Vietnam considers imposing VAT on fertilizers

The Vietnamese government is considering implementing a 5pc value-added tax (VAT) on fertilizers, according to correspondence between the trade and industry ministry, finance ministry and the Vietnam fertilizer association.

The proposal was submitted by the fertilizer association on behalf of Vietnamese producers such as Vinachem group, which have been requesting the implementation of VAT in recent years.

Fertilizer producers would pay VAT to the government in the first instance but then claim a VAT rebate against a range of fertilizer input costs. This would enable local producers to be able to reduce their overall production costs, increasing competitiveness against imports.

Fertilizers have been exempted from VAT since 2015 in an attempt to ensure reasonable prices for farmers while encouraging local fertilizer production. But the exemption has had the opposite effect in practice, some market participants said.

The finance ministry is not expected to make a formal decision on the VAT change in the coming months.

By Huijun Yao