HCM City Customs detects some processing enterprises vacated their business addresses

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Officers of HCM City Customs Department inspect raw materials imported via Cat Lai Port. Photo: T.H

Vacate registered business address

Moai Plainning Vina Co., Ltd (tax code 0313061385) is engaged in export production and processing for woolen textile products. From 2014, the company has imported and exported goods under export production and processing, and carried out customs procedures at the Investment Customs Branch-HCM City Customs Department. The company notified its export production and processing establishment, and storage place for exported raw materials, materials, machinery, equipment and products at 8/5H Hamlet 3, Xuan Thoi Thuong Commune, Hoc Mon District, HCM City. The Investment Customs Branch inspected the company’s production establishment and concluded that its machinery andequipment is eligible for export production and processing.

However, through reviewing and collecting information, the branch detected that from April, the company hadnot declared import and export on the customs system. The branch found that the company has vacated its business address.

The branch continued to expand the verification of the company’s operation at agencies, and discovered that from January 25, 2019, the company transferred all machinery, materials and products fromaddress 8/5H, Hamlet 3, Xuan Thoi Thuong Commune, Hoc Mon District, HCM City to the new address at 63/4A My Hoa 3 hamlet, Tan Xuan commune, Hoc Mon district, HCM City, but the company did not notify the new address of production establishment to the Customs. During operation at this address, the company registered declarations for the import of raw material and export finished products and submitted the 2019 finalisation report to the branch (from January 1 to December 31, 2019).

From February 2020, the company has not operated at 63/4A My Hoa 3 hamlet, Tan Xuan commune, Hoc Mon district, HCM City. Kim Bong Hwan, Korean nationality - the owner of the company no longer resides in Vietnam since the company has suspended its operation.

Through initial verification, the Investment Customs Branch discovered that from the beginning of 2020 to the time the company vacated, the company did not submit the finalisation report to the branch. The branch determinedthat the tax amount that the company has to pay for imported raw materials and supplies but was not used for production of export and has been not accounted is about VND 550 million.

Transfer the case to investigation agency or conduct tax assessment?

To handle the case, HCM City Customs Department determines the tax liability of the company for the amount of imported raw materials and supplies for export production and processing subject to tax exemption to transfer to the Police to handle as per the guidance in Official Dispatch No.7420/TCHQ-TXNK dated November 28, 2019 of the General Department of Customs. However, the department faces problem in considering tax exemption for the declarations arising after the company no longer operates at the address registered the customs.

Pursuant to Point b, Clause 2, Article 10 of Decree No.134/2016 / ND-CP prescribing conditions to determine that imported goods for export production and processing are subject to tax exemption, HCM City Customs Department said that, from the time when the company changes its production establishment without notifying to the Customs, the imported raw materials are not eligible for tax exemption according to Decree No.134/2016/ND-CP dated September 1, 2016. Customs branches cannot know the change of production establishment of the company, except the company is subject to risk management, therefore, the customs cannot collect tax.

According to the HCM City Customs Department, because the owner of the company is a foreigner and no longer in Vietnam, that makes it difficult for the police in investigating and prosecuting. Therefore, HCM City Customs Department proposed to the General Department of Customs to consider and not to transfer case to the investigation police agency. According to the Law on Tax Administration, the branch was requested to still conduct tax assessment for raw materials that have not been exported, including all raw materials at the new production establishment at 63/4A My Hoa 3 Hamlet, Tan Xuan Commune, Hoc Mon District, HCM City because the company did not notify the new address of the production establishment to the Customs.

HCM City Customs Department also faces problems in implementing tax assessment for some enterprises that have vacated and have no legal representative to fulfill tax obligations. HCM City Customs Department said that the vacation and failure of submission of finalization reports for imported raw materials for export production and processing by enterprises are not eligible for tax exemption and are subject to tax assessment. The tax assessment is necessary to determine the tax liability of the vacated enterprises, and ensures the legal basis for tax debt settlement as well as the implementation of coercive measures.

HCM City Customs Department proposes the General Department of Vietnam Customs to consider shortcomings over the past time that many enterprises have abused the State's preferential policies for the regime of export production and processing for tax evasion; to synthesise and report to the Ministry of Finance for the consideration of amendment and supplementation of legal documents.