Is an enterprise importing wheat required to pay VAT upon import in Vietnam?

Is an enterprise importing wheat required to pay VAT upon import in Vietnam?

Pursuant to Clause 1, Article 4 of Circular 219/2013/TT-BTC, as amended by Clause 1, Article 1 of Circular 26/2015/TT-BTC, the regulation is as follows:

Subjects not subject to VAT

1. Products from cultivation (including products from planted forests), livestock, aquaculture, marine products that have not been processed into other products or have only gone through ordinary processing by organizations, individuals self-producing, capturing and selling, and at the import stage.

Newly ordinarily processed products are products that have only been cleaned, dried, shelled, milled, de-hulled, polished, separated seeds, separated stalks, cut, salted, refrigerated (chilled, frozen), preserved with sulfur gas, preserved by chemical solutions to prevent rot, soaked in sulfur solution or other preservative solutions and other common preservation forms.

Example 2: enterprise A signs a pig farming contract with enterprise B in the form where enterprise B provides enterprise A with breeding pigs, feed, veterinary medicine, and enterprise A delivers, sells pig products to enterprise B, the pig rearing fee received from enterprise B and the pig products delivered, sold to enterprise B are not subject to VAT.

Pig products that enterprise B receives back from enterprise A: if enterprise B sells live pigs (whole pigs) or fresh pork, the products sold are not subject to VAT. If enterprise B processes the pigs into products like sausages, smoked meat, meat loaf, or other processed products, the sold products are subject to VAT as regulated.

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Thus, an enterprise importing wheat that has not undergone any initial processing is not subject to VAT, and therefore does not have to pay value-added tax.

Is an enterprise importing wheat required to pay VAT upon import in Vietnam? (Image from the Internet)

What are the current regulations on VAT reduction rates in Vietnam?

According to Article 1 of Decree 72/2024/ND-CP regarding the policy of VAT reduction according to Resolution 142/2024/QH15.

[1] Levels of VAT reduction

- Business establishments applying VAT by deduction method are subject to an 8% VAT rate on goods and services defined in Clause 1, Article 1 of Decree 72/2024/ND-CP.

- Business establishments (including household businesses, individual businesses) applying VAT by a percentage rate on revenue are reduced by 20% of the percentage rate when issuing invoices for goods, services eligible for VAT reduction as provided in Clause 1, Article 1 of Decree 72/2024/ND-CP.

[2] Goods and services not eligible for VAT reduction

Article 1 of Decree 72/2024/ND-CP implements VAT reduction for groups of goods and services currently applying a 10% tax rate, except the following groups:

- Telecommunications, financial, banking, securities, insurance, real estate business activities, metals and metallurgical products, mineral products (excluding coal mining), coke, refined petroleum, and chemical products.

Details in Appendix 1 issued with Decree 72/2024/ND-CP

- Products and services subject to excise tax.

Details in Appendix 2 issued with Decree 72/2024/ND-CP

- Information technology according to information technology law.

Details in Appendix 3 issued with Decree 72/2024/ND-CP

- VAT reduction for each type of goods, services specified in Clause 1, Article 1 of Decree 72/2024/ND-CP is uniformly applied at the import stage, production, processing, and commercial business. For coal products sold (including coal mined and afterwards screened, classified through a closed-loop system before selling) subject to VAT reduction.

Coal products belong to Appendix I issued with Decree 72/2024/ND-CP, at stages other than the selling stage, are not eligible for VAT reduction.

Economic corporations implementing closed-loop processes before selling are also entitled to a VAT reduction for coal products sold.

In cases where goods and services stated in Appendices 1, 2, and 3 issued with Decree 72/2024/ND-CP are either not subject to VAT or subject to a 5% VAT rate according to the Value-Added Tax Law, the rules of the Value-Added Tax Law prevail, and VAT reduction is not applied.

How long is the period for applying an 8% VAT rate in Vietnam ?

As per Clause 2, Article 1 of Decree 72/2024/ND-CP, the VAT reduction rates are as follows:

- Business establishments applying VAT by deduction method are subject to an 8% VAT rate on goods and services outlined in Clause 1, Article 1 of Decree 72/2024/ND-CP.

- Business establishments (including household businesses and individual businesses) applying VAT by a percentage rate on revenue are reduced by 20% of the percentage rate when issuing invoices for goods, services eligible for VAT reduction as provided in Clause 1, Article 1 of Decree 72/2024/ND-CP.

Pursuant to Article 2, Clause 1 of Decree 72/2024/ND-CP, the effective date and implementation are stated as follows:

Effectiveness and implementation organization

1. This Decree takes effect from July 1, 2024, to December 31, 2024.

2. Ministries, according to their functions and tasks, and the People's Committees of provinces and centrally-run cities are to direct relevant agencies to deploy propaganda, guidance, inspection, and supervision so that consumers understand and benefit from the VAT reduction policy as prescribed in Article 1 of this Decree, focusing on solutions to stabilize the supply and demand of goods and services eligible for VAT reduction to maintain market price stability (price excluding VAT) from July 1, 2024, until December 31, 2024.

3. During implementation, if difficulties arise, the Ministry of Finance is assigned to provide guidance and resolution.

4. Ministers, Heads of ministerial-level agencies, Heads of agencies under the Government of Vietnam, Chairpersons of People's Committees of provinces and cities directly under central, and related enterprises, organizations, and individuals are responsible for implementing this Decree.

****Decree 72/2024/ND-CP is effective from July 1, 2024, to December 31, 2024. This means the VAT reduction to 8% will be applied until December 31, 2024.

From January 1, 2025, the goods reduced in VAT will revert to the 10% rate.

Therefore, the end of December marks the expiration of the period for the VAT reduction to 8 percent.