Tax reform strategy: What are amendments to non-tariff areas in Vietnam?

What is a non-tariff area in Vietnam?

According to Clause 1, Article 2 of the Regulation on the operation of non-tariff areas within economic zones and border-gate economic zones, promulgated together with Decision 100/2009/QD-TTg:

Interpretation of terms

Within this Regulation, the terms below are understood as follows:

1. A non-tariff area is a defined geographical area separated from the external territory by a solid barrier, with gates and doors ensuring conditions for the control of Customs authorities and relevant agencies, having Customs authorities supervising, inspecting goods and vehicles entering and leaving the zone.

2. Non-tariff areas within economic zones and border-gate economic zones include bonded areas, special economic-commercial zones, industrial-commercial zones, free trade zones, and other zones called under different names established by Decision of the Prime Minister of the Government of Vietnam. The relationships of purchasing, exchanging goods between this zone and the outside are considered export-import relations.

3. The domestic territory is the part of Vietnam outside the non-tariff area.

The non-tariff area is defined as a geographical area with determined boundaries, separated from the external territory by a solid barrier, with gates and doors ensuring conditions for the control of Customs authorities and relevant agencies, having Customs authorities supervising, inspecting goods and vehicles entering and leaving the zone.

Tax reform strategy: What are amendments to non-tariff areas in Vietnam? (Image from the Internet)

Tax reform strategy: What are amendments to non-tariff areas in Vietnam?

According to Point c, Clause 1, Section 3, Article 1 of Decision 508/QD-TTg 2022:

III. Solutions for Implementing the Strategy

1. Regarding Tax reform strategy

...

c) Regarding export tax and import tax: continue to streamline the number of tax rate levels to simplify the import tariff schedule, aiming to reduce the number of import tax rates from the current 32 levels to about 25 levels by 2025 and 20 levels by 2030. Research and amend, supplement export tax and import tax policies to promote exports, encourage increasing domestic value, limit the export of raw resources and minerals; implement appropriate preferential policies to promote the development of key industries, supporting industries, and priority areas, ensuring alignment with the economic-social development orientations of the country in each period and international commitments. Research and amend the regulations on on-the-spot export goods, on-the-spot import goods, and regulations related to non-tariff areas, ensuring consistency with relevant legal regulations, limiting commercial fraud, and tax evasion;

...

Accordingly, solutions for implementing the strategy for reforming foreign trade policy according to the tax reform strategy until 2030 are as follows:

- Continue to streamline the number of tax rate levels to simplify the import tariff schedule, aiming to reduce the number of import tax rates from the current 32 levels to about 25 levels by 2025 and 20 levels by 2030;

- Research and amend, supplement foreign trade policies to promote exports, encourage increasing domestic value, limit the export of raw resources and minerals;

- Implement appropriate preferential policies to promote the development of key industries, supporting industries, and priority areas, ensuring alignment with the economic-social development orientations of the country in each period and international commitments;

- Research and amend the regulations on on-the-spot export goods, on-the-spot import goods, and regulations related to non-tariff areas, ensuring consistency with relevant legal regulations, limiting commercial fraud and tax evasion.

Thus, the solutions for implementing the strategy for reforming foreign trade policy according to the tax reform strategy until 2030 will include researching and amending regulations related to non-tariff areas to ensure consistency with relevant legal regulations, limiting commercial fraud, and tax evasion.

When are goods produced or processed in the non-tariff area exempt from import Tax?

According to Clause 8, Article 16 of the Law on Export and Import duties 2016:

Tax Exemption

...

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

8. Goods produced, processed, recycled, or assembled in the non-tariff area without using imported raw materials or components from abroad when imported into the domestic market.

9. Temporarily imported goods, goods temporarily exported within a specified period, including:

a) Temporarily imported goods for re-export, temporarily exported goods for re-import for organizing or participating in fairs, exhibitions, product introductions, sports, cultural, or artistic events or other events; temporarily imported machinery and equipment for testing, research and product development; temporarily imported machinery and equipment, professional tools for a specified time to serve work or for foreign merchants; except for machinery, equipment, tools, and means of transport of organizations and individuals allowed to be temporarily imported for re-export to implement investment projects, construction, installation of works, and serve production;

...

Accordingly, goods produced, processed, recycled, or assembled in the non-tariff area that do not use imported raw materials or components from abroad when imported into the domestic market are exempt from import tax.