Official dispatch No. 4968/CT-CS issued on November 5, 2025 by the Tax Department guiding the VAT policy for wood chip products in the purchasing and trading stages. Pursuant to the VAT Law No. 48/2024/QH15 and Decree 181/2025/ND-CP, in case an enterprise does not directly plant forests but buys planted forest wood from other organizations or individuals to chop and grind into wood chips for sale, this product is subject to VAT rate 10%. The document helps to unify the tax application, avoiding confusion between unprocessed forestry products and industrially processed goods.
Main content of Official Dispatch No. 4968/CT-CS
Hanoi Tax Department has concluded:
In case the enterprise does not directly plant forests, but purchases planted forest wood from other organizations/individuals, then chops and grinds it into wood chip products for sale, the wood chip products sold are subject to VAT 10% at the commercial business stage.
Thus, even though the raw material is preferential planted forest wood, after being processed and traded by the enterprise, the product is no longer in the non-taxable group or subject to the tax rate 5%.
Legal basis cited in Official Dispatch No. 4968/CT-CS
In order to have a basis to conclude the VAT rate applicable to wood chip products in cases where enterprises do not directly plant forests, Official Letter No. 4968/CT-CS cited a number of important provisions of the Law on VAT and the guiding Decree. The relevant legal bases include:
| Legal documents | Relevant scope |
| Clause 1, Article 5 VAT Law 48/2024/QH15 | Regulations on non-taxable subjects |
| Point d, Clause 2, Clause 3 and Clause 5, Article 9 of the Law on VAT 48/2024/QH15 | Regulations on VAT rates |
| Clause 1, Article 4 of Decree 181/2025/ND-CP | Guide to unprocessed agricultural and forestry products |
| Clause 3, Article 19 of Decree 181/2025/ND-CP | Regulations on tax rates 5% |
Detailed explanation of VAT on wood chips according to Official Dispatch No. 4968/CT-CS
Application VAT There is no unified tax rate for wood chips, but it depends on the production and circulation stages and the subject that creates the product. To correctly determine tax obligations, businesses need to clearly distinguish the following cases:
When are wood chips not subject to VAT?
Wood chips are not subject to VAT only in cases where the product is still considered as raw material directly from forest plantation, not industrially processed or only simply processed. Specifically:
- Product creator: is an organization or individual who directly plants forests, harvests wood and sells raw materials.
- Product nature: remains the same, not transformed into a new product.
- Practical example: selling cut, peeled, un-crushed or industrially processed acacia and eucalyptus wood.
These products belong to the group of "unprocessed agricultural and forestry products" according to the VAT Law 48/2024/QH15 and Decree 181/2025/ND-CP, so they do not have to declare VAT and businesses are not subject to output tax. This is a policy to encourage forest growers to directly participate in production, reducing tax costs for primary products.
When is the 5% tax rate applied?
Some forestry products that have been lightly processed but still retain their original nature and intended use may be subject to VAT rate 5%. This tax rate is usually applied in the following cases:
- Raw materials that have been pre-processed to facilitate further processing (e.g., sawing, preliminary seasoning) but have not yet been transformed into a finished product.
- Products are still served for domestic processing and not directly sold to the market as finished goods.
However, for chopped or crushed wood chips, the nature of the product has completely changed, from raw materials to industrial products ready for commercial use. Therefore, this product is no longer subject to the 5% tax rate. This is an important point that many businesses often confuse, leading to incorrect tax declarations.
When is the 10% tax rate applied?
If the enterprise does not directly plant forests, but purchases planted forest wood from other organizations or individuals, then chops and grinds it into wood chips to sell to the market, the wood chip product is subject to VAT 10% at the commercial business stage.
Analysis of reasons for applying tax rate 10% according to official dispatch no. 4968/CT-CS
To understand why wood chip products are subject to VAT rate 10% according to Official Dispatch No. 4968/CT-CS, it is necessary to analyze the factors determining the tax rate based on the origin of raw materials, processing process and business purpose. The table below summarizes the reasons and specific explanations, helping businesses and tax authorities clearly understand the legal basis and practice when applying VAT to wood chips.
| Reason | Explain |
| Not a product of direct forestry producers | Enterprises do not plant forests themselves |
| Processed products to make other goods | Chopping and grinding of planted forest wood into wood chips |
| Commercial business activities | Sold to the market for commercial purposes |
Illustrative example of tax handling according to Official Dispatch No. 4968/CT-CS
In order for businesses and tax authorities to easily apply the correct VAT rate to wood and wood chip products, it is necessary to distinguish each specific business situation.
The table below summarizes common cases from selling raw and semi-processed forest timber, to processing wood chips and exporting, with corresponding VAT rates and legal basis. This is a visual guide, helping to avoid confusion when declaring taxes according to Official Letter No. 4968/CT-CS.
| Situation | VAT | Base |
| People sell raw timber from planted forests directly to businesses | Tax free | Law on VAT Article 5 |
| Enterprises buy forest wood → process and peel the bark → sell domestically | 5% (depending on the case) | Decree 181/2025 |
| Enterprises buy wood → chop into wood chips → sell domestically | 10% | Official dispatch No. 4968/CT-CS |
| Exported wood chips have full customs procedures | 0% | Article 9 of Law 48/2024/QH15 |
What should businesses do when applying Official Dispatch No. 4968/CT-CS?
To properly apply Official Dispatch No. 4968/CT-CS and comply with VAT regulations on wood chip products, businesses need to take specific steps to ensure accurate tax declaration, complete document management and avoid legal and financial risks.
Adjust VAT to the correct tax rate
To comply with the regulations on VAT on wood chips according to Official Letter No. 4968/CT-CS, businesses need to take some important steps to ensure accurate declaration, avoid tax arrears and the risk of being penalized. The table below summarizes the tasks to be done with detailed content, helping businesses to control tax obligations when selling domestic wood chips or updating the accounting - sales system.
| What to do | Content |
| Issue tax invoice 10% | When selling domestic wood chips |
| Adjust sales software | Update tax schedule |
| Check previous tax return | Avoid tax arrears → late payment penalties |
Management of documents for purchasing planted forest timber
To ensure compliance with the law and proper implementation of VAT obligations on wood chip products, businesses need to strictly manage documents related to the purchase of planted wood. This not only helps to declare taxes accurately but also prevents the risk of being collected or fined. Below are the important types of documents that businesses need to keep:
- Purchase contract
- Payment documents
- Invoices/documents in accordance with legal regulations
- Minutes confirming the legal origin of planted forest wood
Risks of declaring incorrect tax rates
When declaring and managing VAT on wood chip products, if businesses do not comply with the regulations according to Official Letter No. 4968/CT-CS, many legal and financial risks will arise. The table below lists common risk levels and corresponding consequences, helping businesses identify potential problems and proactively prevent them when declaring, issuing invoices and managing documents.
| Risk level | Consequence |
| Under-declaration of VAT | Charged + fined 20% + late payment fee |
| Insufficient input documents | No tax deduction |
| Incorrect invoice | Invoices must be canceled or adjusted according to regulations. |
Assessing the impact of Official Dispatch No. 4968/CT-CS on the wood chip industry
The issuance of Official Letter No. 4968/CT-CS is of great significance in determining the correct VAT rate for wood chip products, and at the same time directly affects the production, business and tax management activities of enterprises in the industry. The table below summarizes the affected subjects and the specific level of impact, helping enterprises and tax authorities clearly understand and promptly adjust business activities:
| Object | Impact |
| Wood chip manufacturing enterprise | Increased costs → need to adjust selling prices to ensure profits |
| Small scale factory | Need to be more careful in declaring VAT and managing documents |
| Export markets | More favorable if fully meeting the conditions to apply tax rate 0% |
| Tax administration | Help tax authorities reduce revenue loss, increase transparency and management efficiency |
In general, Official Dispatch No. 4968/CT-CS not only creates transparency in tax application, but also promotes businesses to comply with legal regulations, and at the same time helps tax authorities have a basis for more effective management and supervision.
Conclude
Official Letter No. 4968/CT-CS of the Tax Department has clarified the application of VAT 10% to wood chip products when enterprises purchase planted forest wood from other sources and process it into wood chips for commercial sale. Understanding these regulations helps enterprises declare taxes in accordance with the law, avoid the risk of being charged back, fined for late payment or invoice errors, and at the same time ensure transparent and effective business operations.
For businesses in the forestry industry, managing documents, invoices, sales contracts and controlling costs is a key factor in tax compliance. At MAN – Master Accountant Network, we provide in-depth auditing services and comprehensive tax accounting services, helping businesses review, optimize tax declarations and ensure compliance with all the latest legal regulations, including the instructions from Official Letter No. 4968/CT-CS.
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