Which imported goods are exempt from import tax when manufacturing exports in Vietnam?

Are materials, supplies, and components imported for manufacture of exports subject to import tax exemption in Vietnam?

According to Clause 7, Article 16 of the 2016 Law on Export and Import Duties, the regulations are as follows:

Tax Exemption

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7. materials, supplies, and components imported imported for manufacture of exports.

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Thus, materials, supplies, and components imported imported for manufacture of exports are subject to import tax exemption.

Which imported goods are exempt from import tax when manufacturing exports in Vietnam? (Image from the Internet)

Which imported goods are exempt from import tax when manufacturing exports in Vietnam?

According to Clause 1, Article 12 of Decree 134/2016/ND-CP amended by Clause 6, Article 1 of Decree 18/2021/ND-CP, imported goods imported for manufacture of exports are exempt from import tax as stipulated in Clause 7, Article 16 of the 2016 Law on Export and Import Duties, including:

- Materials, supplies (including packaging materials or packaging for packing export products), components, and semi-finished products imported directly to form export products or directly participate in the production process of exports but not directly transformed into goods;

- Finished products imported for packing, labeling, or assembling into export products or for being packaged together as a synchronized part with export products;

- Components and spare parts imported for warranty of export products;

- Imported goods not used for trading, exchanging, or consuming but only for making samples;

- Imported goods for manufacturing exports allowed to be destroyed in Vietnam and have been actually destroyed.

What are bases for determining imported goods imported for manufacture of exports to be exempt from import tax in Vietnam?

According to Clause 2, Article 12 of Decree 134/2016/ND-CP amended by Clause 6, Article 1 of Decree 18/2021/ND-CP, the basis for determining imported goods imported for manufacture of exports to be exempt from import tax is as follows:

- The taxpayer has ownership or the right to use the manufacturing facility of exports, machinery, and equipment at the manufacturing facility on the territory of Vietnam.

The taxpayer shall notify the competent authorities of customs about the production facility, machinery, and equipment at their production facility; notify the production and processing facilities of the entities receiving production, processing, reprocessing contracts to the customs authority according to the customs law.

In case the taxpayer fails to notify the production, processing, or reprocessing facility or reprocessing contract on time as prescribed by customs law, they shall only be subject to administrative penalties in the field of customs according to regulations.

The taxpayer delivers imported goods under Clause 1, Article 12 of Decree 134/2016/ND-CP to hire other entities or individuals who own or have the right to use the manufacturing facility, machinery, and equipment at their facility for manufacturing, reprocess according to the following cases:

+ The taxpayer delivers part or all of the imported goods to hire other entities or individuals within the territory of Vietnam to manufacture or process one or several stages of the product, then receives semi-finished products to continue producing export products. They are exempt from import tax on the goods imported for re-manufacturing or processing.

+ The taxpayer delivers part or all of the semi-finished products produced by the taxpayer from imported goods to hire other entities or individuals within the territory of Vietnam to manufacture or process one or several stages of the product, then receives the semi-finished products to continue producing export products or receives the final product for export. They are exempt from import tax on the goods imported to produce semi-finished products for re-manufacturing or processing.

+ The taxpayer delivers part of the imported goods to hire other entities or individuals within the territory of Vietnam to manufacture or process all stages of the product, then receive the finished product for export and is exempt from import tax on the goods imported for re-manufacturing or processing.

+ The taxpayer delivers imported goods, semi-finished products manufactured from all imported goods to hire other entities or individuals to manufacture, process in non-tariff areas or overseas under one of the cases stipulated under points a.1, a.2, a.3 of Clause 2, Article 12 of Decree 134/2016/ND-CP. They are exempt from export tax on imported goods, and semi-finished products manufactured from all imported goods for manufacturing or processing.

Products hired for manufacture, processing abroad re-imported back to Vietnam must pay import tax as prescribed at Point d, Clause 1 Article 11 of Decree 134/2016/ND-CP.

Products hired for manufacture, processing in the non-tariff zone imported to domestic Vietnam must pay import tax as prescribed at Clause 2, Article 22 of Decree 134/2016/ND-CP.

- The taxpayer imports goods under Clause 1, Article 12 of Decree 134/2016/ND-CP and delivers all imported goods to an organization owned more than 50% of charter capital or common shares of the taxpayer for manufacture, processing of products, then receives products for export. They are exempt from import tax on the imported goods for manufacturing or processing (including cases where the organization hires another unit for re-manufacturing or re-processing one or several stages of the export product).

The organization receiving the manufacturing and processing must have ownership or the right to use the manufacturing and processing facility, machinery, and equipment at the manufacturing facility on the territory of Vietnam.

The taxpayer must notify the customs authority on the manufacturing, processing facility of the organization receiving manufacturing and processing, re-processing, contracts for re-processing with other units according to customs law.

In case the taxpayer fails to notify the customs authority of the re-processing facility or re-processing contract on time as prescribed by the customs law, the taxpayer shall only be subject to administrative penalties in the field of customs according to regulations.

The taxpayer must submit additional documents to the customs authority at the time of notifying the manufacturing facility of the organization receiving re-processing:

   The enterprise registration certificate or the latest audited financial statement of the manufacturing receiving organization and the taxpayer: 1 authenticated copy;   The charter on the organization and activities of the manufacturing receiving organization and the taxpayer: 1 authenticated copy;   The shareholder register of the enterprise for joint-stock companies or the member register for two-member limited liability companies or more of the manufacturing receiving organization and the taxpayer: 1 authenticated copy.

The taxpayer delivers all imported goods to hire the organization for re-processing in non-tariff areas or overseas and is exempt from export tax for imported goods sent for manufacturing and re-processing. Products hired for manufacture and processing abroad reimported to Vietnam must pay import tax as prescribed at Point d, Clause 1 Article 11 of Decree 134/2016/ND-CP. Products re-processed in non-tariff zones imported into domestic Vietnam must pay import tax as prescribed in Clause 2, Article 22 of Decree 134/2016/ND-CP.

- The taxpayer is responsible for making settlement of tax-exempted goods used according to customs law.

- The volume of imported goods used for manufacturing exported products to foreign countries or in non-tariff zones that are tax-exempt is the actual volume of imported goods used to manufacture the exported products.

Imported goods used to manufacture products to be exported locally to entities in the domestic market (not in non-tariff zones) and products exported locally, and imported products locally, adhere to the regulations in points e, g, h Clause 2, Article 12 of Decree 134/2016/ND-CP.

- Imported goods for manufacturing, waste products, scraps formed during the manufacturing process allowed to be destroyed and actually destroyed according to customs law are exempt from import tax.

Imported goods for manufacturing exports but not used or imported goods used for manufacturing but not exported are not exempt from import tax. The taxpayer must register a new customs declaration and declare, pay taxes to the customs authority according to the applicable tax rate and tax value of the imported goods at the time of registering the new customs declaration except for gifts according to the provisions of Article 8 of Decree 134/2016/ND-CP.

- The volume of imported goods used to manufacture products exported locally that are tax-exempt is the actual volume of imported goods used to manufacture the products locally exported if the local exporter notifies the customs authority of the information on the customs declaration of the corresponding product for local import completed within 15 days from the clearance date of the local export product according to Form No. 22, Appendix 7 issued together with Decree 18/2021/ND-CP.

Beyond the aforementioned deadline, if the local exporter fails to notify the customs authority of the information on the customs declaration of the corresponding product for local import completed, the local exporter must register a new customs declaration and declare, pay taxes on imported goods used for the manufacturing of locally exported products according to the applicable tax rate and tax value at the time of registering the new customs declaration.

After paying taxes, the local exporter notifies the customs authority of the information on the customs declaration of the corresponding product for local import completed, and the tax overpaid is handled according to the tax management law on handling overpaid tax amounts.

- Locally exported products are not exempt from export tax. The local exporter registers the export customs declaration and declares, pays export tax according to the applicable tax rate and export product value at the time of registering the local export customs declaration.

- Locally imported products registered under the processing type are exempt from import tax if the local importer meets the provisions of points a and b, Clause 2, Article 10 of Decree 134/2016/ND-CP.

Locally imported products registered under another type must pay taxes according to the applicable tax rate and value at the time of registering the customs declaration.

If the local importer has paid import tax on goods for production and business, and has used the locally imported products in manufacturing exports and actually exported the products abroad or into non-tariff zones, they are entitled to a refund of the import tax paid according to Article 36 of Decree 134/2016/ND-CP.