Vietnam Officially Reduces VAT by 2% Starting July 1

Vietnam’s government has officially implemented a 2% reduction in value-added tax (VAT) starting today, July 1, as part of an ongoing effort to support citizens and businesses.

Under Decree No. 174, issued in line with Resolution No. 204 of the National Assembly, the VAT reduction will apply through December 31, 2026. The policy aims to ease financial burdens, stimulate domestic consumption, and encourage business activity amid ongoing economic challenges.

The decree stipulates a 2% VAT cut for goods and services currently subject to a 10% VAT rate. Excluded from this reduction are sectors such as telecommunications, financial services, banking, securities, insurance, real estate, metal products, mineral products (except coal), and goods and services subject to special consumption tax (except fuel).

This reduction is applied uniformly across all stages of production, importation, processing, and commercial business.

The measure follows the National Assembly’s approval of a VAT reduction during its ninth session. Vietnam has introduced similar tax relief policies repeatedly in recent years to stimulate the economy. Notably, Resolution No. 204broadens the range of beneficiaries compared to previous resolutions and extends the tax relief period through 2026. This time, sectors like transportation, logistics, and IT services also qualify for the reduction.

According to government estimates, the VAT cut is expected to reduce state budget revenue by nearly VND 122 trillion(approx. USD 4.8 billion) over the second half of 2025 and throughout 2026.

Addressing concerns that tax cuts could impact state spending, the Minister of Finance emphasized that while the policy may temporarily reduce direct budget revenue, it is designed to stimulate production, boost business activity, and ultimately help generate additional tax revenue through the ripple effect of increased economic activity.

To offset the shortfall, the government will intensify efforts to enhance tax collection efficiency. This includes strengthening tax administration, accelerating administrative reforms, advancing digital transformation in tax management, and focusing on key areas such as land-related revenue, real estate transfers, e-commerce, and digital platform businesses.

Sophie Dao, Lawyer and Senior Partner at GBS, welcomed the move, stating: “This VAT reduction reflects Vietnam’s commitment to supporting both businesses and consumers in a meaningful, practical way. For international investors and domestic enterprises alike, it signals a stable, pro-business policy environment that encourages growth and resilience. I believe this measure will have a positive impact on demand, helping many sectors regain momentum.”

Dao also highlighted that the consistent application of the VAT reduction across different stages of production and commerce will simplify compliance for businesses, especially those involved in cross-border supply chains and import-export activities.

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Source: Vietnam Insider