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Vietnam Approves 2% VAT Cut Extension Through End of 2026

Hanoi, 18 June 2025 – In a significant move to sustain post-pandemic economic recovery and bolster domestic consumption, the Vietnamese National Assembly has officially approved the extension of the 2% value-added tax (VAT) cut from 10% to 8% until 31 December 2026.

The decision, passed on 17 June 2025 as part of the 9th session of the 15th National Assembly, comes after extensive consultation and aligns with the Government’s continued fiscal stimulus policies to support business recovery and boost consumer spending.

🔍 Key Features of the VAT Reduction Extension

  • Duration: The extended VAT cut will take effect from 1 July 2025 to 31 December 2026.

  • Coverage: The 8% VAT will apply to a wide range of goods and services previously subject to the standard 10% rate. Newly included in this round are sectors such as:

    • Information technology (IT) products

    • Transportation and logistics services

    • Refined petroleum, coke, and chemicals

    • Coal and gasoline (at import and trading stages)

    • Prefabricated metals and selected industrial goods

  • Exclusions: The reduction does not apply to goods and services already subject to the 5% VAT rate or VAT-exempt categories.

💼 Fiscal and Economic Implications

According to the Ministry of Finance, the extension is expected to result in a revenue shortfall of approximately VND 121.74 trillion (USD 4.8 billion), with VND 39.5 trillion in the second half of 2025 and over VND 82.2 trillion in 2026.

Despite this, the policy is projected to:

  • Stimulate retail consumption: In the first two months of 2025 alone, retail sales rose 9.4% year-on-year.

  • Support business recovery: Enterprises saved an estimated VND 8.3 trillion in VAT payments during January and February.

  • Promote industrial activity: Broader VAT coverage now includes input goods and strategic industries that drive economic output.

🗣️ Government’s Commitment to Fiscal Discipline

To offset revenue losses, the Government is enhancing tax administration through digital transformation, AI-powered inspection tools, e-invoicing expansion, and stricter oversight of public spending. The Ministry of Finance also reiterated its dual objective of supporting growth while ensuring long-term budget sustainability.

🧾 Recommendations for Businesses

AusCham Vietnam encourages members and the wider business community to:

  • Review their accounting and invoicing systems to reflect the new 8% VAT rate.

  • Seek professional tax advice to determine the applicability of the reduction to their specific goods or services.

  • Monitor policy updates from relevant authorities to ensure compliance with implementation guidelines.

 

📬 Contact AusCham Vietnam
For questions or to share your business feedback on this policy, please contact our Head of Advocacy & Partnerships at: advocacy@auschamvn.org