Công văn 5826/TCHQ-TXNK

To: Tay Ninh province’s Customs Department,

General Department of Customs has received the Official Dispatch No. 954/HQTN-NV dated June 13, 2018 from Tay Ninh province’s Customs Department that addresses queries and difficulties that they have to face whilst handling duties on spot exports and imports.   The General Department of Customs hereby issues the following opinions on these issues:

1. Regarding the handling of duties imposed on export processing enterprises outside of export processing zones.

Legislative regulations pertaining to this issue:

- Clause 1 of Article 4 in the Law on Export and Import Duties No. 107/2016/QH13 prescribes: 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 considered exportation and importation.

- Clause 2 of Article 2 in the Government’s Decree No. 134/2016/ND-CP dated September 1, 2016 prescribes: Goods exported from the domestic market into export processing enterprises, export processing zones, tax-suspension warehouses, bonded warehouses and other free trade zones defined in Clause 1 Article 4 of the Law on Export and import duties; goods imported from export processing enterprises, export processing zones, tax-suspension warehouses, bonded warehouses and other free trade zones defined in Clause 1 Article 4 of the Law on Export and Import Duties into the domestic market.

- Article 12 and Article 36 of the Government’s Decree No. 134/2016/ND-CP dated September 1, 2016 prescribe duty exemptions and refunds for raw materials, supplies and components imported for export processing purposes.

- Clause 1 and clause 10 of Article 2 in the Government’s Decree No. 82/2018/ND-CP dated May 22, 2018 prescribing the management of industrial parks and economic zones (in effect from July 10, 2018) include the following provisions:

“1… Export processing zone is separate from outside areas in accordance with regulations so applied to free trade zones prescribed in laws on import and export duties…;

10. Export processing enterprise means a company which is established and operated within an export processing zone, or an enterprise specializing in manufacturing exported products within an industrial park or economic zone.

Export processing enterprise which is not located in export processing zones shall be separated from the outside area as per the regulations on free-trade zones laid down in the import and export tax law…”

- Article 30 of the Decree No. 82/2018/ND-CP prescribes:

“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…”.

Based on the aforesaid regulations, if export processing enterprises are not located within export processing zones (awarded Certificates of investment registration), but meet regulations laid down in clause 1 of Article 4 in the Law on Export and Import Duties No. 107/2016/QH13, they shall be entitled to duty advantages the same as applied to free-trade zones (except particular advantages given to free-trade zones in bordergate economic zones).

If domestic enterprises sell goods to export processing enterprises that are not located within export processing zones, but meet regulations set forth in clause 1 of Article 4 in the Law on Export and Import Duties No. 107/2016/QH13, they shall be entitled to tax policies like those applied to free-trade zones.

In case where enterprises have already paid duties on imports for production and business purposes which are brought into production of exporting goods, and have managed to export finished products to export processing enterprises (conforming to the regulations laid down in clause 1 of Article 4 in the Law on Export and Import Duties No. 107/2016/QH13) according to the spot export and import procedures, they shall be entitled to refunds of import duties that they have already paid.

In case where enterprises have already paid duties on imports for production and business purposes which are brought into production of exporting goods, and have managed to export finished products to export processing enterprises (conforming to the regulations laid down in clause 1 of Article 4 in the Law on Export and Import Duties No. 107/2016/QH13) according to the spot export and import procedures, they may be refunded import duties that they have already paid.

If export processing enterprises (complying with provisions of clause 1 of Article 4 in the Law on Export and Import Duties No. 107/2016/QH13) which are not located within export processing zones perform trades in goods with each other, they shall not be subject to duties.

Customs authorities shall use Certificates of registration of investment, or written documents of competent registration bodies in case implementation of procedures for grant of investment registration certificates is not required to determine whether enterprises are export processing ones, as a basis for determining whether these enterprises are eligible to enjoy tax policies applied to free-trade zones.

Enterprises shall, at their discretion, declare and submit documents related to the determination of tax obligations and application of tax policies in free-trade zones, and shall be legally liable for information given to customs authorities. Customs authorities shall carry out the inspection of risk management principles. In case where customs authorities discover that enterprises have made incorrect declarations, they shall be subject to penalties prescribe in legislative regulations.

2. Cases in which enterprises import goods in a form of export processing and then export finished products in a form of sport exportation and importation.

Legislative regulations pertaining to this issue:

- Clause 1 and clause 2 of Article 28 in the Law on Commerce No. 36/2005/QH11 dated June 14, 2005 prescribe that export of goods is the cross-border outbound movement of goods out of Vietnam or the transport thereof to special areas within the territory of Vietnam which are deemed as particular customs areas prescribed by legislation; the import of goods is the cross-border inbound movement of goods into Vietnam from abroad or special zones within the territory of Vietnam which are deemed as particular customs areas prescribed by legislation.

- Article 12 of the Government’s Decree No. 134/2016/ND-CP dated September 1, 2016 prescribes that raw materials, supplies and components imported for export processing purposes shall be entitled to import exemptions.

- Clause 3 of Article 33 in the Government’s Decree No. 83/2013/ND-CP dated July 22, 2013 prescribes cases in which taxpayers are subject to the customs authority's imposition of duties on exported and imported goods.

- Article 133 of the Circular No. 38/2015/TT-BTC amended and supplemented by clause 66 of Article 1 in the Circular No. 39/2018/TT-BTC dated April 20, 2018 of the Ministry of Finance prescribes late payment interest.

Based on the aforesaid regulations, as from September 1, 2016, in case where enterprises import raw materials and supplies for manufacturing of exported goods and then sell products manufactured by using imported raw materials and supplies to foreign tradespersons, but are authorized by foreign tradespersons to ship these products to other enterprises in Vietnam (exporting products in a form of spot exportation), they shall not be entitled to duty exemptions in accordance with regulations in force.

In case where enterprises have been entitled to duty exemptions for raw materials and supplies imported in a form of export processing but then export finished products in a form of spot exportation and importation, customs authorities shall impose duties, calculate late payment interest and impose administrative penalties in accordance with regulations in force. Tariff calculation bases, date and schedule shall be subject to provisions laid down in Chapter II of the Law on Export and Import Duties No. 107/2016/QH13.

For your information and compliance./.