Agro-Forestry-Fishery Exporters Face Financial Strains Under New VAT Law

Strategic Insights -

The introduction of Vietnam's new Law on Value Added Tax (VAT), effective July 1, has created significant challenges for agro-forestry-fishery exporters, with unclear tax regulations and delayed refunds straining their cash flow and competitiveness. According to the Vietnam Chamber of Commerce and Industry (VCCI), the new law has created new barriers that must be removed to promote the industry's development. The law has made several agricultural products, including rice, coffee, and raw seafood, subject to a five percent tax rate, leaving exporters with significant working capital tied up in pending VAT refunds.

Key Takeaways:

  • Under the new VAT law, rice, coffee, and raw seafood are now subject to a five percent tax rate, affecting domestic prices and exporters' cash flow.
  • Rice exporters have significant working capital tied up in pending VAT refunds, slowing their ability to buy paddy from farmers and affecting domestic rice prices.
  • The refund process for VAT remains lengthy and complex, weighing heavily on the liquidity of exporters, particularly in the coffee and seafood industries.
  • Coffee exporters often wait up to six months to receive payments from buyers, while VAT refunds take equally long to process, tying up significant capital.
  • The lack of clear guidance on what constitutes 'preliminary processing' has led to delays in VAT filings and refunds, affecting production and exports.
  • Thousands of billions of dong are tied up in VAT refunds, severely affecting production and exports.
  • The difficulties under the new VAT law relate not only to legal and technical issues but also to cash flow, competitiveness, and sustainable development of the agricultural sector.
  • Adjustments to the VAT law are needed to support the continued growth of the agro-forestry-fishery sector, which is a strategic pillar of the Vietnamese economy.

Statistics:

  • The new VAT law has already affected domestic rice prices due to pending VAT refunds among rice exporters.
  • Rice exporters have significant working capital tied up in pending VAT refunds, which affects their ability to buy paddy from farmers.
  • Coffee exporters wait up to six months to receive payments from buyers, while VAT refunds take equally long to process.
  • Thousands of billions of dong are tied up in VAT refunds, severely affecting production and exports.
  • Agro-forestry-fishery exports account for a significant portion of Vietnam's economy, making adjustments to the VAT law crucial for their continued growth.

Sources:

  • Aaou Anh TuaoY=n, Deputy General Secretary of the Vietnam Chamber of Commerce and Industry (VCCI)
  • Nguya ...n Hoai Nam, General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP)
  • Thai NhAEdeg Hia ++p, Deputy President of the Vietnam Coffee and Cocoa Association
  • Ngo Sa 1 Hoai, Deputy President of the Vietnam Timber and Forest Products Association