“How to handle in cases of rejection of excess raw materials/supplies, machines, equipment and processed products by the hirer? Thank you.” Ms. Nguyen Ngoc Linh in Da Nang sent this question to LawNet for advice.
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LawNet would like to answer this question as follows:
According to Article 66 of Circular No. 38/2015/TT-BTC amended by Clause 43 Article 1 of Circular No. 39/2018/TT-BTC of the Ministry of Finance of Vietnam, the processor shall pay taxes in order to sell such excess raw materials/supplies, hired/borrowed machinery and equipment, or processed products which are rejected by the hirer on the domestic market, except for the cases where refuses, scrap, redundant raw materials and supplies imported for processing under a processing contract shall be exempt from import duties when they are sold domestically provided they do not exceed 3% of the quantity of each type. VAT, special excise tax and environmental protection tax (if any) shall be paid to the customs authority.
Customs procedures and tax policies effective on the date of repurposing shall apply in accordance with Article 25 of Decree No. 08/2015/ND-CP, which is amended in Clause 12 Article 1 of Decree No. 59/2018/ND-CP of Vietnam’s Government and Article 21 of Circular No. 39/2018/TT-BTC.
If the processor also rejects the excess raw materials/supplies, machines, equipment and processed products, they shall be expropriated if usable.
If they are no longer usable, the processor shall destroy them and pay the destruction cost.
Notably, in case of destruction, follow instructions in Point d Clause 3 Article 64 of Circular No. 38/2015/TT-BTC. To be specific:
- The declarant shall send a notification of the destruction method and location to the Sub-department of Customs where imported raw materials/supplies are declared. The destruction shall comply with regulations of law on environmental protection;
- The customs authority shall supervise the destruction under risk management rules based on assessment of the declarant’s conformity with law.
The customs shall not supervise destruction of raw materials, supplies, machines, equipment wastes and rejects of preferred enterprises.
Nguyen Trinh
