Fertilizer products are subject to a 5% tax rate.

With the majority of National Assembly deputies in agreement, on the afternoon of November 26, the National Assembly voted to pass the Law on Value Added Tax (VAT - amended). In his report explaining, accepting and revising the draft Law on VAT (amended) before passing, Chairman of the National Assembly's Finance and Budget Committee (TCNS) Le Quang Manh clarified many contents of interest to National Assembly deputies.

Regarding non-taxable subjects, there are opinions agreeing with Clause 1, Article 5 of the draft Law and stating that allowing non-payment of output VAT but deduction of input VAT is not in accordance with the principles of VAT. There are opinions suggesting to keep it as in the draft Law submitted by the Government to the National Assembly at the 7th Session.

The Standing Committee of the National Assembly believes that, in fact, this policy is no longer suitable and necessary because businesses have switched to using electronic invoices, and the Tax Authority has been able to improve the quality of control and overcome invoice fraud. In particular, the draft Law has added provisions on the conditions for tax refunds, in which buyers are only entitled to tax refunds in cases where "the seller has declared and paid VAT according to regulations for invoices issued to the business establishment requesting a tax refund", creating a legal basis for the Tax Authority to only process tax refund dossiers when the seller has declared and paid money to the State budget. Therefore, there will be no cases of tax refunds for fake invoices when there is no transaction and no input tax has been paid to the budget. At the same time, on November 26, 2024, the Secretary General of the National Assembly sent a request for opinions from National Assembly deputies on two options for handling the above issue. Through the synthesis of opinions, it is shown that 70.50% of the total number of National Assembly deputies agreed with the proposal of the National Assembly Standing Committee to remove the regulation allowing non-payment of output VAT but deduction of input VAT for unprocessed or semi-processed agricultural products at the commercial stage to ensure the principle of VAT that input VAT can only be deducted when the output is subject to VAT. This content has been shown in Article 5 of the draft Law.

The National Assembly agreed to change fertilizer products from non-taxable to 5% taxable.

There are opinions suggesting to consider raising the threshold of non-VAT revenue to over VND200 million; some opinions suggest the threshold is above or below VND300 million or VND400 million for the coming years. The Standing Committee of the National Assembly said that the current Law on VAT stipulates the non-VAT revenue is VND100 million/year. According to calculations by the Ministry of Finance, if the non-tax revenue is VND200 million/year, the state budget revenue will decrease by about VND2,630 billion; if the non-tax revenue is VND300 million/year, the state budget revenue will decrease by about VND6,383 billion. Therefore, to ensure a reasonable increase in the non-tax revenue threshold, relatively consistent with the average GDP and CPI growth rate from 2013 to present, the draft Law stipulates the revenue threshold of VND200 million/year as shown in the draft Law.

Regarding tax rates, many opinions agree with the proposal to apply a 5% tax rate on fertilizers. Some opinions suggest keeping it as the current regulations; some opinions suggest applying a 0%, 1% or 2% tax rate. Some opinions suggest a comprehensive assessment of the impact of this regulation on farmers and agricultural and aquatic production. Some opinions are concerned about the possibility of businesses taking advantage of the policy, raising prices, affecting farmers.

Regarding the proposal to apply a 0% VAT rate (or 1%, 2%), the Chairman of the Committee for Finance and Accounting affirmed: As the National Assembly delegate suggested, if fertilizers are subject to a 0% tax rate, it will ensure benefits for both domestic fertilizer producers and importers because they will 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 enterprises. In addition to the inconvenience to 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 will 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, adding regulations on value added tax refunds for this case. The regulation of a tax rate of 1% or 2% for fertilizers is also not consistent with the goal of VAT reform, which is to reduce the number of tax rates, not increase the number of tax rates compared to current regulations, as explained to the National Assembly delegates.

Based on the opinions of the National Assembly deputies, in Report No. 1035/BC-UBTVQH15 dated October 28, 2024, the Standing Committee of the National Assembly explained and reported on the impact of changing fertilizer products from non-taxable to 5% taxable. The Government also issued Official Dispatch No. 692/CP-PL to supplement the explanation and provide specific supporting data.

To properly reflect the National Assembly's viewpoint in handling the above issue, on November 26, 2024, the Secretary General of the National Assembly sent a request for opinions from National Assembly deputies on two options, one is to apply a 5% tax rate, the other is to maintain the current regulations. Through synthesizing opinions, it shows that 72.67% of the total number of National Assembly deputies agreed with the proposal of the National Assembly Standing Committee and the Government in the direction of stipulating a 5% tax rate on fertilizers, machinery, specialized equipment for agricultural production, and fishing vessels. This content is shown in Clause 2, Article 9 of the draft Law.

Regarding VAT refunds, there are suggestions to clarify the provisions in Clause 3, Article 15 in the case of units producing both goods subject to a 5% tax rate and goods subject to a 10% tax rate, input materials subject to a 10% tax rate, and revenue mainly from goods subject to a 5% tax rate, the enterprise will not be able to deduct all of the 10% input VAT and will not be refunded, causing difficulties for the enterprise.

In response to the opinions of National Assembly deputies, the Standing Committee of the National Assembly requested to amend the draft Law in the direction of allowing tax refunds for production establishments and service providers subject to both 5% and 10% tax, and at the same time assign the Government to stipulate the determination of the amount of input VAT to be refunded according to the allocation rate as prescribed in Clause 3, Article 15 of the draft Law...

Source: https://thoibaonganhang.vn/mat-hang-phan-bon-thuoc-dien-chiu-thue-suat-5-158175.html