VCCI recommends restoring the regulation of not declaring tax and calculating VAT on semi-processed agricultural products

The coffee industry is being greatly affected by the imposition of a 5% VAT on processed products - Photo: TAN LUC

Previously, the regulation that semi-processed agricultural products do not have to be declared or subject to VAT was stipulated by the Government in Decree 209/2013 of the Government.

Concerns about reduced competitiveness of Vietnamese agricultural products

In a document sent to the Prime Minister, the Vietnam Federation of Commerce and Industry (VCCI) reported many problems and issues arising when applying the law. Law on Value Added Tax No. 48/2024 and implementing documents.

According to the provisions of Point d, Clause 2, Article 9 of the Law on Value Added Tax, products that have not been processed into other products or are normally pre-processed are subject to value added tax (VAT) at a rate of 5%. However, in reality, agricultural products such as coffee, pepper, cashews, shrimp, fish, raw wood, etc. mainly only go through pre-processing stages such as peeling, drying, drying, and grinding, which do not generate real added value.

Therefore, VCCI believes that applying a 5% VAT tax to this group of agricultural products is not consistent with the nature of VAT, which is only levied on the added value during the production and business process.

In particular, the VAT pre-collection and post-refund mechanism is forcing businesses and households in the agricultural sector to advance a large amount of capital to fulfill VAT obligations, while the profit margin of these industries is very low, only 1-3%.

For example, to fulfill VAT obligations on semi-processed agricultural products, the coffee industry must pay about 10,000 billion VND/year, the pepper industry must pay about 2,235 billion VND/year, causing great financial pressure on agricultural export enterprises.

This increases export prices, causing Vietnamese agricultural products to lose their competitive advantage compared to countries such as Brazil, Indonesia, and India - where raw agricultural products are exempted or subject to 0% VAT.

Proposed series of solutions to remove obstacles

To remove obstacles for businesses and business households in various industries Regarding the production and export of agricultural products, VCCI proposed that the Prime Minister consider, restore, or temporarily restore the regulation on not having to declare and calculate VAT for semi-processed agricultural products as previously applied in Decree 209/2013 of the Government.

At the same time, it is recommended that the Government assign the Ministry of Agriculture and Environment to preside over and coordinate with relevant ministries and branches to issue a specific list of common pre-processed agricultural products for each industry, ensuring consistency and understanding among localities.

VCCI also recommended that the Government direct the Ministry of Finance to develop an automatic tax refund mechanism for valid records with no signs of fraud, similar to the model being implemented in India.

Adjust regulations related to tax refund conditions in the direction of eliminating the requirement that businesses can only receive tax refunds when suppliers have declared and paid taxes.

Promptly issue specific legal guidelines to remove obstacles in transactions between businesses and farming households - the main production force but without a suitable mechanism to officially participate in the modern supply chain.

There needs to be clear guidance on VAT exemptions for small-scale farmers, ensuring that administrative barriers are not created that make it difficult to procure domestic raw materials.

Source: https://baoquangninh.vn/vcci-kien-nghi-khoi-phuc-quy-dinh-khong-khai-thue-tinh-thue-vat-voi-nong-san-so-che-3381355.html