Can free trade zones be located outside the territory of Vietnam?

Can free trade zones be located outside the territory of Vietnam?

According to Clause 1, Article 4 of the 2016 Law on Export and Import Duties, regulations on free trade zones are stipulated as follows:

Terminology Explanation

In this Law, the terms are understood as follows:

1. A free trade zone is an economic area within the territory of Vietnam, established following the provisions of law, with defined geographic boundaries, separated from the outside area by hard fences, ensuring conditions for inspection, supervision, and customs control activities of the customs office and other relevant authorities over exported and imported goods and means of transport, passengers exiting and entering the country; the purchase and exchange of goods between the free trade zone and the outside is considered an export-import relationship.

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Additionally, according to Clause 20, Article 4 of Circular 219/2013/TT-BTC, free trade zones also include many areas, such as export processing zones, export processing enterprises, bonded warehouses, free trade zones, special economic and trade zones, commercial-industrial zones, and other economic areas established and given tax incentives like free trade zones according to the Prime Minister's Decision.

Referring to the definition of free trade zones, it is clear that free trade zones are economic areas located within the territory of Vietnam.

Therefore, free trade zones cannot be located outside the territory of Vietnam.

Can free trade zones be located outside the territory of Vietnam? (Image from the Internet)

Do goods exported from the Vietnamese market to free trade zones incur export-import duties?

According to Article 2 of the 2016 Law on Export and Import Duties, regulations are as follows:

Taxable objects

1. Goods exported or imported through Vietnamese border gates and borders.

2. Goods exported from the domestic market to free trade zones, goods imported from free trade zones to the domestic market.

3. Goods exported or imported on the spot and goods exported or imported by enterprises having the right to export, import, and distribute goods.

4. Objects subject to export and import duties do not apply to the following cases:

a) Transit goods, transshipment goods, goods temporarily imported for re-export, and goods temporarily exported for re-import;

b) Goods granted humanitarian aid or non-refundable aid;

c) Goods exported from free trade zones to foreign countries; goods imported from foreign countries to free trade zones and used only within free trade zones; goods transferred from one free trade zone to another free trade zone;

d) Crude oil used to pay natural resource tax to the State when exported.

5. the Government of Vietnam shall detail this Article.

Therefore, based on the above regulations, goods exported from the domestic market to free trade zones will incur export-import duties.

Are goods produced in free trade zones in Vietnam exempt from taxes?

According to Clause 8, Article 16 of the 2016 Law on Export and Import Duties, regulations are as follows:

Tax exemption

1. Goods exported or imported by foreign organizations or individuals enjoying diplomatic privileges and immunities in Vietnam within the limits appropriate to international treaties to which the Socialist Republic of Vietnam is a member; goods in duty-free luggage quotas of persons on exit or entry; goods imported for sale at duty-free shops.

2. Movable assets, gifts within the limits prescribed by foreign organizations or individuals to Vietnamese entities or vice versa.

Movable assets, gifts exceeding the duty-free limit must pay tax on the excess portion, unless the receiving unit is a state-funded agency or organization, or is authorized to receive for humanitarian or charitable purposes.

3. Goods traded or exchanged across borders by border residents as prescribed on the list and within the limits to serve the production and consumption needs of border residents.

Goods purchased or transported within the limits but not used for the production and consumption of border residents and goods exported or imported by foreign traders who are permitted to trade in border markets are subject to tax.

4. Goods exempt from export and import duties as specified in the international treaties to which the Socialist Republic of Vietnam is a member.

5. Goods with taxable value or tax payable amount below the minimum threshold.

6. Raw materials, supplies, components imported for processing export products; finished products imported for attachment to processed products; processed products exported.

Exported processed products made from domestic raw materials, supplies subject to export duties are not exempt from duties on the value of the domestic raw materials, supplies constituting the exported product.

Goods exported for processing and then re-imported are exempt from export and import duties based on the value of the exported raw materials constituting the processed product. Goods exported for processing and then re-imported being natural resources or minerals, and products with a total value including natural resources, minerals, and energy costs accounting for 51% or more of the product cost are not exempt from duties.

7. Raw materials, supplies, components imported for manufacturing export products.

8. Goods produced, processed, recycled, assembled in free trade zones not using imported raw materials, components from abroad when imported into the domestic market.

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Therefore, goods produced in free trade zones are exempt from export-import duties.