Vietnam News Agency – According to the draft amendment of the VAT law, fertilizers are expected to be included in the category of goods subject to VAT, with a tax rate of 5%, to address the difficulties faced by domestic production enterprises and ensure that this item can effectively compete with imported products of the same type.
In the draft VAT law, fertilizers should be subject to 5% VAT instead of being exempt from tax under the current regulations (Law No. 71/2014/QH13 dated November 26, 2014).
The Ministry of Finance stated that during the implementation of the above regulations, fertilizer production enterprises requested amendments to the issue of not being allowed to declare and deduct input VAT on goods and services, including investment and procurement activities of fixed assets for fertilizer production services. These must be included in the production costs, leading to increased costs and reduced profits. This puts them at a disadvantage in competing with imported fertilizers. The lack of funds also makes it difficult for enterprises to proactively invest and expand production.
Mr. Do Duc Hung, Deputy General Director of Apromaco Agricultural Materials Joint Stock Company, stated that currently, fertilizer importers do not have input tax, which gives them a competitive advantage over domestic fertilizer producers. Including fertilizers in the list of VAT-taxable goods and setting a specific VAT rate of 5% will also help fair competition with imported fertilizers, especially those from countries with zero import tariffs on fertilizers, such as China and ASEAN.
The agricultural population accounts for more than 50% of Vietnam's total population, and arable and forest land accounts for 60% of Vietnam's total land area. In recent years, Vietnam's annual fertilizer export volume exceeds 3 million tons, while the annual fertilizer import volume exceeds 4 million tons.
The concentration of Vietnam's fertilizer market is low, with local enterprises accounting for about 70% of the market share. Calculated based on the overall revenue of the Vietnamese fertilizer market in 2023, the top five enterprises accounted for about 30% of the market share.
At the same time, Vietnam annually imports more than 4 million tons of fertilizers, with the largest import volume being ammonium sulfate. China is currently Vietnam's largest fertilizer supplier, accounting for nearly 45% of Vietnam's total fertilizer imports. In addition, Russia, Israel, Laos, and Canada are also major sources of Vietnam's fertilizer imports.
Despite the impact of the COVID-19 pandemic on Vietnam's economy, the Vietnamese fertilizer industry still showed a growth trend during the pandemic, with fertilizer production increasing by 5.2% and 3.5% in 2020 and 2021, respectively. Moreover, despite disruptions in supply chains and logistics during the pandemic, fertilizer import and export volumes still showed an overall upward trend. In 2023, Vietnam's fertilizer import volume is expected to reach 4.116 million tons, an increase of 21.3% year-on-year.
Given the increasing market attractiveness and growing demand, Vietnam's fertilizer market is expected to grow significantly. It is predicted that by 2033, Vietnam's fertilizer import volume will reach 6.83 million tons, with a compound annual growth rate (CAGR) of 5.2% from 2024 to 2033.
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