Vietnam's 2% VAT reduction in 2026: which goods qualify and how to report it
The short answer
Under Resolution No. 204/2025/QH15 and Decree No. 174/2025/ND-CP, from 1 July 2025 to 31 December 2026, goods and services subject to the standard 10% VAT rate benefit from a 2% reduction, to 8%.
The reduction does not apply to:
telecommunications;
finance, banking, securities and insurance;
real estate business;
metal products;
mining products (except coal);
goods and services subject to special consumption tax (except petrol).
Businesses, households and individuals that calculate VAT as a percentage of revenue benefit from a 20% reduction in the applicable percentage when invoicing.
Qualifying goods and services must be reported on Form 01 (Appendix III to Decree 174/2025) and filed together with the VAT return.
Less than three months of the policy remain. Businesses should prepare now for a possible return to the 10% rate from 1 January 2027.
A simple 2% cut, but errors remain common
The VAT reduction has been applied in several rounds since 2022, so many finance teams treat it as routine. Tax audits show, however, that errors keep recurring in three places:
misclassifying excluded items, especially metal products and goods subject to special consumption tax;
showing the wrong rate on invoices that combine qualifying and non-qualifying items;
forgetting to file Form 01.
The consequences go beyond collecting the 2% difference. Businesses face late-payment interest and possible penalties for incorrect declarations, and they must correct invoices with their customers. Correcting the invoices is usually the most time-consuming part.
Who qualifies and by how much?
VAT method | Reduction | How it appears on the invoice |
Credit-invoice method | Rate reduced from 10% to 8% | Show 8% on the lines for qualifying goods and services |
Direct method on revenue (businesses, households, individuals) | 20% reduction in the VAT percentage applied | Show the amount reduced under Resolution 204/2025/QH15 on the sales invoice |
The reduction applies at every stage (import, manufacturing, processing and trading), subject to the exclusions below.
What does NOT qualify
Appendix I to Decree 174/2025 lists goods and services that do not qualify, including:
telecommunications;
financial, banking, securities and insurance activities;
real estate business;
metal products and mining products.
Coal qualifies only when sold at the extraction stage. At later trading stages, coal does not qualify.
Appendix II lists goods and services subject to special consumption tax, which do not qualify (except petrol). From 1 January 2026, this list was updated in line with Special Consumption Tax Law No. 66/2025/QH15. A practical example: the Ministry of Finance has confirmed that soft drinks with more than 5g of sugar per 100ml do not benefit from the 2% reduction in 2026, even though special consumption tax on them only starts on 1 January 2027.
The VAT Law comes first. Where an item appears in Appendix I or II but is VAT-exempt or subject to the 5% rate under the VAT Law, the VAT Law applies. That item falls outside the reduction policy altogether.
Practical tip: when checking the appendices, do not rely on the HS code alone. Read the description column as well. Many disputes arise because a business identifies the correct HS chapter but the wrong subheading, or because the product (for example steel structures or metal components) is described differently in the contract and in the customs declaration.
Invoicing and reporting: three principles
1. Invoices must show the reduction correctly.
Under the credit method, each line shows its own rate (8% or 10%).
Under the direct method, the sales invoice must state the amount reduced.
Where an invoice was issued at the unreduced rate, the seller and buyer correct it under the invoicing rules. From 1 July 2026, those rules are set out in Decree No. 254/2026/ND-CP.
2. File Form 01. Prepare Form 01 (Appendix III to Decree 174/2025), listing the qualifying goods and services, and file it with the VAT return for the period concerned. The HTKK software already includes this form.
3. Buyers credit the VAT shown on the invoice. Buyers must not adjust the rate to 10% or 8% themselves. If an invoice shows the wrong rate, the buyer must ask the seller to correct it.
Countdown to 31 December 2026: three things to do now
At the time of writing, no official instrument extends the reduction into 2027. Businesses should prepare for the rate returning to 10% from 1 January 2027.
Review contracts that run across the year end. Contracts with prices stated "inclusive of VAT" at 8% will cause disputes if the rate rises. Consider switching to "price exclusive of VAT; VAT charged at the rate in force when the invoice is issued in accordance with the law".
Control year-end invoice timing. The VAT rate follows the point at which the tax liability arises, i.e. when the invoice is correctly issued. Goods delivered or services completed in December 2026 must be invoiced on time. Do not push invoices into the new year. Equally, do not issue invoices early, before the conditions are met, simply to lock in the 8% rate.
Update systems and price lists. Prepare rate settings in sales software, cash registers and published price lists so the switch can be made as soon as the position is confirmed.
Illustrative case
Company E sells warehouse equipment, including steel storage racks. In 2026, it invoiced all VND 20 billion of revenue at 8%, believing the racks were "equipment" rather than "metal products".
In an audit, the tax authority compared the HS codes on the import declarations with the product descriptions. Its conclusion: the steel racks fall within the metal products group in Appendix I. The company faces collection of the 2% difference (VND 400 million) plus late-payment interest, and a possible penalty of 20% of the under-declared tax.
The harder part is correcting hundreds of invoices already issued to customers, who must then re-declare their input VAT. A single review of the product list against the appendices in July 2025 would have avoided the entire problem.
Checklist for finance teams
List all goods and services sold, and compare HS codes and descriptions against Appendices I and II to Decree 174/2025.
Keep evidence supporting each classification (customs declarations, catalogues, classification analysis results where available).
Check the VAT rate settings for each item in the invoicing software.
Reconcile Form 01 against 8%-rated revenue on each VAT return.
Review high-value contracts that run into 2027.
Plan the rate transition for 1 January 2027.
FAQs
When does the 2% VAT reduction end?
On 31 December 2026, under Resolution No. 204/2025/QH15.
Do steel products qualify for the reduction?
Metal products listed in Appendix I to Decree 174/2025 do not qualify. Each product's HS code and description must be checked.
Do household businesses benefit?
Yes. Households and individuals using the percentage-of-revenue method receive a 20% reduction in the applicable percentage for qualifying goods and services.
Is Form 01 mandatory?
Yes. Businesses applying the reduction must file Form 01 with the VAT return for the relevant period.
Legal basis
Resolution No. 204/2025/QH15 dated 17 June 2025 on VAT reduction.
Decree No. 174/2025/ND-CP dated 30 June 2025 implementing the VAT reduction under Resolution 204/2025/QH15.
VAT Law No. 48/2024/QH15, as amended by Law No. 149/2025/QH15.
Special Consumption Tax Law No. 66/2025/QH15.
Decree No. 254/2026/ND-CP on invoices and e-documents.
How W&A can help
A wrong 2% rate can lead to tax collection, penalties and hundreds of invoices to correct. W&A helps businesses get it right from the start and prepare for the 2027 transition:
Product and service list review: matching HS codes and product descriptions against Appendices I and II to determine exactly what qualifies.
Goods classification and HS code advice: aligning domestic tax and customs positions.
Contract and pricing review: standardising VAT clauses in contracts running into 2027.
VAT filings and correction of wrongly rated invoices: invoice adjustments, amended returns and explanations to the tax authority.
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