VAT and PIT Guidance for Individual Households Sawing Round Logs into Planks or Pieces under Decree 359/2025/ND-CP
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Based on:Nghị định 359/2025/NĐ-CP; Thông tư 84/2021/TT-BTC; Thông tư 40/2021/TT-BTC - Ministry of Finance
This explanation was generated by AI and checked by an automated AI review, not by a human expert. It is not legal, tax or accounting advice and may contain errors. Check the official document before you rely on it.
The Ministry of Finance advises that a household business that purchases round logs (pine, eucalyptus, etc.) and saws them into planks or pieces for sale to processing companies is engaged in manufacturing activity, not merely basic primary processing. Therefore the higher manufacturing tax rate applies. Under Articles 4 and 6 of Circular 84/2021/TT-BTC and Decree 359/2025/ND-CP, the applicable rate is 4.5% (3% VAT + 1.5% PIT) rather than the distribution rate of 1.5% (1% VAT + 0.5% PIT). The classification depends on the actual nature of the processing: simple trimming or de-barking may qualify as basic primary processing, but sawing into commercial-dimension planks or pieces constitutes manufacturing.
VAT and PIT for Household Log-Sawing Business
Responding authority: Ministry of Finance (General Department of Taxation) Legal basis: Article 1(1c), Decree 359/2025/ND-CP; Circular 84/2021/TT-BTC; Circular 40/2021/TT-BTC
Issue
A household business purchases round logs, saws them into planks or pieces, and sells to processing companies. The question is whether the distribution rate (1.5%) or the manufacturing rate (4.5%) applies.
Legal Analysis
Basic primary processing (distribution rate 1.5%) covers: cleaning, sorting, basic packaging, preservation, simple length-cutting.
Manufacturing (rate 4.5%) covers: changing the shape, dimensions, or properties of a product through processing steps using machinery and equipment.
Conclusion
Sawing round logs into commercial-dimension planks or pieces constitutes manufacturing, with the following rates:
- VAT: 3%
- PIT: 1.5%
- Total: 4.5% on revenue
Practical Note
If the household only performs simple length-cutting (e.g., cutting 6m logs to 3m without changing the cross-section), this may qualify as primary processing. However, the household should consult the local tax authority for confirmation in each specific case.