Official 2% VAT Reduction from July 1, 2025 to December 31, 2026 under Decree 174/2025/ND-CP

1. Duration of the New VAT Reduction

Pursuant to Clause 1, Article 2 of Decree 174/2025/ND-CP, the period for applying the reduced VAT rate is:

• From July 1, 2025, through December 31, 2026.

This tax cut is expected to continue supporting economic recovery and stimulating business operations in the second half of 2025 and throughout 2026.

2. Goods and Services Eligible for VAT Reduction

According to Article 1 of Decree 174/2025/ND-CP, the 2% VAT reduction applies to:

• Goods and services currently subject to the 10% VAT rate, except for those groups not eligible under the law.

Goods and Services NOT Eligible for the VAT Reduction Include:

• Telecommunications; financial services; banking; securities; insurance
• Real estate trading
• Metal and mineral products (excluding coal)
• Goods and services subject to special consumption tax (excluding gasoline)

For full detail, see Appendices I and II attached to Decree 174/2025/ND-CP.

Note: If goods or services are already VAT-exempt, or subject to the 5% VAT rate under the VAT Law, they are not eligible for the VAT reduction.

3. Specific Reduction Rates

According to Clause 2, Article 1 of Decree 174/2025/ND-CP:

• For businesses using the credit-invoice method (input VAT credit):
  → The VAT rate for eligible goods and services is reduced from 10% to 8%.
• For households or individual businesses using the percentage-of-revenue method:
  → They receive a 20% reduction of the percentage rate used to calculate VAT when issuing invoices for eligible goods and services.

4. Instructions for Issuing Invoices Under the New VAT Rates

4.1 For Businesses Using the Credit-Invoice Method:

• On VAT invoices, the VAT rate must be clearly marked as “8%”
• Include “VAT amount” and “total amount payable”
• When declaring, businesses will report output VAT and deduct input VAT using the reduced amount shown on the invoice

4.2 For Households / Individual Businesses Using the Percentage-of-Revenue Method:

• Under the “Amount” column: state full amount of goods or services before reduction
• Under “Total goods and services amount”: show the amount after applying the 20% reduced percentage rate
• Add a note: “reduced … (amount) corresponding to 20% of the percentage rate for VAT calculation according to Resolution 204/2025/QH15”

4.3 In Cases with Multiple VAT Rates:

• The invoice must clearly list each VAT rate for each good / service item
• For the percentage method: clearly show the amount reduced on the invoice

5. Adjusting Previously Issued Invoices

If an invoice has already been issued and declared using the old (non-reduced) VAT rate:

• The seller and buyer must adjust the invoice in accordance with legal regulations
• After adjustment:
  • The seller must adjust their output VAT
  • The buyer must adjust their input VAT if applicable

Note: Must use Form No. 01 (Appendix III under the Decree) when filing VAT declarations.

Conclusion

The issuance of Decree 174/2025/ND-CP is an important continuation of government support for businesses and citizens during recovery. With a 2% VAT cut in effect from July 1, 2025 through December 31, 2026, this presents a valuable opportunity for producers and businesses to reduce costs and stimulate consumption.