Proposal for agricultural and aquatic products to be exempted from VAT or 5% tax

National Assembly delegates discuss issues in the assembly hall on the afternoon of December 9th. *Photo: quochoi.vn*

On the afternoon of December 9, continuing the tenth session, the National Assembly discussed in the hall the draft Law amending and supplementing a number of articles of the Law on VAT.

Specific criteria for "normal preliminary processing"

Delegate Thach Phuoc Binh ( Vinh Long Delegation) highly appreciated the draft for expanding the scope of regulation and clarifying the tax exemption policy for products of crops, forests, livestock, aquatic products, aquaculture, and fishing in the sale and import stages.

Delegate Thach Phuoc Binh (Vinh Long delegation) delivers a speech. *Photo: quochoi.vn*

According to delegates, adding regulations for cases where enterprises and cooperatives sell unprocessed products to other enterprises and cooperatives is necessary, reflecting the characteristics of the agricultural supply chain.

However, in the process of implementing the law in recent times, many problems have arisen due to the lack of specific definitions and criteria for “normal processing”. Activities such as sorting, cold storage, peeling, drying, and vacuuming are still understood differently between localities. This leads to tax disputes, causing risks for businesses as well as management agencies.

Based on the above reality, delegates proposed to supplement the regulation assigning the Ministry of Finance to issue a list and specific quantitative criteria for activities considered as normal preliminary processing, based on international practices and the characteristics of Vietnamese agricultural products. In particular, clarify the criteria for distinguishing between preliminary processing and processing, linked to added value, the level of change in product properties or technology application; complete regulations on documents proving origin and purchasing procedures to both facilitate businesses and prevent tax fraud.

Delegate To Ai Vang (Soc Trang Delegation) speaks at the discussion. *Photo: quochoi.vn*

Delegate To Ai Vang (Soc Trang Delegation) said that the draft law needs to clarify the mechanism and conditions for VAT deduction and refund to help remove obstacles and ensure legitimate rights for taxpayers.

Specifically, the Government clearly stipulates the scope and provides detailed and specific instructions on the level of preliminary processing considered normal and not yet processed into other products. Delegates also recommended that the Government consider converting agricultural and aquatic products to VAT-exempt subjects or subject to a 5% tax rate so that enterprises can receive refunds and deductions of input tax, reducing the burden on agricultural enterprises.

We propose reclassifying fertilizers as exempt from VAT.

Delegate Tran Huu Hau (Tay Ninh Delegation) said that with the addition of Clause 1, Article 5, the National Assembly will help Vietnamese export enterprises reduce tens of thousands of billions of VND in capital spent on paying taxes and interest in advance, which will then be refunded by the State.

Delegate Tran Huu Hau (Tay Ninh delegation) speaks at the discussion. *Photo: quochoi.vn*

According to the delegate, removing the "input deduction" of Clause 5, Article 9 will not only help animal feed processing facilities reduce input costs, thereby reducing the selling price of animal feed.

Meanwhile, delegate Tran Van Lam (Bac Ninh delegation) said that animal feed and fertilizer are both important raw materials for the agricultural sector, but are being treated with two different VAT treatment methods. Specifically, although they are both input materials for agriculture, the tax policies for animal feed and fertilizer are not unified. One side is not subject to tax but is entitled to input deductions; the other side is subject to 5% tax but businesses and farmers still have to bear the additional costs.

Delegate Tran Van Lam (Bac Ninh delegation) speaks at the discussion. *Photo: quochoi.vn*

Delegates said this is a major problem because if kept unchanged, fertilizer prices will continue to increase due to VAT, leading to increased input costs for farmers, negatively affecting businesses and growers - the group that has suffered the most damage from natural disasters and epidemics in recent times.

Therefore, the delegates proposed to move fertilizers back to the group not subject to VAT. With the new policy allowing input deductions for goods not subject to tax, fertilizer production enterprises still benefit, while reducing the cost burden for farmers.

Minister of Finance Nguyen Van Thang spoke to explain and accept the opinions raised by National Assembly delegates. *Photo: quochoi.vn*

At the meeting, Minister of Finance Nguyen Van Thang spoke to explain and accept the opinions raised by National Assembly delegates.

Regarding the tax inequality between animal feed and fertilizer, the Minister said that different taxation on two important input materials of the agricultural sector leads to increased production costs and reduced competitiveness. The Ministry of Finance fully acknowledges the opinions and will continue to review and evaluate to report to competent authorities to consider adjusting tax policies on fertilizers in a unified, equal and practical manner.

Source: https://hanoimoi.vn/kien-nghi-san-pham-nong-san-thuy-san-duoc-mien-thue-vat-hoac-5-726251.html