Are goods transferred from one free trade zone to another subject to export-import taxes in Vietnam?

What is a free trade zone in Vietnam?

According to Clause 1, Article 4 of the 2016 Law on export and import duties, a free trade zone is an economic area within the territory of Vietnam, established according to the legal provisions, with defined geographical boundaries, separated from the external area by a solid fence, ensuring conditions for inspection, supervision, and customs control activities by customs authorities and related agencies for exported and imported goods, and for means of transport and passengers crossing borders; the purchase and exchange relationship of goods between the free trade zone and the external area is an export-import relationship.

Are goods transferred from one free trade zone to another subject to export-import taxes in Vietnam? (Image from Internet)

Are goods transferred from one free trade zone to another subject to export-import taxes in Vietnam?

Based on point b, clause 4, Article 3 of the 2016 Law on export and import duties, the subjects of taxation are stipulated as follows:

Subjects of Taxation

1. Goods exported or imported through Vietnam's border gates and borders.
2. Goods exported from the domestic market to the free trade zone, goods imported from the free trade zone into the domestic market.
3. Goods exported, imported on the spot, and goods exported and imported by enterprises implementing the rights of export, import, and distribution.
4. Export and import tax subjects do not apply to the following cases:a) Goods in transit, transshipment, or transhipment;b) Humanitarian aid goods, non-refundable aid goods;c) Goods exported from the free trade zone to overseas; goods imported from overseas into the free trade zone and only used within the free trade zone; goods transferred from one free trade zone to another;d) Oil and gas used to pay resource taxes to the State when exported.
5. The Government of Vietnam particularly regulates this Article.

Thus, goods transferred from one free trade zone to another are not subject to export-import taxes.

When are goods produced in the free trade zone exempt from export-import taxes in Vietnam?

According to clause 8, Article 16 of the 2016 Law on export and import duties, circumstances of tax exemption are regulated as follows:

Tax Exemption

1. Exported and imported goods of foreign organizations and individuals entitled to privileges and immunities in Vietnam within the standards suitable to international treaties to which the Socialist Republic of Vietnam is a member; tax-free standard goods of outbound and inbound passengers; goods imported for sale at duty-free shops.

2. Movable assets, gifts within the quota of foreign organizations and individuals to Vietnamese organizations and individuals or vice versa.

   Movable assets, gifts exceeding the tax exemption quota in quantity or value must pay taxes on the excess portion, except the receiving unit is a State budget-guaranteed agency or organization allowed by competent authorities to receive or for humanitarian or charitable purposes.

3. Goods purchased and exchanged across the borders by border residents within the List of goods and under the quota to serve the production and consumption of border residents.

   Goods purchased and transported under quota but not for the production or consumption of border residents and goods exported, imported by foreign merchants allowed to do business at border markets must pay taxes.

4. Goods exempt from export and import taxes according to international treaties to which the Socialist Republic of Vietnam is a member.

5. Goods with a value or tax payable below a minimum threshold.

6. Raw materials, supplies, and components imported to manufacture export products; complete products imported to be incorporated into processed products for export; processed export products.Processed export products made from domestic raw materials and supplies with an export tax do not get tax exemptions for the equivalent value of domestic raw materials and supplies in the export product.Exported goods for processing, subsequently re-imported, are exempt from export and import taxes on the value of exported raw materials forming the processed product. However, resources and minerals with total resource and mineral value plus energy costs accounting for 51% or more of the product cost are not exempt from taxes.

7. Raw materials, supplies, and components imported to manufacture export goods.

8. Goods produced, processed, recycled, or assembled in the free trade zone without using foreign imported materials or components when imported into the domestic market.

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Thus, if goods produced in the free trade zone do not use foreign imported materials or components when imported into the domestic market, they are exempt from export and import taxes.