Effective from July 1, 2025, Vietnam has officially implemented a 2% reduction in value-added tax (VAT) as outlined in Decree No. 174/ND-CP, issued based on National Assembly Resolution No. 204. This strategic policy move aims to ease cost burdens, stimulate domestic consumption, and support business recovery amid ongoing economic fluctuations.
Tax Cuts, Confidence Gains
Specifically, goods and services currently subject to a 10% VAT rate will see a reduced rate of 8%, applicable from July 1, 2025 to December 31, 2026. However, the policy does not apply to sectors such as finance and banking, insurance, securities, real estate, telecommunications, mineral products (except coal), and goods subject to special consumption tax (except fuel).
Notably, the scope of beneficiaries has been expanded. Industries such as transportation, logistics, and IT services, which were previously excluded from tax relief packages, are now included—indicating a more inclusive and market-responsive fiscal approach.
Short-Term Impact, Long-Term Strategy
According to the Ministry of Finance, this VAT cut may result in a revenue shortfall of approximately VND 122 trillion (nearly USD 4.8 billion) over the next 18 months. Nevertheless, the broader objective is to stimulate production, consumption, and investment, thereby fostering sustainable economic growth and future tax revenue.
To offset the revenue impact, the government plans to intensify tax reform and broaden the tax base—particularly through enhanced collection in real estate, e-commerce, digital platforms, and asset transfers.
Expert Perspective
Sophie Dao, Senior Partner at GBS, shared her view:
“This VAT reduction offers short-term relief for businesses, but more importantly, it signals Vietnam’s commitment to a stable and business-friendly investment environment. It’s a positive message for both domestic enterprises and international investors exploring opportunities in emerging markets.”
Dao also emphasized that consistent application of the VAT cut across production, import, and retail stages will simplify compliance—especially for companies engaged in cross-border supply chains.