New Tax Policy: Challenges and Recommendations for the Livestock and Aquaculture Industries
Vietnam’s livestock and aquaculture sectors are thriving, making significant contributions to the national economy. Tax policies were designed with the intent to encourage and support these industries. However, in practice, certain inconsistencies in applying value-added tax (VAT) to input materials have created unintended obstacles. These issues not only increase costs but also result in a lack of uniformity across the sector, calling for a review of tax policy and timely solutions.
Legal perspective
The core objective of the VAT policy in agriculture is to ease the burden on producers and consumers. This is clearly reflected in Clause 3, Article 5 of the Law on Value-Added Tax No. 48/2024/QH15, which stipulates that livestock and aquaculture feed are not subject to VAT.
In practice, however, the application has not been consistent. While final products such as livestock feed and aquaculture feed are not subject to VAT, certain raw materials—including corn and pre-processed bran—are subject to a 5% VAT. The rationale is that these items are categorized as unprocessed or merely preliminarily processed agricultural and aquaculture products, which are taxable at 5% when traded commercially.
This inconsistency creates a dilemma: when input materials are taxed but the final output is not, businesses are unable to claim input tax credits. As a result, the VAT becomes an additional cost, inflating product prices and reducing profitability. Domestic producers are therefore placed at a disadvantage, especially when competing with imported goods.
What direction should policy take?
To address these issues, the voices from professional associations are vital. The Vietnam Livestock Association and the Vietnam Feed Association have both proposed that the Ministry of Finance should issue a detailed and unified guidance document. Such guidance should clarify the distinction between “traditional animal feed ingredients” and “pre-processed agricultural and aquaculture products,” ensuring consistency across the sector.
From a tax advisory perspective, resolving this problem requires close coordination among ministries. The Ministry of Finance and the Ministry of Agriculture & Environment should work together on a joint guidance document. At the same time, local tax authorities need to strengthen dialogue with businesses, ensuring that policies are applied fairly, accurately, and in line with the spirit of specialized legislation.
Conclusion
The inconsistent application of VAT on livestock and aquaculture feed inputs is more than a tax issue—it is a barrier to the sustainable growth of Vietnam’s agricultural sector. By removing this bottleneck, we can help businesses account for costs more effectively, foster a transparent business environment, and enhance the competitiveness of Vietnam’s agriculture on the global stage.