Official Implementation of a 5% Tax on Fertilizers

On the afternoon of November 26, the National Assembly officially passed the amended Value Added Tax (VAT) Law, with 407 out of 451 delegates voting in favor, accounting for 84.97% of the total delegates.

The amended Value Added Tax (VAT) Law approved by the National Assembly consists of 4 chapters and 17 articles.

The law stipulates that Value Added Tax (VAT) is a tax calculated on the added value of goods and services generated throughout the process from production and circulation to consumption.

The 0% tax rate applies to:

– Exported goods include:Goods exported from Vietnam to foreign organizations or individuals and consumed outside of Vietnam; Goods sold from domestic Vietnam to organizations in non-tariff zones and consumed within those zones to directly serve export production activities; Goods sold in isolated (customs-controlled) areas to individuals (foreigners or Vietnamese citizens) who have completed exit procedures; Goods sold at duty-free shops.

– Exported services, including: services directly provided to foreign organizations or individuals and consumed outside of Vietnam; and services directly provided to organizations in non-tariff zones and consumed within those zones to directly serve export production activities.

– Other exported goods and services include: international transportation; rental services for vehicles used outside the territory of Vietnam; aviation and maritime services provided directly or through agents for international transportation; construction and installation activities carried out abroad or in non-tariff zones; digital information content products supplied to foreign clients with documentation proving consumption outside Vietnam as prescribed by the Government; spare parts and materials for repairing or maintaining vehicles, machinery, and equipment for foreign entities and consumed abroad; processed goods for export as regulated by law; and goods and services exempt from VAT when exported, except for cases where the 0% tax rate is not applicable as specified in point (d) of this clause.

– Cases not subject to the 0% tax rate include: Technology transfer and intellectual property rights transfer abroad; Reinsurance services provided overseas; Credit granting services; Capital transfers; Derivative products; Postal and telecommunications services; Exported products as specified in Clause 23, Article 5 of this Law; Imported tobacco, alcohol, and beer that are later re-exported; Petrol and oil purchased domestically and sold to businesses in non-tariff zones; Automobiles sold to organizations and individuals in non-tariff zones. The Government shall provide detailed regulations for this clause. The Minister of Finance shall stipulate the documents and procedures for applying the 0% Value Added Tax rate as prescribed in this clause.

The 5% tax rate applies to the following goods and services:

Clean water used for production and daily life (excluding bottled or canned drinking water and other beverages); Fertilizers, ores used for fertilizer production, pesticides, and animal growth stimulants as prescribed by law; Dredging and excavation services for canals, ditches, ponds, and lakes serving agricultural production; Cultivation, care, and pest control services for crops; Preliminary processing and preservation services for agricultural products.

– Products from cropsand planted forests (excluding wood and bamboo shoots); livestock, aquaculture, and wild-caught seafood that have not been processed into other products or have only undergone simple preliminary processing, except for products specified in Clause 1, Article 5 of this Law; Natural rubber in the forms of latex, sheet rubber, crepe rubber, or crumb rubber; Fishing nets, twine, and yarn used for making fishing nets; Products made from jute, sedge, bamboo, rattan, leaves, straw, coconut shell, coconut husk, water hyacinth, and other handicraft items made from recycled agricultural materials; Carded or combed cotton fibers; newsprint paper; Fishing vessels operating in offshore waters; Specialized machinery and equipment used for agricultural production as regulated by the Government.

Medical equipment Medical equipment as regulated by the law on medical device management; Medicines for disease prevention and treatment; pharmaceutical chemicals and medicinal materials used as ingredients for producing medicines; Teaching and learning equipment, including models, drawings, boards, chalk, rulers, and compasses; Traditional and folk performing arts activities; Children’s toys; All kinds of books, except those specified in Clause 15, Article 5 of this Law; Scientific and technological services as regulated by the Law on Science and Technology; Sale, lease, and lease-purchase of social housing in accordance with the Law on Housing.

The law stipulates prohibited acts related to tax deduction and refund, including: Buying, giving, selling, advertising, or brokering the purchase and sale of invoices; Creating false transactions for the purchase or sale of goods and services, or transactions that violate legal regulations; Issuing invoices for goods and services during a temporary suspension of business operations, except for invoices issued to customers for contracts signed before the suspension notice; Using illegal invoices or documents, or improperly using invoices and documents as regulated by the Government; Failing to transmit electronic invoice data to tax authorities as required; Tampering with, misusing, unauthorizedly accessing, or destroying the information systems related to invoices and documents; Offering, receiving, or brokering bribes, or engaging in any other illegal acts involving invoices or documents to obtain tax deductions, refunds, misappropriation of tax money, or VAT evasion.

This law shall take effect from July 1, 2025, except as provided in Clause 2 of this Article.
According to Clause 2, the provisions on revenue thresholds for households and individuals engaged in business activities that fall under non-taxable subjects as specified in Clause 25, Article 5 of this Law and Clause 3 of this Article shall take effect from January 1, 2026.

Source: According to Vietnam Law Newspaper (Báo Pháp luật Việt Nam).