The VAT Law was passed by the National Assembly on November 26, 2024 and took effect on July 1, 2025. However, due to recommendations from associations, businesses, and the Ministry of Agriculture and Environment (MAE), the Ministry of Finance (MOF), authorized by the Prime Minister, has asked the National Assembly and its Standing Committee to consider amending several articles of the law.

Complaints

The MAE and associations have reported many obstacles and inconsistencies, and have said that current regulations are creating financial pressure on businesses, particularly in the trading of agricultural products.

Businesses are required to prepay 5 percent input VAT for the commercial purchase of agricultural goods. This VAT amount is later refunded for products whose large production volumes are primarily exported (such as pangasius, pepper, coffee), leading to wasted time and capital immobilization. 

Meanwhile, credit institutions do not disburse loans for this tax component when providing working capital, creating financial pressure and reducing business efficiency.

Estimated figures show the impact of the regulation in the last six months of 2025: VND5,000 billion for the Vietnam Coffee-Cocoa Association; around VND2,162 billion for the Pepper and Spice Association; and around VND2,016 billion for the Vietnam Food Association.

In addition, current regulations create discriminatory treatment between domestically produced agricultural and aquaculture products and imported ones, as imported agricultural and aquatic products are not subject to VAT when entering Vietnam.

Because animal feed is classified as non-taxable, input VAT cannot be credited or refunded, causing increased costs and selling prices for animal-feed producers and negatively affecting livestock farmers. This raises fairness concerns and may reduce competitiveness compared to imported products, which are also non-taxable.

Moreover, the rule requiring buyers to receive VAT refunds only after sellers have declared and paid tax has caused delays for many exporters, who must wait for verification of the seller’s tax obligations, thus creating obstacles and risks for businesses.

3 amendments proposed

In response to business feedback and amid continued storms and floods impacting the economy, especially in agriculture and livestock, the MOF says this an urgent issue which needs timely amendment and supplementation in the VAT Law.

The new draft reinstates the regulation that agricultural, forest, and aquatic products (unprocessed or only conventionally pre-processed) bought and sold at the commercial stage are not subject to declaration and payment of VAT but are eligible for input VAT deduction.

Accordingly, businesses will not have to pay the 5 percent input VAT on agricultural goods in commercial trading stage. This resolves the situation where VAT is collected and then refunded for items mostly produced for export, easing financial pressure and increasing business efficiency for businesses.

The draft also amends VAT policies for agricultural, forestry, livestock, and aquaculture products used as animal feed to align with existing animal-feed regulations.

The MOF believes that by amending the regulation, businesses producing and trading animal feed will not have to pay the 5 percent VAT, thereby reducing production costs and increasing competitiveness against imported goods.

The draft also removes the condition for VAT refund that the buyer is only eligible for a refund when the seller has declared and paid the tax. This helps shorten the tax refund time; exporting entities will receive refunds as regulated without having to wait for verification of the seller's declaration and payment.

Prior to that, in late October, the Vietnam Chamber of Commerce and Industry (VCCI)  sent a document to the Prime Minister proposing solutions to the bottlenecks regarding VAT policy. 

In reality, agricultural products such as coffee, pepper, cashew nuts, shrimp, fish, and raw timber mostly undergo only preliminary processing stages such as shelling, drying, milling, or curing, which do not generate substantial added value. 

According to the VCCI, applying a 5 percent VAT to the aforementioned goods is inconsistent with the nature of VAT, which is meant to tax only the added value generated during the production and business process. The mechanism of "collect first - refund later" forces businesses to advance a large amount of capital to pay the tax, even though their profit margin is only 1-3 percent. 

For example, the coffee industry must temporarily pay nearly VND10,000 billion in VAT annually, and the pepper industry must front up to $85 million. This increases the cost of exports, causing Vietnamese goods to lose competitive advantage compared to countries like Brazil, Indonesia, and India, where raw agricultural products are either exempt or subject to a zero percent tax rate. 

Nguyen Le