Official Promulgation of Decree No. 174/2025/NĐ-CP – 2% VAT Reduction Effective from July 1, 2025
After a period of public consultation and finalization, the Government officially issued Decree No. 174/2025/NĐ-CP on June 30, 2025. This decree provides a 2% reduction in Value-Added Tax (VAT) in accordance with Resolution No. 204/2025/QH15 of the National Assembly. The Decree is effective from July 1, 2025, until December 31, 2026, and applies uniformly across all stages of importation, production, processing, and trade.
Official Promulgation of Decree No. 174/2025/NĐ-CP – 2% VAT Reduction Effective from July 1, 2025
Key Highlights of Decree 174/2025/NĐ-CP
Tax Reduction Rate: From 10% to 8%
The Decree specifies:
Businesses applying the VAT credit method will apply an 8% tax rate instead of 10%.
Individuals and business households using the direct method (percentage on revenue) will receive a 20% reduction in the percentage used to calculate VAT.
Scope of Application: Specific Goods and Services
The tax reduction policy applies to most goods and services currently subject to the 10% rate, except for the following categories:
Telecommunications, finance, banking, insurance, and securities;
Real estate business;
Mineral products (except coal), metals;
Goods and services subject to special consumption tax (except gasoline).
Specific categories are listed in Appendices I & II attached to the Decree.
Clear Guidelines for Invoicing and Declaration
On VAT invoices, businesses must clearly state the "8%" VAT rate and the total reduced tax amount.
For business households and individuals applying the revenue-based percentage, a note must be added: “reduction equivalent to 20% of the VAT percentage under Resolution No. 204/2025/QH15.”
Practical Significance of the Decree
This tax reduction policy continues to deliver positive impacts as in previous periods, aiming to:
Stimulate domestic consumption and lower prices of goods and services for consumers;
Support businesses in reducing input costs and enhancing competitiveness;
Generate more jobs, promote business activities, and contribute to GDP growth.
It is expected that the 2% VAT reduction over the next 18 months may reduce state budget revenue by over VND 120 trillion, but the shortfall is anticipated to be offset by increased production and consumption growth.
What Should Businesses Do Immediately?
Check whether your goods and services fall under the tax reduction scope (refer to Appendices I & II).
Adjust invoice software and prepare appropriate tax declaration forms.
Update internal accounting and finance teams to comply with the new regulations.
Prepare proper documentation to avoid errors during tax inspections or audits.
Download the Full Decree
📥 View Decree 174/2025/NĐ-CP here: Click to view the official PDF file
Need Support for Implementation? DEDICA Is Here to Help
DEDICA Law Firm specializes in:
Consulting on the new VAT policy application for specific industries;
Guiding invoice, document, and contract adjustments;
Representing clients in dealings with tax authorities when issues arise.
Contact DEDICA Law Firm for expert legal consultation!
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