VINACHEM

Prime Minister Pham Minh Chinh has directed the Ministry of Finance to assess extending VAT reductions through 2026.

Vietnam’s value-added tax (VAT) reduction policy may be extended through the second half of 2025 and into 2026, as the government looks for ways to sustain economic growth and ease financial burdens on businesses.

Prime Minister Pham Minh Chinh has directed the Ministry of Finance to study and propose an expansion of VAT reductions, with a report due to the government by March 15, 2025.

This directive was outlined in Official Telegram No. 22/CĐ-TTg, issued on March 9, 2025, which details key administrative reforms aimed at simplifying business procedures, improving the investment climate, and fostering economic development.

As part of this review, the Ministry of Finance has also been tasked with drafting a decree to extend tax payment deadlines for various tax obligations in 2025, including VAT, corporate income tax, personal income tax, and land rental fees. Additionally, the ministry must examine potential extensions of excise tax payment deadlines for domestically manufactured and assembled automobiles.

Vietnam’s VAT reduction policy so far

The potential extension of VAT reductions follows the government’s previous tax relief efforts in 2024 and early 2025.

Under Decree No. 180/2024/NĐ-CP, issued following Resolution No. 174/2024/QH15, a 2% VAT reduction has been in effect from January 1 to June 30, 2025.

This reduction applies to several sectors, except for industries such as telecommunications, IT, finance, banking, insurance, real estate, metals, mining (excluding coal), refined petroleum, chemicals, and goods subject to special consumption tax.

Previously, in 2024, Vietnam’s government implemented two rounds of VAT reductions, covering the periods from:

January 1 to June 30, 2024
July 1 to December 31, 2024

The 2% VAT reduction policy has been credited with lowering production costs, reducing consumer prices, and supporting both businesses and consumers during economic challenges.

Calls for broader tax relief

While past VAT reductions have provided relief, many experts argue that the policy should be expanded to cover a wider range of industries and extended for a longer duration.

Policymakers and business leaders believe that longer tax reductions could better support economic recovery, especially for small and medium-sized enterprises (SMEs), which have been hit hardest by economic fluctuations.

The upcoming March 15 report from the Ministry of Finance will determine whether Vietnam will extend its VAT relief measures into 2026 and possibly broaden its scope to include more industries. – Source: VNN