Are goods selling into a tax-suspension warehouse subject to VAT in Vietnam?

What is a tax-suspension warehouse in Vietnam?

According to Clause 9, Article 4 of the Customs Law 2014, a tax-suspension warehouse is a warehouse used to store imported materials and supplies that have been cleared through customs but not yet taxed, intended for the production of export goods by the tax-suspension warehouse owner.

Where shall a tax-suspension warehouse be established in Vietnam?

According to Clause 2, Article 62 of the Customs Law 2014, the regulations are as follows:

Conditions for establishing bonded warehouses, tax-suspension warehouses, places for gathering CFS

1. Bonded warehouses and places for gathering CFS can be established in areas having the following facilities:

a) Seaports, international civil airports, export and import ports established inland, land border gates, international railway stations;

b) Industrial zones, high-tech zones, non-tariff zones, and other areas as prescribed by law.

2. A tax-suspension warehouse can be established within the factory premises of enterprises producing export goods.

3. The General Director of the General Department of Customs decides on the establishment, extension of operation duration, temporary suspension, and termination of operation of bonded warehouses, tax-suspension warehouses, and places for gathering CFS.

4. the Government of Vietnam provides detailed regulations on the establishment and operation of bonded warehouses, tax-suspension warehouses, and places for gathering CFS.

Thus, a tax-suspension warehouse is established within the factory premises of enterprises producing export goods.

Are goods selling into a tax-suspension warehouse subject to VAT in Vietnam? (Image from the Internet)

Are goods selling into a tax-suspension warehouse subject to VAT in Vietnam?

According to Clause 20, Article 4 of Circular 219/2013/TT-BTC, the regulations are as follows:

Objects not subject to VAT

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20. Goods in transit or transshipment through Vietnam; goods temporarily imported and re-exported; goods temporarily exported and re-imported; raw materials, supplies imported for manufacturing or processing export goods under production or processing contracts signed with foreign parties.

Goods and services traded between foreign countries and non-tariff zones and between non-tariff zones.

Non-tariff zones include: export processing zones, export processing enterprises, tax-suspension warehouses*, tax-suspension warehouses, bonded warehouses, foreign trade special economic zones, trade-industrial zones, and other economic areas established and enjoying tax incentives like non-tariff zones as decided by the Prime Minister of the Government of Vietnam. The trading and exchange of goods between these zones and the outside is considered as export and import relations.*

The documents and procedures for determining and handling non-taxable VAT in these cases are implemented according to the guidelines of the Ministry of Finance on customs procedures; customs inspection and supervision; export tax, import tax, and tax administration for exported and imported goods.

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Meanwhile, Clause 1, Article 9 of Circular 219/2013/TT-BTC states:

0% Tax Rate

1. The 0% tax rate applies to exported goods and services; construction and installation activities abroad and in non-tariff zones; international transport; goods and services not subject to VAT when exported*, except for cases not applying the 0% tax rate as guided in Clause 3 of this Article.*

Exported goods and services are those sold and supplied to foreign organizations or individuals and consumed outside Vietnam; sold and supplied to organizations or individuals in non-tariff zones; goods and services provided to foreign customers according to law.

a) Exported goods include:

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- Goods sold into non-tariff zones according to the regulations of the Prime Minister of the Government of Vietnam*; goods sold to duty-free shops;*

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Thus, goods sold into tax-suspension warehouses are considered export goods and are subject to a 0% tax rate (if not falling under cases ineligible for the 0% tax rate according to Clause 3, Article 9 of Circular 219/2013/TT-BTC, as amended by Clause 5, Article 1 of Circular 26/2015/TT-BTC and Clause 2, Article 1 of Circular 130/2016/TT-BTC).

However, to apply the 0% tax rate for goods sold into tax-suspension warehouses, conditions at Point a, Clause 2, Article 9 of Circular 219/2013/TT-BTC must be met:

- Have a contract for selling or processing export goods; have a consignment export contract;

- Have payment proof for exported goods through banks and other documents as required by law;

- Have a customs declaration as stipulated in Clause 2, Article 16 of Circular 219/2013/TT-BTC.

In cases where goods are sold and the point of delivery and receipt is outside Vietnam, the business establishment (seller) must have documents proving the delivery and receipt of goods outside Vietnam, such as:

+ A purchase contract signed with the overseas seller;

+ A sales contract signed with the buyer;

+ Documents proving goods are delivered or received outside Vietnam, like an international commercial invoice, bill of lading, packing list, certificate of origin, etc.;

+ Bank payment documents, including the business's bank payment to the overseas seller; the buyer's bank payment to the business.