Vietnam plans to extend VAT cut until end-June 2024

1 min readUpdated Jun 1, 2025Oct 18, 20235:48 AM

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The Vietnamese government said on Tuesday it plans to extend a reduction in value added tax (VAT) until the end of June next year to boost domestic consumption and production as the global economy remains sluggish.

The cut in VAT to 8% from 10%, which still needs parliament’s approval, has been in place since July and is set to expire by the end of this year. The next session of parliament is scheduled to begin next week.

The 8% VAT rate is not applicable to services and products like banking, finance, telecommunications and real estate, the government said in a statement.

The tax cut, which is expected to boost domestic consumption, would reduce the government’s budget revenue by 25 trillion dong ($1.02 billion), the statement added.

Vietnam’s economic growth rose 5.33% in the third quarter, higher than 4.05% in the previous one, official data showed.

Headline inflation continued the sharp upward increase that started in June, official data showed. September’s consumer price index rose 3.7% in September against the same period last year.

While economic growth picked up in the July-September period thanks to a gradual recovery in exports, domestic consumption remained subdued and credit growth continued to be slow reflecting weak private domestic investment and investor confidence, the World Bank said in its latest report.

Retail sales in the domestic market with a population of nearly 100 million, rose 9.7% in the first nine months of this year from a year earlier, according to the General Statistics Office.

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What this means

Vietnam's proposed VAT cut extension is a crucial intervention, offering a sustained boost to an otherwise subdued retail sector. Unlike cautious market entries or focused experiential stores seen elsewhere in Asia, this broad fiscal measure directly incentivises consumer spending across most goods and services, despite excluding certain sectors like banking. The government's willingness to sacrifice 25 trillion dong in revenue shows the urgency to prop up domestic demand amidst slow credit growth and weak investor confidence. This move puts pressure on retailers to capitalise on the lower tax burden by strategically pricing and promoting products to drive volume, rather than relying on an organic rebound. Retailers must closely watch next week's parliamentary approval for confirmation of this extended consumer tailwind.

Maria Santos · Retail News Asia newsroom

Questions & Answers

What is the current VAT rate in Vietnam and what rate is being proposed?

The current VAT rate is 10%. The government plans to extend a reduction, proposing to continue the 8% VAT rate, which has been in place since July and is due to expire at year-end.

Which sectors are excluded from this VAT reduction?

The 8% VAT rate does not apply to certain services and products. These include banking, finance, telecommunications, and real estate, according to the government's statement.

When does the Vietnamese government plan for the extended VAT cut to end?

The Vietnamese government plans for the extended VAT reduction to continue until the end of June next year. This is intended to boost domestic consumption and production.

What impact is the VAT cut expected to have on government finances?

The tax cut is expected to reduce the government’s budget revenue. This reduction is estimated to be 25 trillion dong, or $1.02 billion.

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