No refund import tax for materials that are handled for reprocessing

Professional activities at Tuyen Quang Customs Branch - Ha Giang Customs Department. Photo: T.Trang

That was the answer of the General Department of Vietnam Customs for Oasis Garment Co., Ltd.,about import tax on imported raw materials usedfor export production that arehandledforreprocessingfor one or several stages.

Analysis of tax exemption, the General Department of Vietnam Customs stated that the current policy is stipulated in Clause 7, Article 16 of the Law on Export and Import Tax No. 107/2016/QH13, Clause 1, Article 12 of Decree 134/2016/ND -CP, Clause 3 Article 33 Decree 83/2013/ND-CP, Clause 12 Article 1 Decree 59/2018/ND-CP.

From the above provisions, the General Department of Vietnam Customs issued Document No. 6353/TCHQ-TXNK dated 29/10/2018,answering the Company on the tax policy for imported raw materials to produce exported goods and then outsourcing for processing one or more stages. Accordingly:

From 1/9/2016, in cases where organizations and individuals import goods to produce export goods,but do not directly produce all exported goods and handoverpart or all of the imported goods to another organization or person for processing or productionforone or several stages,and then receives the product back to continue producing and exporting the product; In cases where organizations or individuals that import goods for production of export goods, put import goods into production, then hire another organizations or individuals to process or produce one or several stages and take products back to continue to produce or export products, the product does not meet the basis of determining goods subjected to tax exemption under the provisions of Decree 134/2016/ND-CP (does not meet the conditions of ownership or the right use ofmachinery and equipment at production basein order to fit with imported materials and components for the production of export goods) so the part of imported goods which has been handled for production or processing by other enterprises would not be subjected to import tax exemption.

Organizations and individuals importing goods shall declare on new customs declarations. The commodity management policy, tax policy for imported goods will be applied at the time of registration of new customs declarations, except for the case of full implementation of the policy of managing export and import goods at the time of registration for the first declaration.

In cases where organizations and individuals fail to make a declaration of change of use purposes as prescribed above, customs authorities shall fix taxes in accordance with regulations. The basis of tax calculation, time of tax calculation, exchange rate, value of imported raw materials and components for tax calculation will be made by following the first import declaration. In addition, the customs authority will charge late payment and sanction administrative violations (if any) as prescribed for those goods.

Regarding to the tax refund, the General Department of Vietnam Customs said, according to Point d, Clause 1, Article 19 of the Law on Export and Import Tax No. 107/2016/QH13, Clause 1, Article 36 of Decree 134/2016/ND-CP stipulating on the refund of import tax for cases where taxpayers have already paid tax for imported goods serving for production and business but have already put into producing export goods and exported products abroad, or exported to non-tariff zones,the basis for determining goods eligible for tax refund is specified in Clause 3, Article 36 of Decree 134/2016/ND-CP.

Accordingly, in the case for acompany after making declaration for changing using purpose that has paid import tax for the part of imported goods,but handedto another organization or individual to process or produce one or several stages, andthen receives theproducts back for continuingproduction and export products, it doesnot meet the requirements on the basis of determining goods that are subjected to tax refunded as stipulated at Point a, Clause 3, Article 36 of Decree 134/2016/ND-CP. Therefore, it would not be refunded import tax for raw materials that arealready handled by other organizations or individuals for processing or manufacturing one or several stages.

Besides that, regarding to the recommendation of businesses related to tax policies for imported goods serving for export production in accordance with Decree 134/2016/ND-CP, the General Department of Vietnam Customs has synthesized in the draft Decree amending and supplementing Decree 134/2016/ND-CP. Currently, the draft Decree is being submitted for evaluation by the Ministry of Justice and will be summarized by the Ministry of Finance and submitted to the Government for promulgation in the future.

In the immediate future, it is recommended that enterprises should comply with the provisions of the Law on Import and Export Tax No. 107/2016/QH13 and Decree 134/2016/ND-CP and guidance documents.