Ho Chi Minh City Tax Department Guidance: VAT on Round Timber, Sawn Timber, and Kiln-Dried Lumber Sold to Wood Processing Enterprises
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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.
Fresh sawn timber and kiln-dried sawn timber from planted forests that have undergone only normal pre-processing (sawing, splitting, drying) are VAT-exempt when sold by self-producers or traded between credit-method enterprises/cooperatives. A 5% rate applies when a credit-method enterprise or cooperative sells to household businesses or other non-enterprise buyers; direct-method taxpayers pay 1% of revenue. The 10% rate applies only when the timber has been processed into a different product.
Question
Wood-product businesses handling fresh sawn timber and kiln-dried sawn timber from planted forests need to know: what VAT treatment applies to products that have undergone only normal pre-processing (sawing, splitting, kiln-drying) under the latest regulations?
Official guidance
Based on a written reply from Tax Sub-department 26, Ho Chi Minh City, citing Decree No. 359/2025/ND-CP dated 31 December 2025 (which inserted clause 1b after clause 1 of Article 4 of Decree No. 181/2025/ND-CP), Article 4 of Decree No. 181/2025/ND-CP dated 1 July 2025, and clause 3, Article 5 of VAT Law No. 48/2024/QH15, the tax authority provides the following guidance:
Fresh sawn timber and kiln-dried sawn timber from planted forests that have undergone only normal pre-processing (sawing, splitting, or kiln-drying only - not yet processed into another product) are subject to VAT as follows depending on who sells and who buys:
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Self-producers selling their own output: Not subject to VAT.
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An enterprise or cooperative using the credit (deduction) method that purchases and resells to another enterprise or cooperative at the commercial trading stage: Not required to declare or pay output VAT, but may still deduct input VAT already paid.
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A credit-method enterprise or cooperative selling to household businesses, individual producers, or any other buyer that is NOT an enterprise or cooperative: VAT rate of 5% applies (under clause 3, Article 19 of Decree No. 181/2025/ND-CP).
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A taxpayer using the direct (presumptive) method selling at the commercial trading stage: Pays VAT at a flat rate of 1% of revenue.
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Timber that has been processed into a different product (no longer merely normal pre-processing): VAT rate of 10% applies under clause 3, Article 5 of VAT Law No. 48/2024/QH15.
The tax authority advises businesses to compare these rules against their actual situation to ensure correct application.
Action points
- Determine product type: is the timber still at the normal pre-processing stage (sawn/dried only), or has it been processed into a different product?
- Identify the seller's status: self-producer, credit-method enterprise/cooperative, or direct-method taxpayer.
- Identify the buyer type: another enterprise/cooperative (no output VAT declaration required, input VAT deductible) or a household business/individual/other non-enterprise buyer (5%).
- Review existing contracts and invoices to confirm the VAT rate shown matches the applicable scenario.
- If there is any doubt about product classification or buyer category, engage directly with the managing tax authority for clarification.