New Tax Policy: Benefit or Burden for the Agricultural Sector?

From July 1, 2025, a new value-added tax (VAT) policy under Decree No. 181/2025/NĐ-CP has officially taken effect, posing significant challenges for agricultural exporters. Instead of enjoying a 0% VAT rate as before, exporters are now required to temporarily pay 5% VAT and wait for a refund after export. At first glance, the policy may seem reasonable, but in practice it is creating numerous barriers, leaving businesses stressed and concerned.

Financial pressure and complicated administrative procedures

Mr. Pham Hoang Lam, Chairman of the Board of Directors of Southern Food Corporation Joint Stock Company, shared that the tax refund procedure is a “nightmare.” To receive a refund of the 5% VAT, exporting companies must prove that the entire supply chain—from farmers and traders to suppliers—has fully declared and fulfilled tax obligations. This requires sensitive personal information from farmers, such as citizen ID numbers, addresses, and phone numbers, making them hesitant or unwilling to provide it. Moreover, if just one link in the chain is “broken” (i.e., lacking invoices or valid documentation), the entire tax refund dossier will be rejected. This not only increases input costs by about 500 VND per kilogram of rice (equivalent to around USD 20 per ton), but also puts exporters in a difficult position when rice export profit margins typically range from only USD 5–10 per ton (See daily updated rice prices).

Risk of cash flow disruption and loss of competitiveness

The new policy has created a “double risk” for businesses. Mr. Do Ha Nam, Chairman of the Vietnam Food Association, pointed out that prepaying VAT to suppliers carries significant risk. There have been cases where suppliers received payment and then went bankrupt or ceased operations, leaving exporters unable to claim VAT refunds. In addition, export contracts often involve delayed payments—from 3 to 6 months, or even up to a year—while companies must temporarily pay VAT immediately. This causes cash flow bottlenecks, making it difficult for many businesses to maintain operations. The impact extends beyond companies themselves, negatively affecting the livelihoods of millions of farming households when exporters are forced to cut procurement volumes.

Petitions and solutions proposed by businesses

Facing these challenges, associations and enterprises have jointly submitted petitions to the Government. Mr. Pham Hoang Lam proposed three solutions:

1. Postponing the implementation date: Delay the application of the 5% VAT on rice until January 1, 2026, giving businesses time to adapt and adjust contracts.
2. Maintaining the 0% VAT rate: Keep the 0% VAT rate throughout 2025 to stabilize the export market, especially amid a global economic slowdown.
3. Speeding up VAT refunds: Implement fast-track VAT refunds to help businesses maintain cash flow, particularly during peak harvest seasons.

The Vietnam Food Association has proposed an even stronger solution: classifying rice as VAT-exempt goods. This would help ease capital constraints, reduce production costs, and enhance the competitiveness of Vietnamese rice in the international market.

Other agricultural and seafood associations have also called on the Ministry of Finance to report to the Government and consider postponing the implementation of the new regulations, allowing time to review and adjust policies in line with reality—especially for a sector with low profit margins and high vulnerability like agriculture.

What lies ahead for Vietnam’s agricultural sector?

The petitions from businesses have been acknowledged by the Ministry of Finance and will be reported to the Government. While awaiting an official decision, enterprises are still required to comply with current regulations. This new tax policy presents a complex challenge, requiring close coordination between the State and businesses to find optimal solutions. A well-designed policy will not only help companies overcome difficulties but also protect the agricultural supply chain, ensure food security, and maintain Vietnam’s position on the global export map.

Will the Government listen and make timely adjustments to untangle this bottleneck?

For further reference, see the related article at: https://gaodongnai.vn/kien-nghi-bo-thue-vat-gao