DECREE 359/2025/NĐ-CP: REMOVAL OF SELLER-RELATED CONSTRAINTS ON VAT REFUNDS AND CLARIFICATION OF VAT APPLICABLE TO AGRICULTURAL PRODUCTS

On 31 December 2025, the Government issued Decree No. 359/2025/NĐ-CP (“Decree 359”), amending Decree No. 181/2025/NĐ-CP. The Decree takes effect from 1 January 2026. The most significant highlights of Decree 359 include the official removal of regulations linking a buyer’s VAT refund entitlement to the seller’s tax compliance status, as well as important adjustments to the VAT treatment applicable to agricultural products. These changes are expected to have a positive impact on cash flow management and tax certainty for compliant businesses.

Dưới đây là tổng hợp và phân tích các điểm quan trọng doanh nghiệp cần lưu ý:

Below is a summary of the key points that enterprises should carefully note:

1. Clear VAT Treatment for Commercial Trading of Agricultural Products

Decree 359 supplements Clause 1b after Clause 1, Article 4 of Decree 181, clarifying the VAT mechanism applicable to unprocessed agricultural, livestock and aquaculture products, or products subject only to basic preliminary processing. The applicable VAT treatment is determined based on the buyer’s status:

• Where enterprises or cooperatives applying the credit (deduction) method sell such products to other enterprises or cooperatives at the commercial trading stage: No VAT declaration or payment is required, while input VAT remains creditable. Where such products are sold to other entities (household businesses, individuals, end consumers, etc.): VAT must be charged at the rate of 5%. 
• For household businesses, individuals, and enterprises applying the direct VAT method: VAT payable at the commercial trading stage is determined at 1% of turnover.

2. Adjustment to the VAT Refund Mechanism: Removal of the “Seller’s Tax Debt – Buyer’s Refund Suspension” Condition

Previously, Clause 3, Article 37 of Decree 181 required VAT refunds to be suspended if the seller had failed to submit VAT returns or had outstanding VAT liabilities, effectively imposing joint consequences on the buyer. Decree 359 officially abolishes this condition, bringing about several notable improvements:

• Businesses applying for VAT refunds are no longer exposed to the risk of refund suspension due to non-compliance by their suppliers.
• The tax authority shifts from a strict “cross pre-audit” mechanism to a more facilitative approach, clearly separating the legal responsibilities of buyers and sellers.
• This change helps prevent unnecessary cash flow bottlenecks for compliant and bona fide enterprises.

Transitional provision: For VAT refund applications submitted and accepted before 1 January 2026 but for which no refund decision has yet been issued, businesses are not required to satisfy the condition that sellers must have declared and paid VAT on related input invoices. This provision is particularly significant in resolving long-pending refund cases and accelerating VAT refund disbursements.

RECOMMENDATIONS FROM BAKER TILLY A&C

In light of the new regulations under Decree 359, we recommend that enterprises:

1. Review and reclassify customer profiles: Reconfigure electronic invoicing systems to correctly apply VAT treatments (non-declaration vs. 5% VAT) based on customer categories.
2. Reassess pending VAT refund dossiers: Enterprises with refund applications previously stalled due to supplier-related issues should promptly engage with their tax officers to request continued processing under the new rules.
3. Maintain supplier risk management practices: Although VAT refund conditions have been relaxed, enterprises should continue to implement supplier assessment procedures to mitigate potential post-refund tax audit risks.

For the latest updates and tailored professional advice, please contact Baker Tilly A&C.

♦ Tax Advisory Contacts:

• Mr. Nguyen Bao Anh – Deputy General Director – Partner of Tax, Transfer Pricing & Outsourcing Services

         Email: anh.nb@a-c.com.vn

• Ms. Nguyen Thi Thu Thao – Senior Manager – Tax and Accounting Services.

         Email: thao.ntt@a-c.com.vn