Answering import duty refund procedure for export processing enterprise

The dialogue between General Department of Vietnam Customs and Vietnam Business Forum on August 5. Photo: Quang Hùng

Specifically, regarding the problem of import duty refunds for goods changing use purposes, the representative of VBF said that, according to current regulations in the Law on Import Duty and Export Duty No. 107/2016/QH13, Decree No. 134/2016/ND-CP and Decree 18/2021/ND-CP, export processing enterprises (EPEs) and enterprises that are not EPEs when importing goods that are raw materials and supplies to serve the production of export goods are not subject to import duty or exempt from import duty.

During the operation, due to the Covid-19 pandemic, enterprises reduce production capacity or reduce orders, imported raw materials stored for a long time need to be liquidated, and unexpectedly supply raw materials at the request of machinery manufactured from overseas to avoid supply chain disruptions, in this case, EPEs and non-EPEs may have to sell and liquidate a portion of these non-taxable or tax-exempt imported materials.

The representative of VBF also said, according to Clause 5, Article 25 of Decree 08/2015/ND-CP (amended in Decree 59/2018/ND-CP), when changing the purpose of using imported goods, if the goods are not subject to tax or tax exemption, the importer of goods must declare the A42 declaration of change of use purpose for the number of goods expected to change the use purpose (change of use purpose from serving the export production to sale, re-export for liquidation). When declaring the A42 declaration, the enterprise pays import duty and VAT to the customs office.

According to Article 34 of Decree 134/2016/ND-CP (amended and supplemented in Decree 18/2021/ND-CP), imported goods that have already paid import tax but must be re-exported are entitled to a refund of import tax.

However, there are still cases where enterprises have not been refunded import tax for A42 declarations after completing the re-export of materials abroad.

VBF proposed to the General Department of Vietnam Customs to allow enterprises to be refunded the import tax paid on A42 declarations of change of use purpose after enterprises have re-exported goods abroad according to the provisions of Point c, Clause 1, Article 19 of the Law on Export Duty and Import Duty 107/2016/QH13 and Article 34 of Decree 134/2016/ND-CP (amended and supplemented in Decree 18/2021/ND-CP).

To answer this problem, according to a representative of the Import-Export Duty Department (General Department of Vietnam Customs), before that, the General Department of Vietnam Customs issued Dispatch No. 1184/TCHQ-TXNK, Dispatch No. 1185/TCHQ-TXNK dated April 6, 2022 to guide provincial customs departments. Accordingly, for goods that are imported raw materials and supplies, the enterprise has registered the declaration of change of use purpose under the type code A42 and fully paid the duty, then the enterprise registered the export declaration under type code B13 and export goods to foreign countries, export to non-tariff zones. If goods are exported under type code declaration B13 which are identified as previously imported goods, have not been used, processed and the goods are declared on the declaration of change of use purpose type code A42, meeting the conditions for tax refund (as prescribed at Point c, Clause 1, Clause 2, Article 19 of the Law on export duty and import duty No.107/2016/QH13, Article 34 of Decree No. 134/2016/ND-CP amending and supplementing Clause 17, Article 1 of Decree No. 18/2021/ND-CP) enterprises will get an import tax refund as prescribed.

Regarding the problem of import tax refund for goods imported on the spot and then re-exported with status quo, the representative of VBF said that, according to Clause 1a, Article 34, Decree 134/2016/ND-CP as amended in Decree 18/2021/ND-CP :

"1. Imported goods for which import tax has been paid but must be re-exported are refunded and not subject to export tax, including:

a) Goods imported but must be re-exported abroad include export to the goods owner, export goods which are already imported abroad or exported to a non-tariff zone for use in a non-tariff zone.

Currently, there are cases where an enterprise imports goods on-spot as designated by a foreign trader, then re-exports the goods imported with status quo to a foreign country and into a non-tariff zone under type code B13, but import tax refund has not been considered.

Goods imported on-spot are also imported goods for which import tax has been paid, and then re-exported abroad by the original importer or into the non-tariff zone. Goods that meet the following conditions have not been used or processed. Therefore, enterprises are eligible to apply for a refund of the paid import tax for this case.

The representative of VBF also proposed the General Department of Vietnam Customs issue documents to guide provincial customs departments to process tax refunds for goods imported on spot and then exported with status quo to foreign countries and into non-tariff zones.

Regarding this issue, a representative of the Import-Export Duty Department said that according to Point a, Clause 1, Article 34 of Decree 134/2016/ND-CP, imported goods that have paid import duty but must be re-exported are entitled to import duty refund and do not have to pay export duty included: goods imported but must be re-exported to abroad, export back to the owner of the goods, exporting goods which are already imported to abroad or exported to a non-tariff zone for use in the non-tariff area. The re-export of goods must be performed by the original importer or the person authorized by the original importer to entrust the export.

Thus, in the case that goods are imported but have to be re-exported, if they meet the requirements at Point a, Clause 1, Article 34 of Decree No. 134, they will be refunded import duty as prescribed. On the other hand, General Department of Vietnam Customs has issued Official Letter No.6830/TCHQ-TXNK dated November 21, 2018 instructing provincial customs departments to comply with regulations.