What is the VAT rate applicable to three-needled pine resin in Vietnam?

What is the VAT rate applicable to three-needled pine resin in Vietnam?

Pursuant to Clause 2, Article 8 of the Value Added Tax Law 2008 (as amended by Clause 3, Article 1 of the Amended Value Added Tax Law 2013 and further amended by Clauses 2, 3 of Article 3 of the Law on Amendments to Various Tax Laws 2014), a VAT rate of 5% is applied to the following goods and services:

Tax Rate

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

a) Clean water for production and living purposes;

b) Ores for fertilizer production; pesticides and growth stimulants for livestock and plants;

c) [Repealed];

d) Services of digging, dredging channels, ditches, ponds, serving agricultural production; cultivation, care, pest control for plants; preliminary processing, and preservation of agricultural products;

dd) Agricultural, livestock, and aquatic products that have not been processed or only preliminarily processed, except for products specified in Clause 1, Article 5 of this Law;

e) Preliminary processed rubber latex; preliminary processed pine resin; nets, yarns, and fibers for weaving fishing nets;

g) Fresh foods; unprocessed forest products, except for wood, bamboo shoots, and products specified in Clause 1, Article 5 of this Law;

h) Sugar; by-products of sugar production, including molasses, bagasse, and mud residues;

i) Products made from jute, rush, bamboo, rattan, straw, coconut husk, coconut shell, water hyacinth, and other handicraft products made from recycled agricultural materials; preliminary processed cotton; newsprint paper;

k) [Repealed];

l) Medical equipment, instruments, medical cotton, medical sanitary pads; preventive and therapeutic drugs; chemical products and pharmaceuticals as raw materials for medicine production;

m) Teaching aids used for teaching and learning, including models, drawings, boards, chalk, rulers, compasses, and other specialized equipment and tools for teaching, research, and scientific experiments;

n) Cultural, exhibition, sports activities; performing arts, film production; import, distribution, and movie screening;

o) Children's toys; various books except for books specified in Clause 15, Article 5 of this Law;

p) Scientific and technological services as regulated by the Law on Science and Technology.

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Additionally, guidance provided in Official Dispatch 4646/TCT-CS of 2017 on value-added tax states:

Clause 1, Article 5 of the Value Added Tax Law No. 13/2008/QH12 specifies non-VAT-subjects as follows:

“1. Cultivation, livestock, aquaculture products not processed into other products or only undergo ordinary preliminary processing by the organization or individual who directly produce, catch, and sell at the importation stage.”

Point e, Clause 2, Article 8 of the Value Added Tax Law No. 13/2008/QH12 specifies a 5% VAT rate as follows:

“e) Preliminary processed rubber latex; preliminary processed pine resin; nets, yarns, and fibers for weaving fishing nets.”

Based on these regulations, the KonTum Tax Department is requested to clarify the process of exploitation and processing of three-needled pine resin to determine:

- If three-needled pine resin is identified as preliminary processed pine resin under Clause 2, Article 8 of the VAT Law, the VAT rate is 5%.

- If three-needled pine resin is identified as unprocessed pine resin by the organization or individual who cultivate it themselves under Clause 1, Article 5 of the VAT Law, it falls into the category of non-taxable VAT subjects.

From the aforementioned regulations, the VAT rate applicable to three-needled pine resin is determined as follows:

- In the case where three-needled pine resin is identified as preliminary processed resin, the VAT rate is 5%.

- In the case where three-needled pine resin is identified as unprocessed resin by the organization or individual who grow it themselves, it falls into the category of non-taxable VAT subjects.

What is the VAT rate applicable to three-needled pine resin in Vietnam? (Image from the Internet)

What is the taxable price of three-needled pine resin products sold by sole proprietorships in Vietnam?

According to Clause 1, Article 7 of the 2008 Value Added Tax Law (amended by Clause 2, Article 1 of the 2013 Amended Value Added Tax Law) regarding VAT taxable price as follows:

Taxable Price

1. Taxable prices are defined as follows:

a) For goods and services sold by production and business entities, it is the selling price excluding VAT; for goods and services subject to special consumption tax, it is the selling price including special consumption tax but excluding VAT; for goods subject to environmental protection tax, it is the selling price including environmental protection tax but excluding VAT; for goods subject to both special consumption tax and environmental protection tax, it is the selling price including both but excluding VAT;

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Thus, the taxable price for three-needled pine resin products (determined as preliminary processed pine resin) sold by sole proprietorships is the selling price excluding VAT.

Does a sole proprietorship paying VAT by the credit-invoice method declare tax when selling three-needled pine resin products to individual businesses in Vietnam?

Cases where VAT declaration and payment are not required are specified in Clause 5, Article 5 of Circular 219/2013/TT-BTC as follows:

Cases not required for VAT declaration and payment

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5. Enterprises, cooperatives paying VAT by the credit-invoice method selling cultivation, livestock, aquaculture, and seafood products unprocessed into other products or only undergo ordinary preliminary processing to enterprises and cooperatives at the commercial trading stage are not required to declare, calculate, and pay VAT. On the VAT invoice, the selling price is recorded as the price without VAT; both the tax rate and VAT lines are left blank, crossed out.

In cases where enterprises, cooperatives paying VAT by the credit-invoice method sell cultivation, livestock, and aquaculture products unprocessed into other products or only undergo preliminary usual processing to other entities like households, individual businesses, and other organizations, individuals, then VAT must be declared and calculated at the rate of 5% as guided in Clause 5, Article 10 of this Circular.

Households, individual businesses, enterprises, cooperatives, and other economic organizations paying VAT by the direct calculation method on value-added when selling cultivation, livestock, aquaculture products not processed into other products or only undergo usual preliminary processing at the commercial trading stage shall declare and calculate VAT at the rate of 1% on revenue.

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Thus, in cases where a sole proprietorship pays VAT by the credit-invoice method for products of three-needled pine resin (determined as preliminary processed resin) to individual businesses, it must declare and calculate VAT at the rate of 5%.