Responses to difficults regarding imported goods ineligible for VAT reduction in Vietnam

Responses to difficults regarding imported goods ineligible for VAT reduction in Vietnam (Source: internet)

The General Department of Customs issued Official Dispatch 4044/TCHQ-CCHHD dated September 28, 2022, guiding customs procedures, tax policies, and criteria for evaluating priority enterprises in the field of manufacturing and commercial enterprises. In particular, solving problems about imported goods that are not eligible for VAT reduction and many other problems, specifically as follows:

1. Answering questions about imported goods that are not eligible for VAT reduction in Vietnam:

Problems: Problems in understanding and applying the guidance of the General Department of Customs related to the VAT reduction policy under Decree 15/2022/ND-CP

Also related to the implementation of Decree 15/2022/ND-CP, many businesses encounter problems in practice when the customs authorities have different understandings of the VAT rate for many imported goods. After Decree 15/2022/ND-CP was issued, the General Department of Customs issued Official Dispatch 370/TCHQ-TXNK dated January 28, 2022; Official Dispatch 521/TCHQ-TXNK dated February 18, 2022; and No. 642/TCHQ-TXNK dated February 25, 2022 to guide Customs Departments of provinces, cities, and businesses on how to identify and exclude items that are not eligible for VAT reduction according to Decree 15/2022/ND-CP.

In particular, at Point 3.1 of Official Dispatch 642/TCHQ-TXNK, the General Department of Customs guides: "Imported goods that are not eligible for VAT reduction are goods that satisfy the conditions (i) with the product name mentioned in column 8. "product name" and a description of the product’s content in column 9 "content" (in case there is no description of the content in column 9, the product name in column 8 shall apply) of Annex I, Part A of Appendix III or in column 3 "goods" in Part B of Appendix III; and (ii) have HS codes specified in Chapters (02 digits), Groups (04 digits), subheadings) ( 06 digits) and items (08 digits) mentioned in column 10 of Appendix I, column 10, part A of Appendix III, column 4, part B of Appendix III, as follows:...".

Thus, according to the above guidance of the General Department of Customs, only goods that satisfy both of the following two conditions are not eligible for a reduction in VAT rates according to Decree 15/2022/ND-CP:

• Condition (i): the imported goods have the product names listed in Appendices I, II, or III of Decree 15/2022/ND-CP; and

• Condition (ii): the imported goods have the HS code specified in Appendix I column 10 or Part A column 10 or Part B column 4 of Appendix III of Decree 15/2022/ND-CP.

However, in reality, some customs authorities believe that only imported goods satisfy the conditions (ii) above, that is, the HS code of imported goods belonging to HS chapters, headings, and subheadings mentioned in column 10 of Appendix. Appendix I or column 10, Part A, Appendix III, or column 4, Part B, Appendix III of Decree 15/2022/ND-CP are imported goods that have been excluded and are not eligible for VAT reduction under Decree 15/2022/ND-CP.

Enterprises believe that the above interpretation is not consistent with the guidance of the General Department of Customs and creates many problems for businesses. That's because businesses may have difficulty declaring input and output VAT withholding with the tax office because the tax agency may have the opinion that the item is subject to VAT reduction according to the provisions of the Decree 15/2022/ND-CP.

* Answers

On January 28, 2022, the government issued Decree 15/2022/ND-CP detailing the implementation of tax exemption and reduction policies under Resolution 43/2022/QH15 dated January 11, 2022.

To guide the implementation of Decree 15/2022/ND-CP, the General Department of Customs has issued Official Dispatch 370/TCHQ-TXNK dated January 28, 2022; Official Dispatch 521/TCHQ-TXNK dated February 18, 2022; and Official Dispatch 642/TCHQ-TXNK dated February 24, 2022 guiding the implementation of declaration of VAT rates, determination of names, and application of HS codes of imported goods that are not eligible for VAT reduction according to Decree 15/2022/ND-CP.

At point 3.1, Official Dispatch 642/TCHQ-TXNK dated February 24, 2022 clearly instructs: "3.1. Imported goods that are not eligible for VAT reduction are goods that meet the conditions (i) with the product name mentioned in column 8 "product name" and a description of the product's content in column 9 "content" (field). In the absence of a description of the content in column 9, the product name in column 8 of Appendix I, part A of Appendix III, or in column 3 "goods" part B of Appendix III, and (ii) with HS code prescribed according to Chapters (02 digits), Groups (04 digits), Subheadings (06 digits), and goods (08 digits) mentioned in column 10 of Appendix I, column 10 of Appendix III,

- If in column 10 of Appendix I, column 10 of Part A of Appendix III, and column 4 of Part B of Appendix III, only the HS Chapter number is indicated, all goods in that Chapter satisfying the conditions (i) above are imported goods that are not eligible for VAT reduction.

- Where in column 10 of Appendix I, column 10 of Part A of Appendix III, and column 4, of Part B of Appendix III, the Chapter number and details of Group number are stated, all goods belonging to that group satisfy the conditions (i) above. are imported goods that are not eligible for VAT reduction.

- If in column 10 of Appendix I, column 10 of Part A of Appendix III, and column 4 of Part B of Appendix III, Chapter number, Group number, and details of subheading number are specified, all goods belonging to that subheading shall satisfy the conditions (i) above are imported goods that are not eligible for VAT reduction.

- If column 10 of Appendix I, column 10 of Part A of Appendix III, and column 4 of Part B of Appendix III indicate Chapter number, Group number, Subheading, and item code details according to 8 digits, all goods belonging to an 08-digit HS code satisfying the conditions (i) above are imported goods that are not eligible for VAT reduction. "

Therefore, it is recommended that enterprises based on Official Dispatch 642/TCHQ-TXNK above implement it. Contents of Official Dispatch 642/TCHQ-TXNK of the General Department of Customs are applied uniformly throughout the customs sector. In the event of finding that there are inconsistent contents in the implementation between Customs units, the enterprise should request the enterprise to report it specifically so that the General Department of Customs can have a document to correct it.

2. The General Department of Customs' resposes to many other tax problems in Vietnam

- Import tax refund problems for goods converted for use purposes

- Import tax refund problems for goods imported on the spot and then re-exported in their original state.

- Problems related to looking up the date of confirmed export of goods through the customs supervision area on the system.

- Problems in applying customs policies and implementing Decree 18/2021/ND-CP.

- Tax exemption and import tax refund for products that domestic enterprises hire processing enterprises to handle.

- Software for management of non-taxable goods of EPEs.

- Tax exemption when destroying exported goods.

- There are no specific instructions on import procedures and tax exemption procedures for exported products that must be re-imported to Vietnam for destruction.

- Method of determining customs value for temporarily imported goods in the form of borrowing

- Problems with the tripartite export model

More details can be found in Vietnam's Official Dispatch 4044/TCHQ-CCHHD dated September 28, 2022.

Diem My

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