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VIETNAM VALUE ADDED TAX (VAT) POLICY FOR AGRICULTURAL PRODUCTS/ FARMING, BREEDING, AND AQUACULTURE PRODUCTS

– Pursuant to Clause 1, Article 1 of Circular No. 26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance guiding on VAT and tax administration in Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government detailing the implementation of the Law amending and supplementing some of the Law on taxation and amending, supplementing some Articles of the Decrees on taxation and amending, supplementing some Articles of Circular No. 39/2014/TT-BTC dated March 31, 2014 of the Ministry of Finance on invoices for selling goods and providing services, amending Clause 1, Article 4 on regulations on objects not subject to VAT:

“1. Amend Clause 1 Article 4 as follows:

“1. Crop products (including planted forest products), breeding, and aquaculture products that are produced, caught, sold, or imported but have not been processed into other products or have just been preprocessed by organizations and individuals that self-produce, catch, sell, and at import stage.

Preprocessed products have only been cleansed, dried, husked, ground, milled, threshed, split, cut, salted, stored cold (cooled or frozen), preserved with sulfur dioxide, sulfur solution, or other solutions, and other typical preservation methods.”

– Pursuant to Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance guiding the implementation of the Law on VAT and Decree No. 209/2013/ND-CP dated December 18, 2013 of the Government regulating detailing and guiding the implementation of some Articles of the Law on VAT.

+ In Clause 5, Article 5, VAT declaration and payment are not required in the following cases:

“5. Companies/cooperatives that pays VAT by deduction method and sell unprocessed or preprocessed farming, breeding, or aquaculture products to other companies/cooperatives as commercial business are exempt from declaring and paying VAT. The sale price on the VAT invoice is VAT-exclusive price, the line of tax rate must be left blank and crossed out.

If VAT has been declared on invoices for unprocessed or preprocessed products supplied to companies/cooperatives as mentioned above, both the supplier and the buyer must amend the invoices so that they do not have to declare, calculate and pay VAT.”

+ In Clause 5, Article 10 regulating on tax rate of 5%:

 “5. Unprocessed or preprocessed agricultural, breeding, and aquaculture products (specified in Clause 1 Article 4 of this Circular) as commercial business, except for the conditions set out in Clause 5 Article 5 of this Circular.

The unprocessed farming products guided in this Clause including unhusked rice, husked rice, corn, potatoes, cassava, and wheat.”

+ In Article 11 regulating on tax rate of 10%:

“The goods and services not included in Articles 4, 9, and 10 of this Circular will be subject to a 10% tax.

The VAT rates mentioned in Article 10 and Article 11 shall be consistently applied to each type of goods and services, whether they are imported, manufactured, processed, or traded.”

VNC would like to summarize the foregoing provisions as follows:

– Crop products (including planted forest products) that have not been processed into other products or are simply preprocessed by self-manufactured organizations and individuals, marketed and at the import stage, are exempt from VAT as guided in Clause 1, Article 1 of Circular No. 26/2015/TT-BTC.

– Companies/cooperatives that pays VAT by deduction method and sell unprocessed or preprocessed farming, breeding, or aquaculture products to other companies/cooperatives (as commercial business) are exempt from declaring and paying VAT under the guidance in Clause 5, Article 5 of Circular No. 219/2013/TT-BTC. The sale price on the VAT invoice is VAT-exclusive price, the line of tax rate must be left blank and crossed out.

– Companies/cooperatives that pays VAT by deduction method and sell unprocessed or preprocessed farming, breeding, or aquaculture products to other subjects such as households, business individuals and other organizations and individuals (as commercial business) shall declare and pay VAT at tax rate of 5% guided in Clause 5, Article 10 of this Circular.

– Crop products that have been processed into other products are subject to the 10% VAT rate under the guidance in Article 11 of Circular No. 219/2013/TT-BTC

(Preprocessed methods and preservation methods are determined according to the guidance in Clause 1, Article 1 of Circular No. 26/2015/TT-BTC).

Reference example from VNC:

Food Company B, which pays VAT using deduction method, buys rice directly from the farmers or farming companies. Then VAT is not charged on rice purchased directly from farmers or farming companies.

In case Food Company B sells rice to Import Export Company C, Food Company B is not required to declare and pay VAT on the rice sold to Import Export Company C.

Food Company B sells rice to Liability Limited Company D, (which is an enterprise producing vermicelli and rice noodles), then Food Company B is not required to declare, calculate and pay VAT on the amount of rice sold to Company D.

Food Company B directly sells rice to consumers: the Company shall declare and pay VAT at the rate of 5%.