On 17 June 2025, Vietnam’s National Assembly officially approved Resolution No. 204/2025/QH15 to extend the 2% Value-Added Tax (VAT) reduction. The policy will now be in effect from 1 July 2025 to 31 December 2026. This strategic decision is aimed at stimulating domestic production and consumption as the country navigates the challenges of a global economic slowdown.
Policy scope and application
The VAT reduction, which lowers the rate from 10% to 8%, was initially implemented in early 2022 as a response to the COVID-19 pandemic. The government has extended the policy multiple times to maintain economic momentum, support businesses and citizens, and boost production, tourism, and domestic consumption in the last 6 months of 2025 and the entire year of 2026. This latest resolution not only extends the duration of the policy but also expands its coverage.
Key updates include:
- A wider range of goods and services is eligible for the 8% VAT rate, compared to the scope defined in Resolution No. 43/2022/QH15.
- Newly included sectors: transportation, logistics, trade, and information technology services.
However, certain sectors remain excluded, such as telecommunications, financial services, banking, insurance, securities, real estate, mining (excluding coal), metal production, and products subject to special consumption tax (excluding gasoline).
Projected economic impact
According to the Ministry of Finance, the extension is expected to cause a significant decrease in state budget revenue. The total projected reduction is approximately 121.74 trillion VND over the 18-month period.
- Around VND 39.54 trillion in the second half of 2025.
- Around VND 82.2 trillion in 2026.
The VAT reduction is anticipated to lower the cost of goods and services, thereby promoting production and creating more jobs. For businesses, the policy is intended to reduce production costs and lower final product prices. This can lead to increased competitiveness, higher consumption of goods and services, and opportunities for business expansion. Ultimately, these measures are designed to contribute to macroeconomic stability and help achieve Vietnam’s national growth target.
Business implications
For businesses operating in Vietnam, especially those in consumer-facing industries, the extended VAT reduction offers opportunities for strategic pricing and cost management. It is crucial for companies to review their pricing structures, supply chain, and financial planning strategies to maximize the benefits of this fiscal policy.
If you have questions about how this VAT policy may affect your business operations in Vietnam, please contact us. Our team is ready to provide the support you need to stay compliant and discuss your tax strategy.
This article was originally published in June 2024 and last updated in July 2025.
