Key Updates: VAT Reduction for the Second Half of 2024 and Base Salary Increases

1. VAT Reduction Policy for the Second Half of 2024

The Vietnamese government has issued Decree No. 72/2024/ND-CP on June 30, 2024, detailing the VAT reduction policy in line with Resolution No. 142/2024/QH15 dated June 29, 2024, from the National Assembly. This decree specifies a 2% VAT reduction for the second half of 2024, from July 1 to December 31, 2024.

According to the decree, goods and services that are normally subject to a 10% VAT will continue to receive a 2% reduction, resulting in an 8% tax rate during this period. However, exceptions apply to certain sectors listed in Appendices I, II, and III of the Decree, including:

• Telecommunications, financial activities, banking, securities, insurance, real estate, metals and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, and chemical products (details in Appendix I).

• Goods and services subject to special consumption tax (details in Appendix II).

• Information technology as per the law on information technology (details in Appendix III).

This VAT reduction applies to all stages of importation, production, processing, and commercial business.

Enterprises with goods and services eligible for VAT reduction need to declare using Form No. 01 in Appendix IV of this Decree along with the VAT Declaration Form.

2. Increase in Base Salary from 1.8 Million to 2.34 Million from July 1, 2024

The government has also issued Decree No. 73/2024/ND-CP on June 30, 2024, which officially increases the base salary from 1,800,000 VND to 2,340,000 VND per month, effective from July 1, 2024.

From July 1, 2024, the maximum salary for compulsory social insurance, health insurance, and labor accident insurance will be 46,800,000 VND per month (20 times the new basic salary of 2,340,000 VND per month).

The maximum salary for unemployment insurance will be 99,200,000 VND per month (Region I) and 88,200,000 VND per month (Region II), based on the new minimum salaries of 4,960,000 VND per month for Region I and 4,410,000 VND per month for Region II.

The minimum salary for compulsory social insurance, health insurance, unemployment insurance, and labor accident insurance from July 1, 2024, will be 4,960,000 VND per month for Region I and 4,410,000 VND per month for Region II.

For voluntary social insurance, the maximum income will be 46,800,000 VND (20 times the new basic salary of 2,340,000 VND per month).

3. Minimum Wage Increase by 200,000 - 280,000 VND per Month, Effective from July 1, 2024

Lastly, Decree No. 74/2024/ND-CP, issued on June 30, 2024, regulates the minimum wage for employees working under labor contracts. According to this Decree, the monthly and hourly minimum wages will be adjusted upwards from July 1, 2024, as follows:

• Region I: 4,960,000 VND per month (an increase of 280,000 VND per month).

• Region II: 4,410,000 VND per month (an increase of 250,000 VND per month).

• Region III: 3,860,000 VND per month (an increase of 220,000 VND per month).

• Region IV: 3,450,000 VND per month (an increase of 200,000 VND per month).

The Decree also specifies that any agreed-upon and committed pay arrangements that are more favorable to employees (such as paying at least 7% higher than the minimum wage for jobs or positions requiring vocational training, paying at least 5% higher for heavy, hazardous, or dangerous work, and paying at least 7% higher for especially heavy, hazardous, or dangerous work) will continue to be implemented unless otherwise agreed upon by the parties.

The above three Decrees take effect from July 1, 2024.