MINISTRY OF FINANCE GENERAL DEPARTMENT OF CUSTOMS __________ No: 525/TCHQ-TXNK Subject: VAT (Value-Added Tax)

SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ______________________ Hanoi, February 6, 2025

 

 

To: MSD Animal Health Vietnam Co., Ltd.
(39 Le Duan, Ben Nghe Ward, District 1, Ho Chi Minh City)

 

The General Department of Customs has received Official Letter No. 2412MSD/24 dated December 31, 2024, from MSD Animal Health Vietnam Co., Ltd regarding issues related to VAT (Value-Added Tax) for dairy farm milking equipment used in agriculture. The General Department of Customs provides the following response:

1. In Official Letter No. 16659/BTC-CST dated November 22, 2016, the Ministry of Finance instructed:

“1. Machines, equipment, and replacement parts used for animal feed production are specialized machines and equipment for agricultural production and are not subject to VAT, including:

• Replacement parts of the material handling system and conveyors: conveyor belts, scoop buckets, sprockets, plastic blades, conveyor chains, plastic gears, feed distribution wings, etc.

• Replacement parts of grinders: grinding sieves, grinding hammers.

• Replacement parts of mixers: main shafts, mixing wings.

• Replacement parts of pellet mills: molds, pellet roller shafts, roller shells, eccentric shafts, main shafts, mold mounting plates, wear-resistant rings, pellet mill base, wet mixing wings, wet mixing shafts, mold clamp assembly.

• Replacement parts of extrusion pellet mills: screw extrusion barrels, extrusion barrel casings, pressure rings, extrusion mill base.

• Magnet bars.

• Machine piece splitters; split roller shafts.

• Feed pellet classifiers.

• Pellet feed molds.

• Pellet feed roller shafts.

• Grinder blades.”

Thus, Official Letter No. 16659/BTC-CST specifically names the machines, equipment, and replacement parts used in animal feed production that are specialized for agricultural production and are exempt from VAT. Based on the documents submitted with Official Letter No. 2412MSD/24, the milking equipment imported by your company does not fall under the guidance in Official Letter No. 16659/BTC-CST as mentioned above.

2. In Official Letter No. 12848/BTC-CST dated September 15, 2015, the Ministry of Finance guided:

“2. For imported components to assemble machinery and specialized equipment used in agricultural production:

The classification of imported components for assembling machines and equipment used in agricultural production is based on the Vietnam Import-Export Commodity List issued with Circular No. 103/2015/TT-BTC dated July 1, 2015, by the Ministry of Finance, along with the HS code explanatory notes, supplementary AHTN annotations, commodity classification rules, and Circular No. 14/2015/TT-BTC dated January 30, 2015, guiding commodity classification, and analysis for classification, quality control, and food safety checks for export and import goods.

According to rule 2a in Appendix II issued with Circular No. 103/2015/TT-BTC dated July 1, 2015, a commodity classified into a group shall also be classified as part of that group, even if it is in an incomplete or unfinished form, provided that it has the essential characteristics of the finished product. This rule also applies to the finished or completed form of a commodity that retains the essential features of the completed form of that commodity (or is classified as a finished product according to this rule), but has not yet been assembled or disassembled.”

Based on the rule above, imported components that are considered a complete set for assembling machinery and specialized equipment used in agricultural production and fall under the same HS code as the finished machinery or equipment used for agricultural production are exempt from VAT.

For example:

• Imported components to assemble a combine harvester with HS code 84335100 include major parts such as chassis, engine, transmission system, threshing chamber, grain collection system, control system, harvesting drum, rubber crawler tracks, covers for the body and roof, control seat, and toolboxes. These components are used to assemble a complete combine harvester, specifically designed for agricultural purposes, and cannot be used for other purposes, so they are VAT-exempt.

• Imported components to assemble a tiller with HS code 84322900 include parts like rotating shafts, lift arms, support plates, cover plates, and tilling blades. These components are used exclusively for assembling agricultural tillers and cannot be used for other purposes, so they are also VAT-exempt.

• For imported components used to assemble a pesticide sprayer (including spray devices, nozzles, handles, pistons, spouts, valves, etc.), if according to rule 2a in Appendix II, they are not considered a complete set for a pesticide sprayer and do not share the same HS code as the finished sprayer, then these components are not exempt from VAT.

Therefore, components imported to assemble machinery and specialized equipment for agricultural production are subject to the guidance in Official Letter No. 12848/BTC-CST.

In Official Letter No. 492/KTHT-CĐ dated June 7, 2023, the Department of Cooperatives and Rural Economic Development confirmed that 35 components and accessories used to assemble a complete milking line of MSD Animal Health Vietnam Co., Ltd. are considered specialized equipment for agricultural production.

If the company imports individual products from the list in Official Letter No. 492/KTHT-CĐ, they will not be exempt from VAT as per the guidance in Official Letter No. 12848/BTC-CST dated September 15, 2015.

The company is advised to review the guidance in the above documents and compare them with the actual imported goods for implementation. In case of further difficulties, the company should contact the Department of Tax Policy Management for guidance.

The General Department of Customs responds for MSD Animal Health Vietnam Co., Ltd.'s reference.

 

Recipients: As mentioned above. Deputy Director Âu Anh Tuấn (for reporting). Archived: VT, TXNK (3b).

On behalf of the GENERAL DIRECTOR Deputy Director General of Customs     Đang Son Tung

See details here.