Machine-Dried Agricultural Products: Are They VAT-Exempt as Minimally Processed Goods?
RegHub explainer by New MarketerLast updated:
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The Ministry of Finance provided guidance on VAT treatment of agricultural products dried using machinery. Under Article 5, Clause 1 of VAT Law No. 48/2024/QH15 (as amended by Law No. 149/2025/QH15) and Article 4, Clause 1 of Decree 181/2025/ND-CP, agricultural products that have only undergone normal minimal processing - explicitly including sun-drying and machine-drying - are VAT-exempt when sold by the producer. Machine-drying (solely to reduce moisture, with no additives or flavorings) therefore qualifies as normal minimal processing and is VAT-exempt at the production stage. However, Article 9, Clause 2(d) of the VAT Law imposes a 5% rate on the same category of minimally processed agricultural products when they fall outside the VAT-exempt scope of Article 5, Clause 1 (i.e., sold outside the enterprise/cooperative chain). A 10% rate applies to goods and services not covered by Clauses 1 or 2 of Article 9. Where the degree of processing cannot be determined, the Ministry of Agriculture and Environment is responsible for classification.
Question
An individual planning to establish a company producing and trading dried agricultural products (ginseng, cassava, sweet potato, cashew nuts, etc.) using machinery solely to reduce moisture for preservation - with no added flavorings, additives, or chemicals - asks whether such machine-dried agricultural products qualify as normally pre-processed products exempt from VAT.
Official guidance
The Ministry of Finance responded on a general-principle basis as follows:
VAT-exempt category
Under Article 5, Clause 1 of VAT Law No. 48/2024/QH15 (as amended by Article 1, Clause 1(a) of Law No. 149/2025/QH15), VAT-exempt goods include crops, plantation forest products, livestock, aquaculture products, and caught seafood that have not been processed into other products or have only undergone normal minimal processing by the producing/catching organization or individual when sold, and at the import stage. Enterprises and cooperatives that buy such products and resell them to other enterprises or cooperatives are not required to declare or pay VAT but may still deduct input VAT.
Article 4, Clause 1 of Decree No. 181/2025/ND-CP dated 01/7/2025 defines normal minimal processing as: cleaning, sun-drying, machine-drying, husking, milling, grinding, cutting, grain polishing, salting, vacuum-sealing, refrigeration/freezing, sulfur-gas preservation, chemical preservation to prevent decay, immersion in sulfur or other preservative solutions, and other common preservation methods. Therefore, agricultural products that have only been machine-dried (solely to reduce moisture, with no additives or flavorings) qualify as normally minimally processed and are VAT-exempt.
5% VAT rate
Article 9, Clause 2(d) of VAT Law No. 48/2024/QH15 imposes a 5% rate on crops and plantation products (excluding timber and bamboo shoots), livestock, aquaculture, and caught seafood that are unprocessed or only minimally processed - except for products covered by the VAT-exempt scope of Article 5, Clause 1.
10% VAT rate
Article 9, Clause 3 of VAT Law No. 48/2024/QH15 provides that a 10% rate applies to goods and services not covered by Clauses 1 or 2 of that Article.
Note: Circular No. 69/2025/TT-BTC dated 01/7/2025 does not address this topic. Where the degree of processing cannot be determined, the Ministry of Agriculture and Environment is responsible for classification based on the production process provided by the taxpayer.
Action points
- If an organization or individual self-produces agricultural goods and only machine-dries them (moisture reduction only, no additives/chemicals), the product is VAT-exempt when sold.
- If an enterprise or cooperative buys minimally processed agricultural products and resells to another enterprise or cooperative, no VAT declaration or payment is required, but input VAT may be deducted.
- If the product is sold outside the enterprise/cooperative chain (to individual households or non-enterprise/non-cooperative entities), the 5% rate under Article 9, Clause 2(d) may apply.
- Where the degree of processing is unclear, contact the Ministry of Agriculture and Environment for an official determination.