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It has earmarked, for until 2030, VND6.5 million ($267) for cremating people aged above 10 and VND3.5 million for those below 10.
Deceased people who are unidentifiable or have no loved ones to take care of their funeral will be cremated by the government.
The new policy is meant to discourage people from building large, expensive tombs to save land.
Tran Dinh Hang, head of the Hue branch of the Vietnam National Institute of Culture and Arts Studies, said subsidizing cremation makes sense since the city's overall planning will prevent people from opening graveyards simultaneously as they have been doing.
"The practice of burying is embedded in society. A shift towards cremation needs to have a road map."
More cremation sites need to be built so that they are more accessible to people.
Thua Thien-Hue, home to former Imperial City Hue and grand royal tombs, has 9,500 ha of graveyards, among the largest of any province or city in Vietnam.
