Ministry of Finance Responds to Vietnam Timber and Forest Products Association on Non-Cash Payment Challenges in Timber Procurement

Ministry of Finance Responds to Vietnam Timber and Forest Products Association on Non-Cash Payment Challenges in Timber Procurement

The Ministry of Finance has officially issued a response to the Vietnam Timber and Forest Products Association (VIFOREST) regarding proposals to address challenges in implementing non-cash payment requirements for timber and forest product procurement from households and individual suppliers. This issue has attracted significant attention from businesses in Vietnam’s wood industry, particularly in the context of accelerating digital transformation and increasing demands for transaction transparency.

(Illustrative image: Non-cash payment)

In recent years, wood processing and exporting enterprises have faced various difficulties in complying with regulations that require non-cash payments for transactions valued at VND 5 million or more in order for such expenses to be recognized as deductible costs for corporate income tax purposes. This requirement has proven especially challenging for timber procurement activities involving small-scale forest growers, households, and individual suppliers.

In practice, most timber suppliers are smallholder forest owners located in rural, remote, and mountainous areas, where cash transactions remain the dominant payment method. Limited access to banking infrastructure, digital payment tools, and financial services has created barriers to adopting non-cash payment methods. In addition, many individuals are either unable to open bank accounts or are unfamiliar with modern payment systems. As a result, enterprises face risks of having procurement costs disallowed for tax purposes, directly affecting their financial performance and tax obligations.

According to the Ministry of Finance, the regulation on non-cash payments has been in place under the Corporate Income Tax Law to enhance transparency in financial transactions and prevent tax fraud. In line with the Government’s broader digital transformation strategy, Vietnam is actively promoting a cashless economy, targeting a non-cash transaction rate of approximately 80% by 2030.

To support this transition, various policies and legal frameworks have been introduced and refined. These include clearer provisions on non-cash payment requirements for tax deductibility, as well as the expansion of payment methods such as mobile money, intermediary payment services, and agent banking models in rural areas. At the same time, efforts are being made to improve financial inclusion and expand access to payment services for people in remote regions.

Despite these policy advancements, significant challenges remain in practical implementation within the wood industry. The fragmented nature of the raw material supply chain—characterized by numerous small-scale suppliers and frequent low-value transactions—makes it difficult to standardize non-cash payment practices. Furthermore, uneven financial infrastructure and limited familiarity with digital payment tools continue to hinder adoption, increasing operational costs and administrative burdens for enterprises. Businesses are required to enhance internal control systems, adjust procurement processes, and invest in workforce training to comply with the new regulations.

(Illustrative image: Forest planting and protection)

The gap between policy objectives and on-the-ground realities also highlights the need for more flexible mechanisms tailored to the specific characteristics of the forestry sector. Slower digital adoption in rural areas further underscores the importance of coordinated efforts among regulators, financial institutions, and industry stakeholders.

In the long term, the promotion of non-cash payments is expected to bring substantial benefits to the wood industry. Greater transparency in transactions will support timber traceability, strengthen compliance with international standards, and enhance the credibility of Vietnamese wood products in key export markets such as Japan, South Korea, and the European Union. In addition, reducing legal and compliance risks will contribute to the sustainable development of the sector and facilitate deeper integration into global supply chains.

From a business perspective, SMART WOOD, a company engaged in biomass wood processing and export, recognizes that compliance with non-cash payment regulations is an inevitable trend. However, the company also emphasizes the need for a practical implementation roadmap that reflects industry-specific conditions. Moving forward, enterprises expect more flexible mechanisms for transactions involving smallholder suppliers, stronger efforts to promote digital financial inclusion in rural areas, and closer collaboration among regulators, banks, and businesses.

In the context of rapid digital transformation, the Ministry of Finance’s response to industry concerns represents an important step in policy dialogue. It not only helps address immediate challenges faced by enterprises but also contributes to building a more transparent, modern, and sustainable transaction ecosystem for Vietnam’s wood industry.