Finalize 5% VAT on fertilizers

On the afternoon of November 26, with 84.97% of delegates in agreement, the National Assembly officially passed the Law on Value Added Tax (amended).

Notably, the Law on Value Added Tax (amended) has finalized the regulation on a 5% tax rate for fertilizer products.

Before the draft Law was passed, presenting the Report on explanation, acceptance and revision of the draft Law, Chairman of the Finance - Budget Committee Le Quang Manh provided more information on the issue of tax rates, which many delegates were interested in and had different opinions.

According to him, many opinions agree with the proposal to impose a 5% tax on fertilizers. Some opinions suggest keeping the current regulations; others suggest applying a tax rate of 0%, 1%, or 2%.

There are suggestions for a comprehensive assessment of the impact of this regulation on farmers and agricultural and aquatic production. There are concerns about the possibility of businesses taking advantage of the policy and raising prices, affecting farmers.

Responding to the proposal to apply a 0% VAT rate (or 1%, 2%), the National Assembly Standing Committee said that if fertilizers are subject to a 0% tax rate, it will ensure benefits for both domestic fertilizer producers and importers because they will both be refunded the input VAT paid and will not have to pay output VAT.

However, in this case, the State will have to spend money every year to refund taxes to businesses.

In addition to the disadvantage for the State budget, applying a 0% tax rate to fertilizers is contrary to the principles and practices of VAT, which is that a 0% tax rate only applies to exported goods and services, not to domestic consumption.

Applying it in this direction would break the neutrality of tax policy, create a bad precedent and be unfair to other manufacturing industries.

According to the explanation of the drafting agency, the regulation of an additional tax rate of 2% will require restructuring the Law on Value Added Tax such as designing a separate clause on tax rates and adding regulations on value added tax refunds for this case.

The regulation of a 1% or 2% tax rate on fertilizers is also not consistent with the goal of VAT reform, which is to reduce the number of tax rates, not to increase the number of tax rates compared to current regulations, as explained to National Assembly delegates.

Based on the opinions of National Assembly deputies, in Report No. 1035 dated October 28, 2024, the National Assembly Standing Committee explained and reported on the impact of transferring fertilizer products from non-taxable to 5% taxable.

The Government also issued Official Dispatch No. 692 to supplement explanations and provide specific supporting data.

To properly express the National Assembly's viewpoint in handling the above issue, on November 26, the Secretary General of the National Assembly sent a request for National Assembly deputies' opinions on two options: one is to apply a 5% tax rate, the other is to keep it as current regulations.

Through the synthesis of opinions, it is shown that 72.67% of the total number of National Assembly deputies agreed with the proposal of the National Assembly Standing Committee and the Government to stipulate a tax rate of 5% for fertilizers, machinery, specialized equipment serving agricultural production, and fishing vessels. Therefore, this content has been shown in Clause 2, Article 9 of the draft Law.

The Law on Value Added Tax (amended) takes effect from July 1, 2025.

According to Thuy An/VTV

Source: https://doanhnghiepvn.vn/kinh-te/chot-ap-thue-vat-5-doi-voi-phan-bon/20241126081918023