Are specialized machinery and equipment for agricultural production subject to VAT in Vietnam?

Are specialized machinery and equipment for agricultural production subject to VAT in Vietnam?

Currently, based on Clause 3a, Article 5 of the 2008 Law on Value-Added Tax, as amended by Clause 1, Article 3 of the 2014 Law on Amendments to Tax Laws and Clause 3a, Article 4 of Circular 219/2013/TT-BTC, supplemented by Clause 2, Article 1 of Circular 26/2015/TT-BTC, specialized machinery and equipment for agricultural production are not subject to VAT.

Specialized machinery and equipment for agricultural production include: plowing machines; harrows; rotary tillers; row marker machines; root shredders; field leveling equipment; seeders; planters; sugarcane planters; nursery production systems; diggers, furrow makers, spreaders, fertilizer applicators; pest control sprayers, tanks; harvesters of rice, corn, sugarcane, coffee, cotton; root, fruit, and tuber harvesters; tea pruning, harvesting machines; rice thresher; corn husker; soybean thresher; peanut husker; coffee sheller; coffee and wet rice pre-processing machinery; agricultural dryers (rice, corn, coffee, pepper, cashew...), aquaculture dryers; agricultural crop collectors, loaders; egg incubators; grass harvesters, straw balers, grass balers; milkers and other specialized machinery.

However, from July 1, 2025, as per the regulations in Clause 2, Article 9 of the 2024 Law on Value-Added Tax (effective from July 1, 2025), a 5% VAT rate will apply to the following goods and services:

Tax Rate

...

2. The 5% VAT rate applies to the following goods and services:

a) Clean water for production and domestic use, excluding bottled water and other beverages;

b) Fertilizers, ores for fertilizer production, pest control chemicals, and growth stimulants for livestock as prescribed by law;

c) Services related to earthworks, dredging of canals, ditches, ponds for agricultural production; cultivation and care of plants; preliminary processing, preservation of agricultural products;

d) Products from planting, forestry (excluding wood, bamboo), livestock, aquaculture, and fishing not processed into different products, or only through ordinary preliminary processing, excluding products specified in Clause 1, Article 5 of this Law;

đ) Rubber latex in sheet form, block form, crumb form, retreaded rubber; nets, floats, and ropes for making fishing nets;

e) Products made from jute, sedge, bamboo, grain straw, coconut shells, coconut husks, water hyacinth, and other handmade products produced using recycled agricultural materials; cotton fibre already carded and combed; newsprint;

g) Fishing ships operating in sea areas; specialized machinery and equipment for agricultural production as prescribed by the Government of Vietnam;

h) Medical equipment as prescribed by the law on healthcare management; pharmaceuticals for disease prevention and treatment; drug substances, pharmaceuticals are raw materials for pharmaceutical production, pharmaceuticals for disease prevention and treatment;

i) Equipment used for teaching and studying, including models, diagrams, boards, chalk, rulers, compasses;

k) Traditional, folk performing arts activities;

l) Children's toys; books, except those specified in Clause 15, Article 5 of this Law;

m) Scientific and technological services under the Science and Technology Law;

n) Sale, lease, or lease-purchase of social housing as per the Law on Housing.

Thus, from July 1, 2025, specialized machinery and equipment for agricultural production as prescribed by the Government of Vietnam will transition from non-VAT goods to a 5% VAT rate.

When is the time for determining VAT for specialized machinery and equipment for agricultural production in Vietnam from July 1, 2025?

The timing for determining VAT for specialized machinery and equipment for agricultural production from July 1, 2025, is stipulated in Article 8 of the 2024 Law on Value-Added Tax as follows:

- The timing for determining value-added tax for goods is the time at which the ownership of goods is transferred to the buyer or the time the invoice is issued, regardless of whether payment has been received;

- The timing for determining value-added tax for export and import goods is stipulated by the Government of Vietnam.

Are specialized machinery and equipment for agricultural production subject to VAT in Vietnam? (Image from the Internet)

Where do taxpayers declare and pay VAT in Vietnam?

Based on the provisions of Article 20 of Circular 219/2013/TT-BTC, taxpayers declare and pay VAT at the localities where they produce and conduct business.

+ Taxpayers declaring and paying VAT via the credit method, with dependent accounting production establishments located in provinces and centrally run cities other than the province or city where the headquarters are located, must pay VAT at the locality where the production establishment is situated and at the locality where the headquarters are situated.

+ In cases where enterprises or cooperatives using the direct method have production establishments in provinces or cities other than where the headquarters are located or where they have itinerant sales activities outside the province, the enterprises or cooperatives shall declare and pay VAT at a percentage on revenue for revenue arising from outside the province at the locality where the production establishment or itinerant sales occur.

Enterprises or cooperatives do not have to pay VAT at a percentage on revenue at the headquarters for revenue arising outside the province that has been declared and paid.