Vietnam: Can an export processing enterprise apply the tax policy of the non-tariff zone when it fails to to make a notification according to the form after 01 year from the effective date of Decree 18/2021/ND-CP?
- What are the conditions to be considered an export processing enterprise in Vietnam?
- How are export processing enterprises specially regulated according to Vietnamese regulations?
- What are the conditions to apply the tax policy of non-tariff zones for export processing enterprises according to Vietnamese regulations?
What are the conditions to be considered an export processing enterprise in Vietnam?
According to the provisions of Clause 10, Article 1 of Decree No. 18/2021/ND-CP supplementing Article 28a of Decree 134/2016/ND-CP stipulating the conditions for customs inspection and supervision of export processing enterprises (EPZs) The enterprise must satisfy the following conditions:
- There are hard fences that separate the EPE from the outside; there are gates/doors that are the only ways for goods to enter and leave the EPE.
- There are surveillance cameras at the entrances and exits where goods are stored throughout the day (24/24 hours, including days off and holidays); images recorded by these cameras shall be transmitted to the supervisory customs authority of the EPE and retained at the EPE for at least 12 months.
- Having a software to manage imported goods that are not subject to tax of the export processing enterprise to report the import - export - inventory finalization on the use of imported goods in accordance with the law on customs.
Thus, an export processing enterprise is only considered to have fully satisfied the conditions for customs inspection and supervision when all production facilities of the export processing enterprise satisfy the conditions for customs inspection and supervision.
Vietnam: Can an export processing enterprise apply the tax policy of the non-tariff zone when it fails to to make a notification according to the form after 01 year from the effective date of Decree 18/2021/ND-CP?
How are export processing enterprises specially regulated according to Vietnamese regulations?
Pursuant to Article 30 of Decree 82/2018/ND-CP stipulating the management of industrial parks and economic zones:
“Article 30. Particular regulations applied to export processing zones and export processing enterprises
1. Export processing zones and export processing enterprises shall be subject to regulations applicable to separate customs areas and non-tariff zones, except for particular regulations applicable to non-tariff zones within bordergate economic zones. If export processing enterprises may be exempted from applying for the Certificate of investment registration, such exemption shall be specified in their investment registration certificates or written document issued by the competent investment registry. The investment registry shall be held responsible for gathering opinions from the competent customs authorities on the capability to satisfy conditions of the customs inspection and supervision before issuing the investment registration certificate or confirmation in writing to investors.
2. In industrial parks, there may be industrial sub-zones for export processing enterprises. Export processing zones, export-processing enterprises or industrial parks reserved for export-processing enterprises shall be separated from the outside by fence systems, have gates, entrance and exit doors, and fulfill requirements concerning supervision and control by customs authorities and related functional agencies according to regulations applicable to non-tariff areas and regulations laid down in the legislation on import and export duty.
3. Export processing enterprises may purchase building materials, stationery, food, foodstuffs and consumer goods from inland areas of Vietnam for carrying out construction works or meeting the needs of operation of the office system and basic needs of officers and staff members working in these enterprises.
Export processing enterprises and persons selling goods to export processing enterprises shall have the option of carrying out procedures for export or import of building materials, stationery, food, foodstuffs and consumer goods from inland areas of Vietnam.
4. Customs procedures, inspection and supervision of exported and imported goods of export processing zones and export processing enterprises shall be subject to the customs legislation.
5. Exchange of goods between export processing zones or export processing enterprises and other areas within the territory of Vietnam, except for non-tariff zones, shall be defined as an export or import relationship, unless otherwise stipulated in clause 3 of this Article and except in the cases where customs procedures are not required under regulations adopted by the Ministry of Finance.
Export processing enterprises may sell into the domestic market their liquidated assets and goods under the provisions of law on investment and trade. At the time of selling or disposing of goods in the domestic market, export or import management policies shall not apply, except to the extent that the goods are subject to management in conformity with conditions or standards ,and specialized inspection have not yet been implemented when import; The goods must be approved in writing by the import permit-issuing agency
6. Officers, workers and staff members working in export processing zones and export processing enterprises, when carrying foreign currencies from inland areas of Vietnam to export processing zones or export processing enterprises, and vice versa, shall not have to make customs declaration.
7. Export processing enterprises, when being permitted to purchase, sell goods and carry out other activities directly related to the purchase and sale of goods in Vietnam, must open separate accounting books for revenue and expenses related to these activities in Vietnam, arranging zones for storage of goods for such purchase or sale separated from those for production activities of export-processing enterprises, or setting up separate branches outside export processing enterprises or export processing zones to carry out these activities.
8. Branches of an export processing enterprise may have the operational system so applied to export processing enterprises as specified in this Article if they meet the conditions specified referred to in Clause 2 of this Article, may be set up within export processing zones, industrial parks or economic zones, and shall have to keep a record of accounting entries at the discretion of export processing enterprise.”
What are the conditions to apply the tax policy of non-tariff zones for export processing enterprises according to Vietnamese regulations?
In Official Dispatch 1939/TCHQ-GSQL dated May 30, 2022 of the General Department of Customs: Pursuant to Point d, Clause 5, Article 28a of Clause 10, Article 1 of Decree 18/2021/ND-CP stipulating inspection conditions For customs inspection and supervision of EPEs that have been granted investment certificates before the effective date of Decree 18/2021/ND-CP and are operating, then:
“Article 28a. Conditions for customs supervision and inspection and application for tax policies on exporting processing enterprises (EPE) that are free trade zones (FTZ)
…
d) If the EPE fails to submit the notification within 01 year from the issuance date of the first confirmation of the Sub-department of Customs or fails to fulfill the conditions for customs supervision and inspection specified in Clause 1 of this Article, it will not be eligible for FTZ tax policies and has to fully pay the taxes, late payment interest and fines relevant to the imports to which FTZ tax policies were applied which accumulate from the issuance date of the Certificate of Investment Registration, the revised Certificate of Investment Registration or the investment registration authority’s written confirmation if the Certificate of Investment Registration is not required regarding the new investment project or project’s expansion that fails to satisfy the conditions for customs supervision and inspection specified in Clause 1 of this Article.
In case the EPE fulfills the conditions for customs supervision and inspection specified in Clause 1 of this Article after 01 year and submits the notification to its supervisory Sub-department of Customs in accordance with Point c of this Clause, FTZ tax policies shall be applied from the day on which the Sub-department of Customs issues the confirmation of fulfillment of the conditions for customs supervision and inspection specified in Clause 1 of this Article.”
Thus, from the date of overdue 1 year from the effective date of Decree 18/2021/ND-CP, if the conditions for customs inspection and supervision are not satisfied, the tax policy will not be applied. for non-tariff zones. In case the enterprise then informs the Customs Sub-department to manage and inspect the inspection and supervision conditions and the Management Customs Sub-department confirms that they are satisfied, the enterprise shall continue to apply the tax policy on non-tariff zones.
LawNet
