Despite undergoing only minimal processing—such as shelling, drying, or sun-curing—many of Vietnam’s multibillion-dollar agricultural export commodities are still subject to value-added tax (VAT), with billions of dong in tax credits being “locked up.” This has placed significant financial strain on exporters.

Unreasonable tax collection, difficult VAT refunds?

Recently, several agricultural industry associations jointly petitioned the National Assembly to approve amendments to the VAT Law to help enterprises secure better opportunities and expand exports. For products such as rice, coffee, pepper, cashew nuts, shrimp, and fish, which undergo only simple pre-processing without generating real added value, the imposition of a 5% VAT rate is inconsistent with the spirit of the law and creates substantial challenges.

According to calculations by the Vietnam Coffee and Cocoa Association (VICOFA), with 90% of Vietnam’s exports being unroasted green coffee beans, the industry has had to temporarily pay around VND 10 trillion in VAT annually. This places immense pressure on corporate finances, increases export costs, and reduces the competitiveness of Vietnamese goods on the global market.

A representative of the Vietnam Food Association (VFA) added that while coffee and pepper exports are currently benefiting from high demand, the global rice market remains sluggish, with major buyers such as the Philippines and Indonesia not yet returning, even as Vietnam’s winter–spring rice crop approaches its peak harvest. Extreme weather and prolonged storms have intensified pressure to purchase and consume rice. In this context, the VAT burden further strains rice exporters, who already operate on very thin margins of just 1–3%.

According to VFA, VAT refunds for the 5% tax collected since July 1, 2025, have yet to be returned. Complicated procedures and long processing times have exacerbated financial difficulties. The association therefore urges the Government and National Assembly to urgently address VAT policies to stabilize rice production and export.

Businesses also report prolonged delays—sometimes months—or outright denials of VAT refunds for reasons beyond their control. Under the 2024 VAT Law, exporters can only receive refunds if their suppliers have “declared and paid taxes.” This is viewed as unreasonable, as it transfers the supplier’s obligations to the buyer, who has already fulfilled all tax requirements. Verification lies with the tax authorities, and exporters should not bear the risk of a seller’s non-compliance.

Another issue is the rule that VAT refunds cannot exceed 10% of export revenue per period. Given the seasonal nature of agriculture, enterprises often purchase raw materials in bulk at the beginning of the season, while exports are carried out over many months. This mismatch results in large amounts of input VAT not being refunded, affecting liquidity and limiting their ability to purchase from farmers.

Most agricultural raw materials are sourced from smallholder farmers who are unable to issue invoices, creating additional challenges in proving eligible inputs for deduction or refund.

Removing bottlenecks — promoting digitalization and automated VAT refunds

In the first 10 months of the year, Vietnam recorded a trade surplus of USD 20 billion, with nearly USD 18 billion coming from agricultural exports alone—up 16.4% year-on-year. Seven agricultural sectors earned more than USD 1 billion each in export surplus. Agriculture remains a key pillar of the economy amid global uncertainty.

Against this backdrop, the Vietnam Chamber of Commerce and Industry (VCCI) has submitted a report to the Prime Minister addressing VAT policy obstacles and proposing solutions.

VCCI recommends reinstating (even temporarily) the provision exempting “simple pre-processed agricultural products” from VAT declaration and calculation—similar to the mechanism under Decree 209/2013. The Government should also issue a clear list of “normally pre-processed products” for each sector to ensure consistency across localities.

Furthermore, VCCI proposes that the Ministry of Finance develop an automated VAT refund system for valid, non-fraudulent applications—similar to successful models in countries like India. Digital data integration between tax authorities, customs, and enterprises would allow for faster, more accurate verification, reducing time, costs, and the risk of fraud.

The organization also urges the removal of the requirement that VAT refunds depend on the supplier’s tax compliance status, as this unfairly penalizes exporters for third-party issues.

VASEP additionally notes that in the context of digital trade and increasing cross-border e-commerce, Vietnam needs a legal framework to support VAT refund procedures. VCCI therefore proposes recognizing e-documents and digital transaction data as legitimate evidence for export VAT refunds. Given Vietnam’s reliance on smallholder farmers, it also recommends allowing enterprises to use purchase lists without invoices (under Circular 78/2021) as substitute documents for VAT deduction and refund.

Small enterprises fear technical mistakes under new rules According to VICOFA, most coffee exports are destined for Europe. Recently, many exporters have been held liable because suppliers committed invoice fraud or failed to fulfill tax obligations, resulting in exporters being charged with tax arrears or denied VAT refunds. This severely damages their international reputation.In addition, administrative penalties ranging from VND 5–8 million apply even to minor technical errors, creating unnecessary pressure on small enterprises and newly converted household businesses.

Source: Bao Thanh Nien