2% VAT Reduction Extended until the End of 2026 – What Should Businesses Prepare For?

SUMMARY

On June 17, 2025, the National Assembly officially passed Resolution No. 204/2025/QH15, extending the 2% reduction in the Value-Added Tax (VAT) rate from July 1, 2025 to December 31, 2026. Under this policy, the current standard VAT rate of 10% will be reduced to 8% for a wide range of goods and services consumed domestically.

This tax measure excludes specific sectors such as financial services, banking, insurance, real estate, telecommunications, mining (excluding coal), and goods/services subject to special consumption tax (except for gasoline). The Government will issue further guidance and a detailed list of applicable goods and services.

As a continuation of previous VAT support programs, this policy offers financial relief and market stimulus. However, businesses must apply it correctly to avoid tax reassessments or penalties.

KEY LEGAL PROVISIONS

According to Article 1 of Resolution 204/2025/QH15, the VAT rate is reduced from 10% to 8% for goods and services specified under Clause 3, Article 9 of the VAT Law No. 48/2024/QH15, specifically:

• Applies to goods and services not subject to the 0% or 5% preferential VAT rates;

• Excludes the following sectors:

  • Telecommunications;

  • Financial services, banking, securities, insurance;

  • Real estate business;

  • Metal products and mineral resources (excluding coal);

  • Goods and services subject to special consumption tax (except gasoline).

This reduced rate applies from July 1, 2025 to December 31, 2026, and does not apply retrospectively. Transactions occurring before July 1, 2025, must still follow the existing 10% VAT rate.

IMPLICATIONS FOR BUSINESSES

This VAT reduction presents multiple benefits:

• Lower selling prices, helping businesses remain competitive;

• Improved cash flow, especially for retail, trade, and service businesses;

• Enhanced domestic consumption, supporting overall business recovery.

However, misapplying the tax rate can lead to substantial risks:

• Tax reassessment and penalties, if applying the 8% rate to ineligible items;

• Lost cost savings, if eligible items are not adjusted accordingly;

• System and reporting inconsistencies, if accounting, invoicing, and commercial teams are not aligned.

  
  

W&A RECOMMENDATIONS

To ensure accurate implementation of the VAT reduction policy, W&A recommends that businesses:

• Review all goods and services offered, to identify which fall under the 8% category;

• Update accounting systems, e-invoicing software, contracts, and quotations from July 1, 2025;

• Educate internal teams on new tax rules, especially sales, finance, and accounting departments;

• Closely monitor official guidance from the Government, expected in the form of a new Decree outlining detailed conditions and applicable lists.

Early preparation is essential to ensure businesses can both legally benefit from the reduction and avoid future tax disputes or sanctions.

CONCLUSION

Resolution No. 204/2025/QH15 is part of Vietnam’s ongoing fiscal support strategy to assist businesses in a challenging economic environment. However, the effectiveness of this policy depends largely on how promptly and accurately it is implemented.

Businesses should not wait until July 2025 to act. By proactively reviewing operations, updating systems, and training staff, companies will be better positioned to capture tax savings and reinforce compliance – ultimately supporting long-term growth and stability.

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