- Specifically, the materials and components that make up the electrical cabinets include:

- Mechanical equipment, accounting for 15% of the value of the finished electrical cabinets, with a VAT rate of 10% on the purchased components.

- Switchgear (electrical equipment), accounting for 30% of the value of the finished electrical cabinets, with a VAT rate of 8% on the purchased components.

- Transmission equipment (copper metal bars, metal core electrical cables, etc.), accounting for 20% of the value of the finished electrical cabinets, with a VAT rate of 10% on the purchased components.

- Protection, control, and monitoring display equipment, accounting for 18% of the value of the finished electrical cabinets, with a VAT rate of 8% on the purchased components.

- Intermediate connecting equipment (busbars, screws, etc.), accounting for 5% of the value of the finished electrical cabinets.

- Labor costs account for 12% of the value of the finished electrical cabinets.

Mrs. Hien is asking whether the VAT rate for the sale of her company's electrical cabinets is 8% or 10%.

The Ministry of Finance provides the following response:

Based on Article 1 of Decree No. 44/2023/ND-CP dated June 30, 2023, of the Government, regarding the policy of reducing VAT according to Resolution No. 101/2023/QH15 dated June 24, 2023, of the National Assembly, as follows:

"Article 1. Reduction of VAT

1.  Reduction of VAT for groups of goods and services subject to a 10% tax rate, except for the following groups of goods and services:

a) Telecommunications, financial activities, banking, securities, insurance, real estate business, metal and finished metal products, mineral products (excluding coal mining), coke, refined petroleum products, and chemical products. Details are provided in Appendix I attached to this Decree.

b) Products and services subject to special consumption tax. Details are provided in Appendix II attached to this Decree.

c) Information technology according to the law on information technology. Details are provided in Appendix III attached to this Decree.

d) The reduction of VAT for each type of goods and services as prescribed in Clause 1 of this Article shall be applied uniformly at all stages of import, production, processing, and trade. For coal products sold (including cases where coal is mined and then classified and sold according to a closed process), which are subject to the reduced VAT rate, the products listed in Appendix I attached to this Decree are eligible for the reduced VAT rate. Coal products listed in Appendix I attached to this Decree, at stages other than coal mining, are not eligible for the reduced VAT rate.

… In the case of goods and services listed in Appendices I, II, and III accompanying this Decree, they are not subject to VAT or are subject to a 5% VAT rate as specified in the VAT Law. In such cases, VAT shall be applied according to the provisions of the VAT Law, and no reduction in VAT shall apply.

2.  Reduction of VAT Rate

a) Businesses that calculate VAT by the deduction method shall apply a VAT rate of 8% to goods and services as stipulated in Clause 1 of this Article.

… 4. In the case of businesses as stipulated in Point a of Clause 2 of this Article that sell goods or provide services with different VAT rates, the VAT invoice must clearly indicate the VAT rate for each item as specified in Clause 3 of this Article…”

Based on Appendices I, II, III of the list of goods and services not subject to VAT reduction issued with Decree No. 44/2023/ND-CP dated June 30, 2023, by the Government;

Based on Decision No. 43/2018/QD-TTg dated November 1, 2018, by the Government on the Vietnam product industry classification system;

According to the above regulations, in the case of your company, which calculates VAT by the deduction method and provides goods and services subject to a 10% VAT rate but not included in Appendices I, II, or III issued with Decree No. 44/2023/ND-CP dated June 30, 2023, by the Government, a VAT rate of 8% shall apply from July 1, 2023, until December 31, 2023, as stipulated in Article 1 of Decree No. 44/2023/ND-CP.

In the case of your company providing goods and services listed in Appendices I, II, or III issued with Decree No. 44/2023/ND-CP, no reduction in VAT shall apply as stipulated in Clause 1 of Article 1 of Decree No. 44/2023/ND-CP.

We recommend that you refer to the Prime Minister's Decision No. 43/2018/QD-TTg, cross-reference the product codes of the goods and services your company provides with the product codes listed in Appendices I, II, and III issued with Decree No. 44/2023/ND-CP to ensure compliance with the regulations.

If you encounter any difficulties during the implementation, please provide relevant documents related to the issues and contact the tax authority responsible for direct management for specific guidance.