Comments on provisions on change in use purpose of goods

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Goods imported and exported at Nam Hai port, Dinh Vu, Hai Phong. Photo: Thai Binh

Goods that their useful purpose has been changed are stipulated in Clause 5 of Article 25 of Decree 08/2015/ND-CP. Accordingly, imports and exports are entities that are not required to pay import-export duty, special consumption tax, value-added tax, environmental protection tax or exemption from taxes or consideration for import-export duty exemption or imposition of tax rate according to tariff quota and have been cleared but then changed the entities and purpose of tax exemption or consideration for tax exemption; the tax rate according to the tariff quota will be applied.

Imports are raw materials that used for processing and manufacturing exports and temporary imports for re-exports and have been cleared but then changed their useful purpose for domestic consumption, new Customs declaration must be submitted instead. Policies on the management of imports and exports and policies on taxes for imports and exports shall be implemented at the time when the new Customs declarations are registered except the case where all policies on management of imports and exports have been fully implemented at the time when the initial Customs declarations are registered.

The procedures are specified in Article 21 of Circular 38/2015/TT-BTC, meaning that enterprises must register new Customs declarations to change the use purpose and implement fully policies on taxes, channel classification for inspection on the risk management system and follow the policies for imports and exports when registering new Customs declarations except the cases where policies on management of imports and exports have been fully implemented at the time when the initial declarations are registered. When taxpayers change the useful purpose for domestic consumption but do not voluntarily declare and pay taxes, they will be levied taxes and fined according to the law.

However, in the actual management and implementation of procedures for change in use purpose, some cases have not matched with the reality and caused inadequacies such as:

For goods that their useful purpose has changed, Customs declarants must register new Customs declarations and implement Customs procedures and channel classification according to the regulations of risk management as registering normal declaration. At that time, a new customs declaration is likely to be classified into Red channel. But goods their useful purpose has changed do not keep their original status shown in the initial declaration or their part does not keep the original status, the physical inspection for the new declarations for these goods is unreasonable and difficult.

Because name of goods on the new dossiers and declarations are the name of goods on the initial declarations, but the fact that the goods status is no longer similar to the initial status, even different from nature, physical properties due to being processed and manufactured so that Customs officers cannot determine whether the goods are in accordance with the initial declarations or not.

For example raw materials and supplies of investment incentives, raw materials for shipbuilding, oil and gas and goods for export production and processing have been processed and produced, then enterprises change the use purpose. For this case, should a new regulation towards not implementing the physical inspections for the new declarations be issued, that will be more realistic?

The implementation of commodity policies (following regulations on licenses, specialized inspections) for goods that their useful purpose has been changed (except the cases where policies on management of imports and exports have been fully implemented at the time when the initial declaration was registered) aims to ensure the strict management and avoid being abused for policy frauds for types of incentives.

However, there are many shortcomings and inadequacies from the implementation of commodity policies when registering declaration for change in use purpose. At the time when the initial declaration was registered, policies on specialized management or license management have not been issued and regulations on prohibition and restrictions from import and export for goods that their useful purpose has changed, but then these police and regulations are issued and take effect, however when registering the new declarations, the new policies and regulations must be fully complied.

This will lead to cases that are not permitted or do not meet conditions on import and export to register the new declarations and cannot be solved by any other forms (re-export is impossible, while those goods have been transferred the ownership. And these goods are destroyed, it is too unreasonable). Thus, the enterprises should be permitted to decide their properties in accordance with the provisions of the Civil Procedure Code.

For example: at the time of registration of initial declarations, the imported machinery A was not subject to quality management upon importing, but then the new regulations stipulate that the A is subject to quality management, so when the enterprise changes their use purpose of A, the quality inspection must be implemented. However, during the use, the quality of the A is not guaranteed, so that the State quality inspection agency decided that the A is not eligible for export. For this case, how to ensure the right to decide the properties of enterprises in line with the Civil Procedure Code 2005.

Should more specific regulations for each different case and entity when changing the useful purpose for better management and more consistency with the actual situation be issued? For goods that their useful purpose has changed and are registered for new declaration, that is naturally considered as import and export relationship (such as goods of processing enterprises with domestic market, temporarily imported goods for re-exported and processed goods) are obliged to implement all policies that take effect at the time of registration of new declarations in compliance with the current provisions.

For duty-free goods for investment, goods in the tariff quota, duty-free goods for shipbuilding, oil, and gas, when changing use purpose that is procedure for declaration and tax payment, they do not need to implement all policies at the time of registration for new declaration as current provisions, but only must implement all policies that still take effect until now and have been not implemented at the time of registration for initial declarations

For change in use purpose for duty-free goods of investment projects (goods for fixed asset establishment), although these goods have been depreciated completely but are still valid or out of validity they still have economic value (selling scraps), should procedures for change in use purpose be implemented?

If the procedures for change in use purpose must be implemented, the Customs management on duty-free goods will be very difficult, there are some cases where the goods were registered duty-free declarations and projects have been licensed for operation from 50 to 70 years, but the management still belongs to responsibility of Customs and obligations of enterprises, it is unreasonable. Should a regulation on management responsibility and obligation for goods that their useful purpose has been changed of enterprises for a certain period be issued, that will be more reasonable?

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Should the regulations be amended and supplemented to implement procedures for change in use purpose of goods that have enjoyed the tax incentives and are not required to paying taxes positively and easily and more reasonably?