VAT Guidance for Businesses Trading in Minimally-Processed Agricultural and Forestry Products - Input Credit, Refund, and Cost Accounting
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The Tax Department provided guidance on VAT policy for businesses producing and trading in minimally-processed plant products (wood chips, ground bark, firewood, etc.) sold to other businesses, under VAT Law No. 48/2024/QH15 and Decree 181/2025/ND-CP (as amended by Decree 359/2025/ND-CP). Under newly inserted Clause 1b of Article 4 of Decree 181/2025: enterprises and cooperatives that purchase minimally-processed agricultural/forestry products and sell them to other enterprises/cooperatives are **not required to declare or pay VAT** but **may still claim input VAT credits**. If sold to individuals, household businesses, or other non-enterprise entities, the 5% VAT rate applies. Regarding VAT refunds: refunds are available only if conditions in Article 15 of the VAT Law are met (primarily exports, new investment projects, or businesses exclusively supplying 5%-rate goods with uncredited input VAT of VND 300 million or more after 12 months/4 quarters). If refund conditions are not met, uncredited input VAT may be treated as a **deductible expense** for CIT purposes under Article 9(2) of CIT Law No. 67/2025/QH15.
VAT Guidance - Minimally-Processed Agricultural and Forestry Products
Source: Tax Department, Q&A dated 18 May 2026
1. VAT Policy for Minimally-Processed Agricultural/Forestry Products
Under VAT Law No. 48/2024/QH15 (amended by Law No. 149/2025/QH15) and Decree 181/2025/ND-CP (amended by Decree 359/2025/ND-CP, effective 1 January 2026):
Newly added Clause 1b of Article 4 of Decree 181/2025:
- Enterprises and cooperatives that purchase minimally-processed agricultural/forestry products and sell them to other enterprises or cooperatives: not required to declare or pay VAT, but may claim input VAT credits.
- If sold to individuals, household businesses, or other economic organizations: 5% VAT applies.
- Household/individual businesses using the direct method: calculate VAT at 1% of revenue.
Minimally-processed products include: cleaning, drying, chopping, grinding, cutting, cold storage, etc.
2. VAT Refund Conditions
Under Article 15 of the VAT Law, refunds are available when:
- There are exported goods/services with uncredited input VAT of VND 300 million or more.
- There is a new investment project in the investment phase.
- Only producing goods/services subject to the 5% rate with uncredited input VAT of VND 300 million or more after 12 consecutive months or 4 consecutive quarters.
- Dissolution/bankruptcy with excess VAT paid.
3. Treatment of Input VAT Not Refundable or Creditable
Under Article 9(2)(l) of CIT Law No. 67/2025/QH15: input VAT that cannot be credited and does not qualify for refund but is directly related to the business is treated as a deductible expense for CIT purposes. Note: once included in expenses, it may not also be credited against output VAT.
4. Accounting Methods
- Method 1: Record the tax-inclusive price directly as an expense per transaction.
- Method 2: Record to account 1331, then transfer to the relevant expense account at period end. Both methods are acceptable but must comply with current accounting regulations.