Do free trade zones in Vietnam have boundaries?

Do free trade zones in Vietnam have boundaries?

Based on Clause 1, Article 4 of the 2016 Law on Export and Import Duties, a free trade zone is defined as follows:

Terminology Explanation

In this Law, the following terms are understood as follows:

1. A free trade zone is an economic area within the territory of Vietnam, established in accordance with the law, with a defined geographical boundary, separated from the surrounding area by a hard fence, ensuring conditions for the inspection, supervision, and control of customs agencies and related agencies over export and import goods, vehicles, and passengers. The relationship of buying and selling, exchanging goods between the free trade zone and the outside is a relationship of export and import.

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Thus, it can be understood that a free trade zone is an area within the territory of Vietnam with clearly defined boundaries, ensuring safety and supervising activities within this free trade zone.

Do free trade zones in Vietnam have a boundaries? (Image from the Internet)

Are goods exported from a free trade zone to foreign countries subject to export-import duties in Vietnam?

According to Article 2 of the 2016 Law on Export and Import Duties which stipulates as follows:

Taxable Objects

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

2. Goods exported from the domestic market into the free trade zone, goods imported from the free trade zone into the domestic market.

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

4. Export and import duties are not applicable to the following cases:

a) Goods in transit, transshipment, and international transfer;

b) Humanitarian aid goods, non-refundable aid goods;

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

d) Petroleum used to pay resource tax to the State when exported.

5. The Government of Vietnam provides detailed regulations on this Article.

Thus, according to the above regulations, it can be seen that goods exported from the free trade zone to foreign countries are not subject to export and import duties.

Are goods assembled in a free trade zone exempt from taxes in Vietnam?

Based on Clause 8, Article 16 of the 2016 Law on Export and Import Duties which stipulates as follows:

Tax Exemption

1. Exported or imported goods of foreign organizations and individuals entitled to privileges and immunities in Vietnam within the quotas in accordance with international treaties to which the Socialist Republic of Vietnam is a signatory; goods within the duty-free luggage allowances of exiting or entering persons; goods imported for sale at duty-free shops.

2. Moving assets, gifts within the quotas from foreign organizations and individuals to Vietnamese organizations and individuals or vice versa.

Moving assets, gifts with quantities or values exceeding the duty-free limit must pay tax on the excess portion, except in cases where the recipient unit is an agency or organization with State budget-funded operational expenses and is authorized to receive, or in cases for humanitarian or charitable purposes.

3. Goods bought and sold, exchanged across borders of border residents within the list of goods and quotas for production and consumption by border residents.

In case goods are purchased and transported within the quotas but not used for production and consumption by border residents and goods exported or imported by foreign traders allowed to trade in border markets, taxes must be paid.

4. Goods exempted from export or import duties under international treaties to which the Socialist Republic of Vietnam is a signatory.

5. Goods with values or tax amounts below the minimum threshold.

6. Raw materials, supplies, components imported for processing export products; complete products imported to be attached to processed products; processed products for export.

Processed products for export produced from domestic raw materials and supplies subject to export taxes are not exempt from taxes on the value of the domestic raw materials and supplies incorporated into the export products.

Goods exported for processing and then imported are exempt from export and import duties on the value of the exported raw materials incorporated into the processed products. For goods exported for processing and then imported which are resources, minerals, or products with total resource and mineral values plus energy costs accounting for 51% or more of the product cost, they are not exempt from duties.

7. Raw materials, supplies, components imported for the production of export goods.

8. Goods produced, processed, recycled, and assembled in a free trade zone not using imported raw materials and components from foreign countries when imported into the domestic market.

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Thus, goods assembled in a free trade zone that do not use imported raw materials and components from foreign countries when imported into the domestic market will be exempt from export and import duties.