VAT Rate on Domestically Produced and Imported Industrial Chains under Decree 174/2025/ND-CP
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Ho Chi Minh City Tax Authority (Unit 17) responded to PLB Vietnam Co., Ltd. regarding the VAT rate applicable to industrial chains under Decree 174/2025/ND-CP dated 30 June 2025 on VAT reduction pursuant to Resolution 204/2025/QH15 (effective 1 July 2025 to 31 December 2026). The guidance states that where a business sells goods currently subject to 10% VAT that do not appear in Appendix I or Appendix II attached to Decree 174/2025/ND-CP, the reduced VAT rate applies from 01/07/2025 to 31/12/2026. Where goods qualify for the reduction, the business may credit input VAT accordingly. The tax authority requires businesses to cross-reference their product industry codes against the Vietnamese Product Industry Classification System (under Decision 43/2018/ND-TTg) and against Appendix I and II of Decree 174/2025/ND-CP to self-determine the applicable VAT rate for each product in their actual operations. No blanket ruling of 8% or 10% is issued for domestically produced industrial chains.
Question
PLB Vietnam Co., Ltd. (Tax ID: 0314106046, Ho Chi Minh City) asked about the VAT rate applicable to imported industrial chains (HS Codes 731511 and 731512) and domestically produced industrial chains under Decree 174/2025/ND-CP. Specifically: do imported chains attract 8% or 10% VAT? Can the VAT rate of input raw materials be used to determine the output VAT rate for domestically produced chains?
Official guidance
Ho Chi Minh City Tax Authority (Unit 17) responded based on Decree 174/2025/ND-CP dated 30/06/2025 and Resolution 204/2025/QH15 dated 17/06/2025 as follows:
VAT reduction policy: Article 1, Clause 1 of Decree 174/2025/ND-CP provides for VAT reduction on goods and services currently subject to the 10% rate, excluding goods and services listed in Appendix I (ineligible for VAT reduction) and Appendix II (subject to special consumption tax, excluding petrol). The reduction applies uniformly at all stages: importation, production, and trading.
Two applicable scenarios:
- Scenario 1: If a business's goods are currently subject to 10% VAT and do NOT appear in Appendix I or Appendix II of Decree 174/2025/ND-CP, the reduced VAT rate applies from 01/07/2025 to 31/12/2026 under Article 1, Clause 2(a) of the Decree.
- Scenario 2: If the goods qualify for VAT reduction under Decree 174/2025/ND-CP, the business may credit input VAT in accordance with the applicable rules.
Self-determination requirement: The tax authority instructed the business to cross-reference its product industry codes against the Vietnamese Product Industry Classification System issued under Decision 43/2018/ND-TTg dated 01/11/2018 and against Appendix I and II of Decree 174/2025/ND-CP to determine the applicable VAT rate for each product in its actual operations. No blanket ruling was issued for domestically produced chains.
Under the Law on Tax Administration, taxpayers are responsible for the accuracy, truthfulness, and completeness of their tax declarations; the tax authority provides interpretation and information on tax obligations.
Action points
- Cross-reference the industry code of your industrial chains under the Vietnamese Product Industry Classification System (Decision 43/2018/ND-TTg) against Appendix I of Decree 174/2025/ND-CP to determine whether your chains (imported or domestically produced) are on the ineligible list.
- If the goods do NOT appear in Appendix I or Appendix II: apply the reduced VAT rate of 8% from 01/07/2025 to 31/12/2026 at all stages (importation, production, trading).
- If the goods appear in Appendix I or Appendix II: continue applying the 10% rate or the special consumption tax rate as applicable.
- Retain classification documentation for potential tax inspection purposes.