Proposal to exempt fertilizers from VAT

This information was stated by Mr. Tran Van Lam, full-time member of the Delegates’ Working Committee, at the discussion session on the revised Value Added Tax (VAT) Law, on the afternoon of December 9.

According to Mr. Lam, in the draft, the Government proposes to supplement regulations in the direction of solving current problems for some products such as animal feed, agricultural and aquatic products. These are non-taxable items, so input VAT cannot be deducted or refunded, increasing costs and reducing the competitiveness of domestically produced products compared to imported goods.

However, he said that fertilizer is also an input material for the agricultural industry, similar to animal feed, but is treated differently. From July 1, 2025, fertilizers will be subject to 5% VAT.

Delegates said that if this regulation remains, input costs for fertilizers will increase, causing losses to farmers. Therefore, he proposed to move fertilizer back to the non-VAT group as before, but production enterprises can deduct input tax, similar to animal feed.

Vice Chairman of the Culture and Society Committee Ta Van Ha also agreed with the above proposal. Mr. Ha said that at the 8th meeting last year, he “ardently suggested” that VAT should not be applied to fertilizers. In response to some opinions that it is necessary to take care of fertilizer production businesses, he said we must think of more than 100 million people because the 5% tax on this product “affects the workers’ meals.”

“We have calculated for animal feed, so we should also consider fertilizer,” commented the Deputy Chairman of the Culture and Social Committee, adding that this item should be returned to tax exemption, but businesses can still deduct inputs or similar options that benefit farmers.

Meanwhile, Mr. Trinh Xuan An, full-time member of the National Defense and Security Committee, recalled that at the previous meeting, delegates debated a lot about this issue. He said that domestic fertilizer production associations and businesses have proposed applying VAT on fertilizers. Because before that – in 2016, fertilizers were removed from the taxable group, domestic manufacturing enterprises had to include tax costs in their prices, and they could not compete with imported goods.

If fertilizer is returned to the VAT exemption group, according to Mr. An, the draft also needs to stipulate that it can be deducted like agricultural products. “If only non-taxable fertilizer is proposed, businesses will be very disadvantaged,” Mr. An shared.

Delegate Truong Trong Nghia, Vice Chairman of the Ho Chi Minh City Bar Association, also proposed that the Government consider policies that harmonize people’s interests and compete with domestic manufacturing enterprises.

Minister of Finance Nguyen Van Thang acknowledged the comments of National Assembly delegates on VAT on fertilizer products. He said the Ministry will continue to research, review and report to competent authorities for consideration and handling.

Regarding the fact that the law had only been in place for a few months and had to be amended, Mr. Thang said he felt he “had not fulfilled his responsibility” as an advisory body drafting the Value Added Tax Law. However, he said that after a few months of the law taking effect, the Ministry of Finance received many feedback from associations and businesses about problems arising in practice.

With the proposal to exempt animal feed from VAT, Mr. Thang explained that it aims to ensure equality and competitiveness with imported goods. “This will remove difficulties for agricultural production, especially in the context of the industry being greatly affected by the consequences of natural disasters and prolonged floods,” Mr. Thang said.

The National Assembly is expected to vote to pass the Value Added Tax Law (amended) on December 11.