What goods imported for further processing and processed exports under processing contracts are exempt from export and import duties in Vietnam?

What goods imported for further processing and processed exports under processing contracts are exempt from export and import duties in Vietnam?

Under Clause 1, Article 10 of Decree 134/2016/ND-CP, as amended by Clause 4, Article 1 of Decree 18/2021/ND-CP, goods imported for further processing and processed exports under processing contracts that are exempt from export and import duties include:

- Raw materials, semi-finished products, supplies (including those for the manufacture of packages of exports), imported components that are incorporated into the exports or used during the processing of exports not incorporated into the exports, including those imported by the processor to execute the processing contract;

- Goods imported as samples that are not traded or used;

- Machinery and equipment imported for processing under a processing contract;

- Imported finished products that are attached on processed products or packed with processed products as a whole for export according to the processing contract or appendices thereof and are considered raw materials or supplies imported for processing;

- Components and parts imported for repair of processed exports under warranty according to the processing contract or appendices thereof and are considered raw materials or supplies imported for processing;

- Goods imported for further processing but are permitted to be destroyed in Vietnam and have been destroyed in reality.

Goods imported for further processing and used as gifts shall be exempt from duties in accordance with Article 8 of Decree 134/2016/ND-CP.

When the processing contract expires, it is not required to re-export goods imported for processing. Imported goods that are not re-exported shall be dutiable;

- Processed products that are exported to a foreign country, a free trade zone or an organization or individual in Vietnam as requested by the hirer.

Processed exports are exempt from export duties as prescribed by point g, Clause 1, Article 10 of Decree 134/2016/ND-CP if they are entirely processed from imported goods.

In case processed exports are made of dutiable domestic raw materials or supplies, export duties on the value of raw materials or supplies incorporated into the products at the duty rates applied to such raw materials or supplies shall be paid when the products are exported.

What goods imported for further processing and processed exports under processing contracts are exempt from export and import duties in Vietnam? (Image from the Internet)

What is the basis for determining goods imported for further processing and processed exports under processing contracts that are exempt from export and import duties in Vietnam?

Under Clause 2, Article 10 of Decree 134/2016/ND-CP  amended by Clause 4, Article 1 of Decree 18/2021/ND-CP, the basis for determining goods imported for further processing and processed exports under processing contracts that are exempt from export and import duties in Vietnam is as follows:

- The taxpayer has a processing contract that is conformable with regulations of Decree 69/2018/ND-CP. The taxpayer shall specify the number of the processing contract and its appendices on the customs declaration.

- The taxpayer or processor hired by the taxpayer has the right to ownership or enjoyment of the processing facility in Vietnam and equipment in the facility and has submitted the facility notification, the processing contract, sub-processing contract and their appendices to the customs authority in accordance with customs law. In case these documents are not submitted on schedule, the taxpayer shall only incur administrative penalties for customs offences as per regulations.

- In case the taxpayer (that has a processing contract) assigns another organization or individual (hereinafter referred to as “third party”) that satisfies the requirements specified in Point b of Clause 1, Article 10 of Decree 134/2016/ND-CP to process some or all of the stages, then receive the semi-finished products for further processing or receive the finished products for export, the taxpayer will be exempt from import duty on the imports assigned to the sub-processor.

In case the taxpayer (that has a processing contract) assigns all or part of the imports or semi-finished products that are processed from imports to a third party in a free trade zone or a foreign country, the imports or semi-finished products are exempt from export duties.

The products that are imported into Vietnam after being processed overseas are subject to import duties according to Point d Clause 1 Article 11 of Decree 134/2016/ND-CP.

The products that are imported into the domestic market of Vietnam after being processed in the free trade zone are subject to import duties as prescribed in Clause 2 Article 22 of Decree 134/2016/ND-CP.

- The taxpayer (that has a processing contract) shall report the use of duty-free imports in accordance with customs laws.

- The quantity of imports used for processing the products that have been exported to a foreign country or a free trade zone that is exempt from import duties is the quantity of goods imported in for processing the exported products in reality.

Regulations of points g and h, Clause 2, Article 10 of Decree 134/2016/ND-CP shall apply to goods imported for processing products that are exported to another domestically located organization or individual (outside of free trade zones), and in-country processed imports.

- Goods imported for further processing, scrap and refuses produced during processing that are returned to the foreign hirer are exempt from export and import duties.

Goods imported for further processing, processed products, scrap and refuses produced during processing that are permitted to be destroyed and have been destroyed in reality are exempt from import duties.

In case goods are imported for manufacture of outward processing but processed products are not exported or redundant imports are not exported, the taxpayer shall register a new customs declaration, declare and pay tax to the customs authority according to the duty rates and dutiable values of imports at the time of registration of the customs declaration, except for gifts specified in Article 8 of Decree 134/2016/ND-CP.

- The quantity of imported goods that are used for processing in-country exports in reality will be exempt from import duties if the in-country exporter has sent the customs authority a notification (Form No. 22 in Appendix VII hereof) of the customs declaration of the in-country imports within 15 days from the day on which customs clearance is granted to the in-country exports.

If the in-country exporter fails to submit the notification to the customs authority by the deadline, the in-country exporter shall register a new customs declaration, declare and pay duties on the imports used for processing the in-country exports at the rates and dutiable values of the imports that are applicable when the new customs declaration is registered.

If the in-country exporter submits a notification of the customs declaration of the in-country imports to the customs authority after duties are paid, the paid duties shall be settled in accordance with regulations of law on settlement of overpaid tax.

- Goods that are imported in-country for processing according to the customs declaration shall be exempt from import duties if the importer satisfies the requirements specified in points a and b, Clause 2, Article 10 of Decree 134/2016/ND-CP. If goods that are imported in-country for other purposes, the in-country importer shall declare and pay duties at the rates and dutiable values of the in-country imports that are applicable when the declaration is registered.

In case the in-country importer has paid import duties, used the in-country imports for manufacture of goods for export and exported the goods to a foreign country or a free trade zone in reality, paid import duties will be refunded in accordance with Article 36 of Decree 134/2016/ND-CP.

What goods exported for processing and processed imports under processing contracts are exempt from export and import duties in Vietnam?

Under Clause 1, Article 11 of Decree 134/2016/ND-CP, as amended by Clause 5, Article 1 of Decree 18/2021/ND-CP, the goods exported for processing and processed imports under processing contracts that are exempt from export and import duties in Vietnam include:

- Raw materials, supplies and components for export.

Export duties shall be charged on the value or quantity of raw materials, supplies and components corresponding to the quantity of processed products that are not re-imported at the duty rates applied to such raw materials, supplies and components.

Where goods exported for processing are natural resources, minerals or products in which the value of natural resources or minerals plus (+) energy cost makes up at least 51% of the product price and the goods are subject to export duties (except scraps produced during the manufacture or processing of the imports for export), duty exemption shall not be granted.

Products in which the value of natural resources or minerals plus (+) energy cost makes up less than 51% of the product price shall be determined in accordance with Decree 100/2016/ND-CP and Decree 146/2017/ND-CP.

- Goods exported as samples that are not traded or used;

- Machinery and equipment exported for processing under a processing contract;

- When products that are processed overseas are imported into Vietnam, import duties on the value of raw materials, supplies and components incorporated into the processed products shall be exempt; the remaining value of the products shall be dutiable at the import duty rates applied to processed imports.