VAT on Sale of Minimally Processed Wood By-Products (Bark, Wood Chips) Purchased from Individuals and Resold to Enterprises
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The Ministry of Finance provided guidance on VAT for companies purchasing wood by-products (ground bark, chipped bark, chipped acacia firewood, wood chips, etc.) from non-business individuals and reselling them to other enterprises for use as boiler fuel. Under VAT Law No. 48/2024/QH15 (amended by Law 149/2025/QH15) and Decree 181/2025/NĐ-CP (amended by Decree 359/2025/NĐ-CP effective January 1, 2026): Plantation/forest products not processed into other products or only minimally processed (including cutting, chopping, grinding, drying) are VAT-exempt when sold by the producing organization or individual. When a company purchases and resells to another enterprise: no VAT declaration or payment required. When sold to individual business households or other organizations/individuals: 5% VAT rate applies. Business households using direct calculation method when selling commercially: 1% rate on revenue.
Question
A company purchases wood by-products (ground bark, chipped bark, wood chips, etc.) from non-business individuals who have performed cutting, chopping, grinding, drying, and debris screening. The company inspects against technical standards and resells to other enterprises for use as boiler fuel. Issue: determining applicable VAT from January 1, 2026.
Applicable Legal Provisions
VAT Law No. 48/2024/QH15 (amended by Law 149/2025/QH15):
- Article 5, Clause 1: Plantation/forest products not processed into other products or only minimally processed, sold by the producing organization/individual - VAT-exempt
- Article 9, Clause 2(d): Plantation/forest products (excluding timber, bamboo shoots)... minimally processed, excluding VAT-exempt products - 5% rate
- Article 9, Clause 3: Other goods and services - 10% rate
Decree 181/2025/NĐ-CP (amended by Decree 359/2025/NĐ-CP, effective January 1, 2026):
- Article 4, Clause 1: Minimal processing includes cleaning, drying, husking, milling, grinding, cutting, chopping... and standard preservation methods
- Article 4, Clause 1b: Enterprises purchasing minimally processed products and reselling to other enterprises/cooperatives: no VAT declaration or payment required but input VAT remains deductible
- When sold to individual business households or other organizations/individuals: 5% VAT rate
- Business households using direct calculation method selling commercially: 1% of revenue
Applicable Conclusion
Bark and wood chips that have undergone cutting, chopping, grinding, drying, and screening qualify as plantation/forest products subject only to minimal processing. When an enterprise resells to another enterprise: VAT-exempt (no declaration or payment). When sold to other parties (business households, other individuals): 5% VAT rate applies.