OVERVIEW

The National Assembly passed Law No. 149/2025/QH15 (New Amended Law), effective from January 1, 2026. This legislation is expected to resolve working capital blockages for agricultural enterprises and remove the admin-burden compliance condition for VAT refunds. Additionally, it establishes a new tax-exempt revenue threshold for household businesses.

KEY UPDATES

The New Amended Law addresses and provides clarifications on several important tax issues. These are:

• Agricultural Cash Flow Release: The VAT treatment for commercial trading of unprocessed agricultural products (B2B) shifts from a 5% rate to a "not required to declare and pay" mechanism. This eliminates the requirement for upfront VAT payments on these inputs, effectively unlocking significant working capital that was previously trapped in the tax system, while fully retaining the right to credit input VAT.
• Reduction of Third-Party Refund Risk: The statutory condition requiring sellers to have fully declared and paid their taxes before a buyer can claim a refund is abolished. 
• Household Business - VND 500 million Threshold: The tax-exempt revenue threshold for household businesses is raised to VND 500 million. Notably, exceeding this cap triggers VAT liability on the total revenue (not just the excessive amount). 
• Scraps and By-products Tax Rate: The New AmendedLaw clarifies that scrap and by-products recovered from production are taxed based on their own classification, not the tax rate of the main product. For example, a factory producing fertilizer (tax-exempt or 5%) that sells worn-out packaging or scrap metal from machine maintenance must apply 10% to the scrap, not the fertilizer's rate.

ISSUES FOR CONSIDERATION

• CIT Deduction Note: One of the exceptions allowing deduction of expenses without VAT invoices applies to purchases from business individuals/households whose revenue falls below the VAT‑exempt threshold, provided they are supported by a “List of purchases of goods and services without invoices.” With the threshold now increased to VND 500 million, the opportunity for CIT deductibility using such a list has expanded accordingly.
• Withholding Tax Risk: If a household vendor exceeds the VND 500 million threshold, they legally become a taxable entity. Although declaring tax is the household vendor's obligation, tax authorities might try to apply a "Collection at Source" approach if there is no tax declaration by the vendor. The tax authority may argue that the Company is the income payer and thus the Company may be forced or involved in the collection enforcing activities to collect the tax arrears plus penalties.

WHAT A&M CAN HELP WITH

• Integrated VAT Optimization and Refund Strategy: Provide a holistic review of your VAT lifecycle to maximize refund opportunities and minimize audit risks:
  • Assist with end-to-end preparation of refund dossiers and provide defense support during tax audits to validate transaction substance and clear outstanding input VAT. 
  • Review product and service master data to ensure precise tax application for both output sales and scrap disposal.
• Internal Control Review: Review of procurement policies regarding household vendors to establish purchase caps and mandatory documentation protocols, mitigating non-deductibility risks.

All information contained in this tax update is for general key update and reference purposes only and is not intended to be relied on as specific professional advice for any actions. There is no guarantee and/or liability (from A&M, its employees, or any parties and/or personnel) of the completeness and/or accuracy (express or implied) of any information contained in this tax update. For further discussion, please contact us.