What is the relationship of goods exchange between a free trade zone and the outside in Vietnam?

What is the relationship of goods exchange between a free trade zone and the outside?

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

Definitions

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 according to legal regulations, with defined geographical boundaries, separated from the external area by a hard fence, ensuring conditions for customs inspection, supervision, and control activities by customs authorities and other relevant agencies over export and import goods, vehicles, and passengers entering and exiting; the buying and selling, exchanging of goods between a free trade zone and the outside is an import-export relationship.

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Thus, according to the above provision, the exchange of goods between a free trade zone and the outside is an import-export relationship.

What is the relationship of goods exchange between a free trade zone and the outside in Vietnam? (Image from the Internet)

Do goods transferred from one free trade zone to another have to pay import-export duties in Vietnam?

According to Article 2 of the 2016 Law on Export and Import duties, it is stipulated as follows:

Taxable Objects

1. Goods exported, imported through Vietnam's border gates and borders.

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

3. Goods exported, imported on the spot and goods exported, imported by enterprises exercising export, import, and distribution rights.

4. Export and import taxable objects do not apply in the following cases:

a) Goods in transit, transshipment, temporary import for re-export;

b) Humanitarian aid goods, grant aid goods;

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

d) Crude oil used to pay natural resource tax to the State upon export.

5. The Government of Vietnam shall detail this Article.

Thus, according to the above provision, goods transferred from one free trade zone to another will not have to pay import-export duties.

Are goods processed in the free trade zone exempt from tax in Vietnam?

According to Clause 8 Article 16 of the 2016 Law on Export and Import duties, it is stipulated as follows:

Tax Exemption

1. Goods exported, imported by foreign organizations and individuals entitled to privileges and immunities in Vietnam within the limits suitable to international treaties to which the Socialist Republic of Vietnam is a contracting party; goods within the tax-free luggage standards of exit, entry passengers; goods imported for sale at duty-free shops.

2. Movable property, gifts, and presents within the limits given by foreign organizations and individuals to Vietnamese organizations and individuals or vice versa.

Movable property, gifts, presents, exceeding the tax-free limit, shall be subject to tax on the excess portion, except for cases where the receiving organization is an agency, organization funded by the state budget and permitted to receive by a competent authority, or for humanitarian or charitable purposes.

3. Goods bought and sold, exchanged across borders by border residents included in the List of goods and within the limit for production, consumption by border residents.

In case goods within the limit are purchased, transported not for production, consumption by border residents, and goods exported, imported by foreign traders allowed to trade in border markets, tax shall apply.

4. Goods exempt from export, import duties according to international treaties to which the Socialist Republic of Vietnam is a contracting party.

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

6. Raw materials, supplies, components imported for the production of export goods; complete products imported to insert into processed products; export processed products.

Processed export products produced from domestic raw materials, supplies subject to export tax shall not be exempt from tax on the value portion of domestic raw materials, supplies constituting in exported products.

Goods exported for processing and then imported are exempt from export and import duties calculated on the value of exported materials constituting the processed product. For goods exported for processing and then imported, which are resources, minerals, products with combined value of resources, minerals plus energy costs accounting for 51% of the product cost or more, tax exemption does not apply.

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

8. Goods manufactured, processed, recycled, assembled at a free trade zone without using imported raw materials, components from abroad when imported into the domestic market.

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Thus, goods processed in a free trade zone without using imported raw materials and components from abroad when imported into the domestic market will be exempt from export-import duties.