Responses to issues on tax exemption for goods imported for processing and processed exports in Vietnam

The General Department of Customs of Vietnam issued Dispatch 5529/TCHQ-TXNK dated 24/11/2021 in response to issues in Decree 18/2021/ND-CP on import and export taxes.

Response to issues on tax exemption for goods imported for processing and processed exports in Vietnam

Question: In case the taxpayer fails to announce reprocessing facility and/or reprocessing contract (in case of expired reprocessing contract). How will the matter be resolved? Are the goods still eligible for tax exemption in Vietnam?

Answer: 

Pursuant to Point b Clause 2 Article 10 mentioned under Clause 4 Article 1 of Decree 18/2021/ND-CP , the taxpayer who fails to announce reprocessing facility and reprocessing contract in a timely manner according to customs laws shall only be met with penalties for administrative violations and customs authority still grants tax exemption for goods imported for processing if all requirements under Article 10 of Decree 134/2016/ND-CP amended under Clause 4 Article 1 of Decree No. 18/2021/ND-CP are fulfilled.

These regulations apply to processing contracts made from April 25, 2021.

In case the taxpayer fails to announce reprocessing facility, reprocessing contract or expired reprocessing contract, customs authority shall rely on case file of the violation and Article 17 of Decree 126/2020/ND-CP to impose tax and impose penalties as per applicable laws.

Question: In case of goods imported for processing, manufacturing and export, and later reprocessed by an export-processing enterprise which is hired by a domestic enterprise, will tax of the export materials, supplies, and parts that create the processed products be exempt in accordance with Point d Clause 1 Article 11 or will the tax be fully incurred for processed imports in Vietnam?

Answer: 

The General Department of Customs promulgated Official Dispatch No. 3634/TCHQ-TXNK dated July 19, 2021: If a domestic enterprise imports goods for processing, domestic export and later hires an export-processing enterprise to manufacture or process imports and semi-finished products, the domestic enterprise must declare and submit import duty as per the law for processed products imported to domestic market in accordance with Clause 2 Article 22 of Decree 134/2016/ND-CP.

Value serving calculation of import duty is processing rate, value of materials used during processing provided by the export-processing enterprise, and adjustable (if any) in accordance with Clause 3 Article 17 of Circular 39/2015/TT-BTC dated March 25, 2015.

Do not include value of materials and supplies sent to the export-processing enterprise by the domestic enterprise for processing in the taxable value.

Question: For goods imported for processing and export whose products are not exported or residual imports that remain in storage and have not been repurposed, is the taxpayer required to produce new declaration, declare and submit tax to the customs authority? When will the taxpayer declare? Which code will the taxpayer declare under in Vietnam?

In case of residual materials or unexported products of processing and domestic export, there should be specific regulations on the time limit in which repurposing must be declared depending on the nature of the line of business. Otherwise the customs authority will face difficulty managing and monitoring in case of residual materials or unexported products of processing and domestic export retained in storage for multiple years.

Answer: 

Pursuant to Article 25 of Decree 08/2015/ND-CP dated January 21, 2015 amended under Clause 12 Article 1 of Decree 59/2018/ND-CP dated April 20, 2018, if goods which are imported for processing and export whose products are not exported or goods that are residual materials and supplies and retained in storage by the enterprise have not been repurposed, the enterprise is not required to produce a new customs declaration and submit tax.

In case of residual materials or unexported products of processing and domestic export, the enterprise must include in the import-export-inventory report in accordance with Clause 2 Article 60 of Circular 38/2015/TT-BTC amended under Clause 39 Article 1 of Circular No. 39/2018/TT-BTC.

Residual materials and supplies, processed products, and domestic export products are not restricted by applicable tax laws in terms of maximum storage time and/or maximum time limit before declaration for repurposing must be performed. Should any sign of fraud or tax evasion or any violation that causes a deficit to the state budget is found by the customs authority, the customs authority shall conduct post-clearance inspection in order to impose tax in accordance with Article 17 of Decree 126/2020/ND-CP dated October 19, 2020.

Pursuant on:

- Points a, b, c, e, Clause 2, Article 10 of Decree 18/2021/ND-CP;

- Official Dispatch 3634/TCHQ-TXNK dated 19/7/2021;

- Article 25 of Decree 08/2015/ND-CP (amended in Clause 12, Article 1 of Decree 59/2018/ND-CP).

See more in Official Dispatch 5529/TCHQ-TXNK issued on November 24, 2021.

Bao Ngoc

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