Amending regulations to cover all cases of imported goods for export production

	Part of the materials assigned to other enterprises for production will not be subject to tax exemption
	Tax Policy for destroyed products, waste products, scrap materials complying with provisions of Decree 134/2016/NĐ-CP
	Circular amending and supplementing Circular 38/2015 / TT-BTC: Many new regulations on management of processed goods and export production

Customs operations at Yen Phong Customs Branch under Bac Ninh Customs Department. Photo: T.Trang.

Regulations are not specific

Commenting on the regulation on tax exemption for imported goods for export production, Ho Chi Minh City (HCMC) Customs Department said that the inspection of manufacturing establishments has been specified in the Customs Law and the guiding documents. However, HCMC Customs Department did not understand clearly the regulation: "where taxpayers export goods to foreign countries or to non-tariff area etc, goods processed in non-tariff areas which are re-imported to Vietnam, must pay import duty in accordance with Article 22 of Decree No. 134/2016 / ND-CP. "

According to HCMC Customs Department, in the case where taxpayers importing goods for export production, then exporting those goods to foreign countries or non-tariff areas for reprocessing are also subject to import duty for the imported materials if they meet conditions as per regulation. However, the customs authority cannot inspect the manufacturing and processing establishments abroad, and this policy is to promote domestic production. Therefore, HCMC Customs proposed to accept that enterprises importing goods for export production hire domestic enterprises or enterprises in the non-tariff area to remanufacture and reprocess.

Also commenting on this content, Vietnam Association of Seafood Exporters and Producers (VASEP) suggested the Drafting Committee to supplement the provisions in Clause 2, Article 12 of the Draft Decree for 2 re-manufacture cases, including Taxpayers shall transfer part or whole of imported raw materials, supplies, components and semi-finished products to other organizations and individuals in Vietnam for manufacture and then receive back manufactured products for export or for further manufacture.

And the case that taxpayers export a part or whole of imported raw materials, supplies, components or semi-finished products for processing in foreign countries or in non-tariff areas, then import them back to Vietnam for export, in the direction that taxpayers in these two cases are entitled to tax exemption but must notify the manufacturing establishments of the hired organizations and individuals and re-manufacture contracts to customs authority before taking the raw materials, supplies and components for the performance of re-manufacture contracts.

According to VASEP, according to Clause 2 of Article 12 of the Draft Decree, the Customs regime of export production arising from two re-manufacture cases is not exempted from tax (the first is not clearly stated in the Draft; the second case shall be exempted from tax for exporting raw materials, supplies and components exempt from tax (but or for semi-finished products for further manufacture), however, products which are processed overseas and reimported to Vietnam, are not entitled to tax exemption. This is unfair to imported raw materials, supplies and components for export production (upon import, semi-finished products are exempted from tax and products which are reprocessed or re-manufactured in Vietnam are also exempted from import tax). And, this is also contrary to the requirement stated in Point b, Clause 1 of Official Letter No. 4765 / VPCP-KSTT dated May 22nd, 2018 of the Government’s Office on removing difficulties and obstacles to enterprises in the field of tax and customs.

In addition, regarding provision of Clause 6, Article 12 of Decree No. 134/2016 / ND-CP, the VASEP commented that this provision is renovated, which is import tax shall not be paid for for domestic consumption of waste, discards and scraps of imported raw materials for export production. However, it is proposed that the Draft should have amendments to the declaration and payment of taxes on waste and discards. Accordingly, the tax declaration and payment will be submitted to a unit of the financial sector – specifically the internal tax authority rather than the Customs authority to facilitate enterprises and avoid additional administrative procedures.

Supplement provisions for easy implementation

Appreciating those comments, the Draft Decree has been revised as follows: Taxpayers are permitted to select to declare the amount on each transfer of domestic consumption or declare the total amount of domestic consumption transfer on a monthly basis to the customs to unify with the implementation from September 1st , 2016 until now.

Clause 1, Article 12 of Decree 134 does not provide for tax exemption for imported raw materials, supplies and components for export production while the export processing customs regime contains this provision (Point e, Clause 1 of Article 10). Therefore, many enterprises have proposed amendments to Article 12 in line with preferential policies of the processing customs regime. Thus, the draft Decree amends and supplements Clause 1 of Article 12 towards clearly specifying the actual imported goods for export production has been destroyed.

In addition, the Drafting Committee also stated that, similar to the processing Customs regime, Clause 2 of Article 12 does not specify the responsibility of taxpayers for notifying the settlement and handling of redundant raw materials, supplies, waste, scraps, discards of the actual norm which has been transferred for domestic consumption, therefore, based on the customs law, it needs to add the provision that the settlement and tax policy must comply with the provision at the time of domestic consumption transfer, which is similar to the processing customs regime.

According to the Drafting Committee, in fact, the export production customs regime raise the case that taxpayers transfer part or whole of the imported raw materials, supplies and components to other organizations and individuals in Vietnam for re-manufacture and then receive back the manufactured products for export or for further manufacture; and the case that taxpayers export part or whole of the imported raw materials, supplies and components for processing in foreign countries or in non-tariff areas, then reimport them to Vietnam for export (this content is stated at Official Letter No. 4765 / VPCP-KSTT).

Therefore, Clause 2, Article 12 of the Draft Decree, has added a provision for these two cases in the following direction:

In the case where taxpayers transfer a part or whole of imported raw materials, supplies or components or semi-finished products manufactured from raw the imported materials, supplies or components to other organizations and individuals in Vietnam for re-processing (referred to as re-processors) of a part of a product or the whole of a product and then receive the processed products for export or for further manufacture of export products, the taxpayers must notify in writing the manufacturing establishment of re-processors, reprocessing contracts to the Customs according to the Customs Law.

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In the case where tax payers export to foreign countries or non-tariff areas a part or whole of imported raw materials, supplies and components for partly processing or wholly processing of the product and then import the processed products to Vietnam for export or for further manufacture, the taxpayers shall be exempted from export tax on raw materials, supplies and components used for processing. Products which are processed in foreign countries and re-imported to Vietnam, must pay import tax according to the provisions at Point d, Clause 1, Article 11 of this Decree. Products which are processed in the non-tariff areas and re-imported to Vietnam shall pay import tax according to the provisions of Article 22 of this Decree.