When Vietnam's VAT reduction ends: rate transitions and tax clauses in long-term contracts
The short answer
Since 2022, Vietnam has applied a 2% VAT reduction (from 10% to 8%) in a series of successive rounds. The current round, under Resolution No. 204/2025/QH15, runs until 31 December 2026.
Each time the policy ends, is extended or changes scope, businesses face the same set of issues:
the rate for transactions spanning the transition date;
invoice adjustments and returned goods;
pricing in long-term contracts;
sales system configuration.
The core principles are:
the VAT rate follows the point at which the tax liability arises, i.e. when the invoice is correctly issued;
contracts should state prices exclusive of VAT, with a clause applying the VAT rate in force when the invoice is issued.
Businesses that get these two things right control the risk whether the policy ends or continues.
Why is this a recurring problem?
The VAT reduction was designed as a time-limited support measure, extended in stages: Resolutions No. 43/2022/QH15, 101/2023/QH15, 110/2023/QH15, 142/2024/QH15, 174/2024/QH15 and 204/2025/QH15. The scope of qualifying goods has also changed from round to round.
For contracts lasting several years, such as maintenance, outsourced services or framework supply agreements, it is almost certain that the rate will change at least once during performance. A business that deals with this properly once will be ready for every future change.
Three transition principles
1. The rate follows the correct invoice date.
Goods delivered, services completed and invoices correctly issued while the policy is in force: the reduced rate applies.
Tax liabilities arising after the policy ends: the standard rate applies.
Businesses may not pull invoices forward to obtain the lower rate, nor push them back to get around the rules.
2. Adjustments and returns follow the original invoice. Under the principle applied in earlier rounds, where goods or services invoiced at the reduced rate are later returned or adjusted, the adjusting invoice uses the rate on the original invoice. Businesses should check the guidance for the specific round.
3. Distinguish advance receipts clearly. Advances and prepayments for services must be invoiced when received. A deposit under the Civil Code securing performance of a service contract, by contrast, is not invoiced on receipt. This distinction determines which side of the transition date a receipt falls on.
Long-term contracts: how should the tax clause be written?
How the price is stated | Risk if the rate changes | Recommendation |
"Price inclusive of 8% VAT" | If the rate rises, the seller absorbs the difference or a dispute arises | Avoid in long-term contracts |
"Lump-sum price inclusive of all taxes" | The seller bears all tax policy risk | Use only where that risk has been priced in |
"Price exclusive of VAT; VAT charged at the rate in force when the invoice is issued in accordance with the law" | Both parties automatically apply the correct rate | Recommended for all long-term contracts |
Beyond the price clause, long-term contracts should also include:
A change-in-law clause: a mechanism for adjustment where tax changes significantly affect the parties' obligations.
An invoicing clause: invoice timing linked to specific acceptance or handover milestones.
A clause on correcting invoices with the wrong rate: responsibilities for cooperation and timelines.
For contracts involving the State, such as contracts awarded through public procurement, prices are often fixed by the approved estimate. Price adjustments for rate changes must follow procurement rules and the signed contract, which makes advance review all the more important.
Illustrative case
Company T signs a 24-month system maintenance contract starting in July 2026. The monthly fee is stated as VND 108 million "inclusive of 8% VAT".
If the rate returns to 10% from 1 January 2027 and the price stays at VND 108 million:
Company T's pre-tax revenue falls from VND 100 million to about VND 98.18 million a month;
over the remaining 18 months, it loses about VND 32.7 million in revenue, close to 1.8% of the contract value.
That is small for one contract. For a business with hundreds of similar contracts, however, the impact on margins is significant.
Had the contract stated "VND 100 million exclusive of VAT, with VAT charged as provided by law at the time of invoicing", the issue would have resolved itself automatically.
Checklist before every rate change
Review the portfolio of current contracts and flag those with VAT-inclusive prices.
Proactively negotiate contract amendments with major customers before the transition date.
Lock down invoice timing for transactions at the end of the period. Reconcile acceptance and delivery records.
Update rate settings in invoicing software, cash registers and online sales platforms.
Update published price lists and notify customers and distributors.
Prepare procedures for returns and invoice adjustments after the transition date.
Monitor closely any extension or change in scope. If the policy is extended, review the list of qualifying goods for the new round.
FAQs
When does the current VAT reduction end?
Under Resolution No. 204/2025/QH15, on 31 December 2026. Businesses should monitor any new resolutions on extension or adjustment.
Goods delivered in December but invoiced in January: which rate applies?
The rate follows the correct invoice date. Goods delivered in December must be invoiced in December, when ownership or the right to use passes. Invoicing late in January breaches the invoicing-time rules.
What if goods sold at 8% are returned after the policy ends?
Under the principle applied in earlier rounds, the adjusting invoice uses the rate on the original invoice. Businesses should check the specific guidance for each round.
Is a contract with a price "inclusive of 8% VAT" adjusted automatically?
No, unless the contract contains an adjustment clause. The parties need to negotiate an amendment, or the seller must accept lower pre-tax revenue.
Legal basis
Resolution No. 204/2025/QH15 and Decree No. 174/2025/ND-CP on the VAT reduction.
VAT Law No. 48/2024/QH15, as amended by Law No. 149/2025/QH15.
Decree No. 254/2026/ND-CP on invoices and e-documents.
Civil Code 2015 and Commercial Law 2005 (on contract formation and adjustment).
How W&A can help
VAT rate changes recur. A business that prepares properly once will no longer be caught out. W&A supports businesses with:
Contract portfolio review to identify contracts at risk when rates change.
Drafting price, tax and change-in-law clauses for template contracts and amendments.
Advice on invoice timing and adjusting invoices during transition periods.
Review of qualifying goods and services whenever the policy is extended or its scope changes.
Support in negotiations with customers and suppliers where pricing disputes arise from rate changes.
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