Tax assessment by Lao Cai Customs consistent with the State Audit Office of Vietnam’s conclusion

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A truck transporting exported ore at Kim Than No.2 International Border Gate. Photo: T.B

Swapped concepts

Recently, Tien Phong newspaper published an article titled “Lao Cai rejects the Ministry of Finance’s document, many enterprises have huge tax debts”.

According to the article, some enterprises exporting iron ore via Lao Cai International Border Gate are subject to export tax arrears because the State Audit proposed including export tax into customs value to calculate export tax.

Thereby, ore exporters said if the taxable price includes export tax, the tax rate for ore will be 56 percent, up by 16 percent compared to the tax rate of 40 percent for iron ore products. This is the main reason enterprises reject paying tax arrears for ore exported at Lao Cai International Border Gate.

For this problem, the General Department of Vietnam Customs has provided its official opinion. According to Article 86 of the Customs Law, customs value is determined and declared by the Customs declarant shall be checked by Customs in customs process and as a basis for calculation of import and export taxes.

Before Customs checks customs value, tax liability has not been incurred and enterprises do not exactly know the taxable export.

Therefore, the amount enterprises intend to pay taxes on is not considered as export tax. Enterprises have deliberately swapped concepts to cause confusion, making incorrect declarations.

How to handle problems?

Regarding handling the problems of ore exporters, the General Department of Vietnam Customs said while complying with the State Audit Office of Vietnam’s conclusions, ore exporters have reflected their problems to Lao Cai Provincial People's Committee.

On July 2, Lao Cai Provincial People's Committee held a meeting to instruct enterprises to comply with the law. The meeting was chaired by Dang Xuan Phong Chairman of Lao Cai Provincial People's Committee with the participation of Le Duc Thuan- Head of the State Audit of Zone VII, Vu Xuan Cuong -Head of the National Assembly Delegation and representatives of departments and sectors of Lao Cai Province, the General Department of Vietnam Customs, Lao Cai Customs Department and representative of ore exporters subject to the payment of additional export tax arrears.

After the meeting, the State Audit of Zone VII issued Dispatch No. 432/CV-KV VII dated August 13, 2019 to respond Lao Cai Provincial People's Committee’s Dispatch No. 3367/UBND-KT dated July 26, 2019. Accordingly, it remains content in the audit report enclosed with Dispatch No. 478/KTNN-TH.

Thus, the explanation and guidance for enterprises to strictly comply with provisions of law has been implemented by Lao Cai Provincial People's Committee, the Ministry of Finance, representatives of some Lao Cai provincial departments and sectors, the General Department of Vietnam Customs and Lao Cai Customs Department.

However, exporters still base on the former guidance documents to reflect problems and inconsistencies between the Ministry of Finance's guidance documents.

The Ministry of Finance issued Dispatch No. 1461/BTC-TCHQ dated February 14 to respond Lao Cai National Assembly Delegation; Dispatch No. 15967/BTC-TCHQ dated December 31, 2019 to Le Thanh Van - Member of National Assembly XIV of Ca Mau National Assembly Delegation. The General Department of Vietnam Customs issued Dispatch No.7918/TCHQ-TXNK dated December 23, 2019 to reply to Viet Phat Import Export Investment and Trading Joint Stock Company; Dispatch No.565/TCHQ-TXNK dated January 22 to respond to Minh Duc Mining Joint Stock Company and Ngoc Son Co., Ltd; Dispatch No.609/TCHQ-TXNK dated February 3 to answer Lao Cai Mining Processing and Mineral Joint Stock Company and Lan Anh Construction Co., Lt.

Regarding guidance documents on Customs valuation, customs valuation for exported goods is stipulated in Clause 2, Article 86 of the Customs Law No. 54/2014/QH13 of June 23, 2014, Article 20 of Government Decree No. 08/2015/ND-CP of January 21, 2015, Article 4 of Circular 39/2015/TT-BTC of March 25, 2015 (amended and supplemented at Clause 15, Article 1 of the Ministry of Finance's Circular No. 39/2018/TT-BTC dated April 20, 2018) and the Ministry of Finance's Dispatch No. 18058/BTC-CST dated December 11, 2014 replying to the National Delegation Lao Cai Provincial Association.

However, due to many different understandings of customs valuation, the Ministry of Finance issued Dispatch No. 4873/BTC-CST dated April 25, 2019, Dispatch No.4693/BTC-TCHQ dated April 22, 2019 saying the Customs valuation will comply with Clause 2 Article 86 of the Customs Law.

The Ministry of Finance issued Dispatch No. 7461/ BTC-TCHQ dated June 27, 2019 to respond to the People's Committee and the National Assembly Delegation of Lao Cai Province. The customs value of exported goods is the selling price of such goods item determined upon its arrival at the exit border gate, excluding international insurance cost and freight.

Regarding enterprises having to pay large additional taxes according to the decisions of Lao Cai Customs Department, the General Department of Vietnam Customs said, based on the conclusion on local budget audit of the Lao People's Committee Cai in 2017 issued together with Dispatch No. 478/ KTNN-TH dated September 25, 2018, at Item 1.4.2.9, Point 1, Section 2, the State Audit proposed Lao Cai Provincial People's Committee direct Lao Cai Customs Department to request enterprises to pay to the State budget additional export taxes determined by the State Audit and impose penalties.

Pursuant to Clause 1, Article 7 of the Law on State Audit No. 81/2015/QH13 dated June 24, 2015 of the National Assembly: “Audit reports made by the State Audit Office of Vietnam are binding upon audited units after they are published in terms of management and use of public finance and/or public assets”.

Based on these provisions, the Lao Cai Customs Department (Lao Cai Border Gate Customs Branch) has issued tax assessment decisions in accordance with the State Audit Office of Vietnam’s conclusion.