Value-added tax (VAT) is the largest source of revenue for the state budget, contributing 20-24.5% of total state budget revenue in the 2019-2023 period. Over more than two decades, this tax has become an important foundation of Vietnam's public finance system.
VAT Law 2024: New adjustments towards sustainable development
Value-added tax (VAT) is the largest source of revenue for the state budget, contributing 20-24.5% of total state budget revenue in the 2019-2023 period. Over more than two decades, this tax has become an important foundation of Vietnam's public finance system.
In the context of the rapidly changing world economic and political context, the amended VAT Law 2024 aims to ensure a fair, transparent and international tax system. These changes not only enhance management effectiveness but also reduce the burden on businesses and people.
Boosting business momentum
VAT contributes greatly to the budget, but there are still some limitations. The threshold of non-taxable revenue of VND100 million/year is no longer suitable for households and individuals doing business. Raising the threshold to VND200 million/year helps reduce the financial burden and promote the development of small businesses. This is considered a suitable solution for comprehensive and sustainable development.
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| Adjusting VAT contributes to enhancing management effectiveness and moving towards sustainable development. Photo: Shutterstock |
Many business owners shared that raising the taxable revenue threshold will help them reinvest and attract customers. Ms. Tran The, a business owner in Thanh Xuan District, said: “In the context of rising raw material prices and input costs, raising the taxable revenue threshold to VND200 million/year will allow us to have more money to reinvest in development, or implement promotional programs and attract customers.”
Towards basically applying one tax rate
The Law on VAT has adjusted a number of goods and services that are not subject to tax. Products such as fertilizers, agricultural machinery, and offshore fishing vessels have been subject to a tax rate of 5% (Article 5 of the Law on VAT). Some items such as unprocessed forest products, sugar, sugar by-products, and cultural and sports activities have been adjusted from a tax rate of 5% to 10%. This is an important step in the Tax Reform Strategy until 2030.
During the process of developing and finalizing the draft Law on VAT, the project Strengthening Public Financial Management in Vietnam, co-funded by the European Union and the German Government through GIZ, provided technical assistance and shared experiences from developed and developing countries on VAT policies.
The workshop "Exchange of draft amended Law on VAT" organized by the Department of Tax, Fee and Charge Policy Management and Supervision in coordination with the project, took place in Nha Trang in May 2024 to collect comments on the draft amended Law on VAT. Delegates from ministries, local agencies, research and academic organizations and private enterprises participated in the discussion and gave many comments contributing to the completion of the draft.
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| Workshop "Draft discussion on revised VAT law" |
At the workshop, a representative of the Vietnam Fertilizer Association suggested that applying a 5% tax rate would help domestic fertilizer production compete better with imported fertilizers. The new regulation expands the taxable subjects, moving fertilizers from the non-taxable group to the 5% tax rate. This shows that the drafting committee has taken into account the opinions of relevant parties.
Towards an efficient tax system in line with international practices
The revised VAT Law is an important step forward in modernizing the tax system, demonstrating the Government’s commitment to supporting people and businesses. These reforms help optimize budget revenues and facilitate socio-economic activities. The “Strengthening Public Financial Management in Vietnam” project will continue to coordinate with the Ministry of Finance to implement activities and put new regulations into practice.
Source: https://baodautu.vn/luat-thue-gtgt-2024-dieu-chinh-moi-huong-toi-phat-trien-ben-vung-d232456.html
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