Is an export-processing zone a free trade zone in Vietnam?

Is an export-processing zone a free trade zone in Vietnam?

Pursuant to Clause 1, Article 4 of the Law on Export and import duties 2016 stipulating:

1. Free trade zone means an economic zone located within Vietnam’s territory, established in accordance with law, having a definite geographic boundary, and separated from the outer area by hard fences in order to facilitate customs inspection and customs control by the customs authority and relevant agencies with regard to exports and imports, inbound and outbound vehicles and passengers; the trading relationship between the free trade zone and the outside area is consider exportation and importation.

Besides, Clause 20, Article 4 of Circular 219/2013/TT-BTC stipulates:

Free trade zones include: export-processing zones, export processing companies, tax-suspension warehouses, bonded warehouses, special economic zones, commercial - industrial zones, and other economic zones established and provided with similar tax incentives as free trade zones according to Decisions of the Prime Minister. The transactions between a free trade zone and an external party are considered export/import.

Thus, an export-processing zone is a free trade zone.

Is an export-processing zone a free trade zone in Vietnam? (Image from the Internet)

Is the tax rate of 0% not applied to free trade zones in Vietnam?

Pursuant to Article 9 of Circular 219/2013/TT-BTC stipulating:

Tax rate of 0%

1. 0% VAT is applied to exported goods and services; construction and installation overseas and in free trade zones; international transport; exported goods and services that are not subject to VAT, except for the cases in Clause 3 of this Article, in which 0% VAT is not applied.

Exported goods and services are those that are sold to overseas organizations and individuals and are consumed outside Vietnam, sold to the entities in free trade zones, or sold to foreign customers as prescribed by law.

a) Exported goods include:

- The goods exported to other countries, including those under entrustment contracts;

- The goods sold to free trade zones as prescribed by the Prime Minister; the goods sold to duty-free shops;

- The goods that are delivered to the recipients outside Vietnam;

- Parts and supplies for repairing, maintaining vehicles, machinery, and equipment of foreign entities, and those that are used outside Vietnam;

- Cases of deemed exportation:

+ Forwarded processed goods under trade laws on international goods trade and export processing.

+ Exported goods delivered to a domestic recipient appointed by the importer (hereinafter referred to as domestic exports).

+ The goods exported to be sold at overseas fairs or exhibitions.

b) Exported services include the services directly provided for overseas organizations and individuals and are consumed overseas; the services provided for the entities in free trade zones and consumed within the free trade zones.

Overseas individuals are the foreigners that do not reside in Vietnam, the Vietnamese people that reside overseas and are not present in Vietnam when the services are provided. The entities in free trade zones are the entities that have registered their business and other cases prescribed by the Prime Minister.

Thus, for goods in the free trade zone, the 0% tax rate is still applied in each specific case.

Best regards!