Proposal to expand VAT-exempt agricultural products
Recently, the Ministry of Finance has announced and solicited public and business feedback on the draft Decree detailing the implementation of certain provisions of the Law on Value-Added Tax (“Draft“). The Draft introduces several noteworthy amendments, including the following:
Proposal to expand the scope of agricultural products exempt from value-added tax (“VAT”)
Under current regulations, one category exempt from VAT includes unprocessed or minimally processed products from cultivated plants, planted forests, livestock, aquaculture, and fishing. Minimally processed products are defined as those that have undergone minimally processing methods such as cleaning, drying, shelling, dehusking, cutting, salting, refrigeration, and other common preservation methods.
To support businesses in the agricultural sector, the Draft proposes expanding the definition of minimally processed agricultural products. Specifically, products that undergo the following processes will still be considered VAT-exempt: coarse milling, partial grinding, dehusking, polishing, husk removal, trimming, milling, polishing grains, glazing grains, separating into parts, deboning, chopping, skinning, crushing, flattening, airtight canning, sulfur dioxide preservation, chemical preservation to prevent decay, and soaking in sulfur solutions.
Proposal to clarify VAT calculation in specific cases
To minimize inconsistencies between businesses and tax authorities regarding VAT calculation, the Draft proposes additional provisions clarifying VAT calculations for specific scenarios.
According to the Draft, the taxable price for asset leasing services will be the rental price agreed upon in the lease contract. If the contract specifies a lump-sum payment for the entire lease term, the payment will be allocated to each taxable period accordingly.
For goods processing services, the VAT-taxable price will be the processing fee stipulated in the processing contract, including labor costs, fuel expenses, material costs, and other expenses incurred in processing the goods.
For construction and installation activities, the Draft provides two scenarios for determining VAT-taxable prices. If the construction contract includes materials, machinery, and equipment, the taxable price will consist of both the service fee and the value of the materials and equipment. If the contract does not include materials, machinery, and equipment, the taxable price will cover only the construction and installation service fee.
Proposal to require non-cash payments for invoices from VND 5 million for VAT deduction
Under current regulations, one of the conditions for VAT input tax deduction on purchases of goods and services exceeding VND 20 million is that businesses must provide proof of non-cash payment. However, the Draft proposes lowering this threshold to VND 5 million.
If this proposal is approved, purchases of goods and services with a single transaction value of VND 5 million or more (instead of the current VND 20 million) must have non-cash payment proof to qualify for VAT input tax deduction.
Clarification of non-cash payment documents
To ensure consistency in interpretation among tax authorities and businesses, the Draft also proposes additional regulations clarifying the definition of non-cash payment documents. These documents must be bank transaction records proving the transfer of funds from the buyer’s account to the seller’s account at a financial institution. Acceptable forms of non-cash payment include checks, payment orders, wire transfers, collection authorizations, bank cards, credit cards, mobile phone SIMs (e-wallets), and other approved payment methods.
If adopted, the provisions in the Draft will clarify various aspects of VAT regulations, ensuring greater transparency and accuracy in VAT declarations and payments for businesses.
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