2% VAT Reduction: Government Proposes Extension Until End Of 2026, Expanding Scope Of Application

On May 13, Minister of Finance Nguyen Van Thang presented a report on the National Assembly’s draft Resolution on VAT reduction. Accordingly, the Government proposed continuing the implementation of the 2% VAT rate reduction policy during the last 6 months of 2025 and the entire year of 2026. Notably, this time the policy is proposed with an expanded scope of eligible subjects compared to the previous Resolution No. 43/2022/QH15.

Expanding The Scope Of VAT Reduction: Proposal Details

Looking back at the period from 2022 to the first 6 months of 2025, the 2% VAT reduction policy was applied to groups of goods and services currently subject to the 10% VAT rate (reduced to 8%), except for a number of excluded groups such as: telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metals, prefabricated metal products, mining products (excluding coal extraction), coke, refined petroleum, chemical products, goods and services subject to special consumption tax.  

Minister Nguyen Van Thang emphasized that the VAT reduction solution, combined with other support policies on taxes, fees, and charges, has demonstrated clear effectiveness, helping businesses reduce production costs, increase profits, and stimulate market purchasing power.

To continue creating momentum for economic promotion and development, support people and businesses, and strongly boost production and business activities, tourism, and domestic consumption in 2025 and 2026, it is necessary to continue implementing the VAT reduction policy.

Therefore, based on the 2% reduction policy that has been implemented stably since 2022, while also ensuring the achievement of the goal to boost production and business activities, tourism, domestic consumption, and the national growth target for 2025 of 8% or higher, the Government proposes implementing the 2% VAT rate reduction policy by expanding the scope of subjects eligible for the 2% VAT reduction compared to the previous Resolution No. 43/2022/QH15, and implementing the tax reduction in the last 6 months of 2025 and the entire year of 2026.

Minister Nguyen Van Thang stated that the VAT reduction plan in this Draft Resolution has changes in content compared to the provisions in previous resolutions. Accordingly, concerning goods and services subject to VAT and those not subject to VAT (including goods/services not subject to VAT, goods/services for export applying a 0% tax rate, goods/services subject to a 5% tax rate, and goods/services subject to a 10% tax rate), the reduction will only apply to goods and services subject to the 10% tax rate.

Within the group of goods and services subject to the 10% VAT rate, the 2% VAT rate reduction will apply to goods and services serving production and business, tourism, and consumption to support increasing purchasing power, stimulating domestic consumption and tourism. There will be no VAT reduction for goods that are mineral resources, except for special goods that significantly contribute to production and business. There will be no VAT reduction for goods and services subject to Special Consumption Tax (SCT), except for gasoline.

Accordingly, the Draft stipulates a 2% Value Added Tax rate reduction for groups of goods and services currently applying the 10% rate (resulting in 8%), excluding the following groups of goods and services: Telecommunications, financial activities, banking, securities, insurance, real estate business, metal products, mining products (excluding coal), goods and services subject to special consumption tax (excluding gasoline).  

Impact On State Budget Revenue

According to the Minister of Finance, the projected decrease in state budget revenue during the last 6 months of 2025 and the entire year of 2026 upon implementing the proposal is approximately 121.74 trillion VND. Specifically:

• A decrease of about 39.54 trillion VND in the last 6 months of 2025.
• A decrease of about 82.2 trillion VND in 2026.

While the VAT reduction impacts state budget revenue by decreasing it, it also has the effect of stimulating production and promoting production and business activities, thereby contributing to generating additional revenue for the state budget. To offset the revenue shortfall resulting from the policy implementation, the Government will focus on directing Ministries, central agencies, and localities to implement synchronized additional solutions.

Economic And Financial Committee Appraisal

Upon appraising this content, the majority opinion within the Economic and Financial Committee agreed on the necessity of issuing a Resolution to continue applying the VAT reduction policy for the last 6 months of 2025 and the entire year of 2026 as proposed by the Government, in order to support businesses in promoting production and business, while simultaneously maintaining macroeconomic stability.

According to the Economic and Financial Committee, in the context where the domestic economy is facing numerous difficulties and challenges, and the global economy has many unpredictable unstable fluctuations, the continued issuance of this policy can be seen as a measure aimed at domestic consumption to promote growth, contributing to the achievement of the set 8% growth target.

The Committee proposed that the Government organize the implementation of the policy, ensure the set goals are achieved, and prevent difficulties or problems from arising; evaluate and calculate the possibility of balancing the budget when implementing this Resolution concurrently with the budget impact of other revenue reduction policies and newly arising expenditure tasks from now until the end of the year, to be presented in the report on the assessment of the 2025 state budget financial situation and serve as a basis for building the 2026 budget estimate; and be responsible for managing and executing revenue tasks, ensuring the state budget balance for 2025 within the scope of the state budget deficit decided by the National Assembly.