIT deduction for any donation or sponsorship expenses related to pandemic prevention in Vietnam for the 2022 fiscal year. To do this, businesses need to submit the relevant documents to avail of the deduction. The amount of donation or sponsorship must be confirmed in writing by the receiving authority or agency.

Decree 15 took effect on February 1, 2022, however, the government may issue further guiding circulars for implementation of the Decree. The tax breaks are expected to help businesses due to the pandemic and recover production.