From July 1, 2025, what will be the VAT rate for fertilizers in Vietnam?

From July 1, 2025, what will be the VAT rate for fertilizers in Vietnam?

Based on Clause 2, Article 9 of the Law on Value Added Tax 2024 (effective from July 1, 2025), it is stipulated as follows:

Tax Rates

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2. A tax rate of 5% applies to the following goods and services:

a) Clean water for production and daily life, excluding bottled water, canned water, and other types of beverages;

b) Fertilizers, ores for producing fertilizers, pesticides, and animal growth stimulants as per legal regulations;

c) Services of excavation, dredging of channels, ditches, ponds to serve agricultural production; nurturing, caring, pest control for crops; preliminary processing and preservation of agricultural products;

d) Products from plantations, cultivated forests (excluding wood and bamboo shoots), livestock, aquaculture, and fishing that have not been processed into other products or have only undergone ordinary preliminary processing, except for products specified in Clause 1, Article 5 of this Law;

đ) Rubber latex in crepe form, ribbed smoked sheets, strip form, block form; nets, ropes, and strings for weaving fishing nets;

e) Products made from jute, rush, bamboo, rattan, leaves, straw, coconut husk, coconut shells, water hyacinth, and other handmade products utilizing agricultural by-products; raw cotton after carding; newsprint;

g) Vessels used for exploiting marine resources; specialized machinery and equipment for agricultural production as per the regulations by the Government of Vietnam;

h) Medical equipment as per the legal regulations on medical equipment management; medicines for disease prevention and treatment; pharmaceutical substances and materials for producing preventive and curative medicines;

i) Equipment used for teaching and learning including: models, drawings, boards, chalk, rulers, compasses;

k) Traditional, folk performing arts activities;

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

m) Scientific and technological services as regulated by the Law on Science and Technology;

n) Sale, lease, lease-purchase of social housing as regulated by the Housing Law.

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Thus, according to the above regulation, from July 1, 2025, fertilizers will be subject to a 5% VAT rate as stipulated by the Law on Value Added Tax 2024.

From July 1, 2025, what will be the VAT rate for fertilizers in Vietnam? (Image from the Internet)

What are procedures for applying tax deduction method to business establishments in Vietnam?

Pursuant to Clause 2, Article 11 of the Law on Value Added Tax 2024 (effective from July 1, 2025), the regulations on the tax deduction method applicable to business establishments are as follows:

Tax Deduction Method

1. The tax deduction method is prescribed as follows:

a) The value added tax payable by the tax deduction method is the output value added tax minus the deductible input value added tax;

b) The output value added tax is the total value added tax of goods and services sold as recorded on the value added tax invoice.

The value added tax of goods and services sold as recorded on the value added tax invoice equals the taxable price of goods and services sold multiplied by the value added tax rate of those goods and services.

In cases where the invoice records the payment price inclusive of value added tax, the output value added tax is determined by subtracting the taxable price from the payment price as specified at point k, paragraph 1, Article 7 of this Law;

c) The deductible input value added tax is the total value added tax recorded on value added tax invoices for purchased goods and services, tax payment documents for imported goods, or tax payment documents in case of purchasing services as stipulated in Clause 3, Clause 4, Article 4 of this Law and meeting the conditions specified in Article 14 of this Law.

2. The tax deduction method applies to business establishments that meet all the policies on accounting, invoices, and documents as regulated by the law on accounting, invoices, and documents, including:

a) Business establishments with annual revenue from selling goods and providing services of 1 billion VND or more, excluding households and individuals in production and business;

b) Business establishments voluntarily applying the tax deduction method, excluding households and individuals in production and business;

c) Foreign organizations and individuals providing goods and services for oil and gas exploration, development, and exploitation activities to pay taxes by the deduction method as declared, deducted, and paid by the Vietnamese side.

3. the Government of Vietnam prescribes in detail this Article.

Accordingly, the tax deduction method applies to business establishments that fully implement policies on accounting, invoices, and documents as regulated by the law on accounting, invoices, and documents, including:

- Business establishments with annual revenue from selling goods and providing services of 1 billion VND or more, excluding households and individuals in production and business;

- Business establishments voluntarily applying the tax deduction method, excluding households and individuals in production and business;

- Foreign organizations and individuals providing goods and services for oil and gas exploration, development, and exploitation to pay taxes by the deduction method as declared, deducted, and paid by the Vietnamese side.

When does the Government of Vietnam determine VAT for types of goods?

Based on Clause 2, Article 8 of the Law on Value Added Tax 2024 (effective from July 1, 2025), the regulations are as follows:

Time to Determine Value Added Tax

1. The time to determine value added tax is specified as follows:

a) For goods, it is the time of transfer of ownership or right to use the goods to the buyer or the time of issuance of the invoice, regardless of whether the money has been collected;

b) For services, it is the time of completion of the service provision or the time of issuance of the service provision invoice, regardless of whether the money has been collected.

2. The time to determine value added tax for the following goods and services is stipulated by the Government of Vietnam:

a) Exported goods, imported goods;

b) Telecommunication services;

c) Insurance business services;

d) Electricity supply activities, electric power production, clean water;

đ) Real estate business activities;

e) Construction, installation activities, and oil and gas activities.

Thus, according to the above regulations, the time to determine Value Added Tax for the types of goods stipulated by the government includes:

- Exported goods, imported goods;

- Telecommunication services;

- Insurance business services;

- Electricity supply activities, electric power production, clean water;

- Real estate business activities;

- Construction, installation activities, and oil and gas activities.