The implementation of Law on export and import: detailed tax exemption regulations on imported goods for processing and processing goods for export

Production of export products at TOTO Company of Vietnam. Photo: HỮU LINH.

Tax exemption Regulations on Specified proportion of scrap in the production of export products

Decree 134/2016/ND-CP specifies the regulations on imported goods for processing and processing goods for export in paragraph 6, article 16 of the Law on export & import duty on the basis of current regulations. Customs procedures dealing with surplus scrap, waste and raw materials, and materials in the outsourcing processes are stipulated in Circular 38/2015 / TT-BTC of the Ministry of Finance. Accordingly, raw materials and excess materials imported for processing must not exceed 3% of the total amount of raw material supplies are exempt from the Customs procedures for transfer, and free from import duty, but must be declared and relevant taxes paid as prescribed by law.

To enhance legitimacy and guarantee the stability of the policy, the Decree stipulates the rate of scrap, waste and raw materials and redundant materials during manufacturing and processing which are eligible for tax exemption on the basis of fundamental contents of the current regulations and appropriate adjustments in order to be consistent with the nature of the processed goods. In particular, Clause 4, Article 10 of the decree regulates: "surplus imported scrap, waste and raw materials and supplies for processing not exceeding 3% of the total amount of each material and supplies actually imported under processing contracts, are exempt from import duty tax when they are sold for domestic consumption, but must be declared and VAT, excise tax, environmental protection tax (if any) must be paid to the Customs authorities.”

For exported goods for processing and processed import products, as specified in Article 11 of the Decree: natural resources, minerals, products with a total value of natural resources and minerals plus the cost of energy accounted for less than 51% of the cost for processing export products are not exempt from export duty. The determination must comply with the provisions in Decree 100/2016/ND-CP dated 1-7- 2016 providing detailed regulations and guidelines for implementation of the Law amending and supplementing some articles of the Law on VAT, the Law on Special Consumption tax and the Law on Tax Administration. At the same time, to comply with the Law on Tax Administration in implementing the self-responsibilities of the taxpayer are stipulated at Point a, Clause 1, Article 11 of the draft decree :"Taxpayers declare and determine the total value of natural resources and minerals plus costs less than 51% of energy prices before handling Customs procedures for export goods "

Besides, the Decree also specifies the basis for determining tax-exempt goods as follows:

Organizations and individuals with processing contracts under the provisions of Decree No. 187/2013/ND-CP of the Government must declare on the Customs declaration, detailed information on the number, date of processing contracts, and outsourcing enterprise’s name.

Taxpayers or organizations and individuals outsourcing for taxpayers whose premises are based in the territory of Vietnam must process and produce in accordance with the provisions by Customs laws, report outsourcing contracts to the Customs authorities.

The duty free value or volume of imported materials, supplies and components is the real value of imported raw materials, supplies, components used to produce the actual processed products for export and is defined as finalization of the management and use of imported raw materials and materials for processing export products under the provisions of Customs legislation.

At settlement, taxpayers shall declare the accurate, truthful value of exported raw materials, supplies and components exports actually used to produce the actual imported processed products which were exempted in making Customs declarations

Tax exemption requirements for imported goods for processing export products

Clause 7 of Article 16 of the Law No. 107 on export and import duty regulates tax exemptions for imported materials, supplies and components for manufacturing export products. Accordingly, raw materials and materials for manufacturing exports which are subjected to import tax and tax refunds as stipulated in the current regulations are moved to non-tax payers.

Moreover, Article 12 of the Decree also specifies the materials, supplies and exemption cases by type of manufacturing. Besides, cases of tax refunds according to current regulations are converted to exempt cases prescribed by Law on export and import duty in 2016.

Specifically, imported raw materials, supplies, components and semi-finished products, and finished products to produce goods for export are exempt from import duty including: Raw materials and supplies (including supplies for packaging or packages for export products), imported components and semi-finished products directly constituting export products or participate directly in the production process but not directly transformed into goods; Finished imported products mounted and assembled into products for export or starred as synchronized items with the products for export; Components and spare parts imported for warranty for products for export; Imported goods not used for purchase, exchange or consumption but only for samples.

Besides, Article 12 of Decree 134 also instructs the legal basis for determining tax-free goods, namely: Organizations and individuals that produce goods for export with production facilities for export goods in the territory of Vietnam and with the ownership or use rights on machinery and equipment in the premises in line with raw materials, supplies and components imported for production of export goods. The production in the premises must comply strictly with Customs legislation and imported materials, supplies and components and only be used to manufacture products for export.

The value or volume of imported materials, supplies and components are exempt from taxes is the real value or volume used to produce real products for export. This value is defined in settling the management and use of raw materials, supplies and components imported for production of export products under the provisions of Customs legislation.

When settlement, taxpayers shall declare accurately and truthfully the actual value or amount of raw materials, supplies and components exports used to produce the actual processed products which were tax free, when making Customs procedures.

Records, tax exemption procedures comply with the provisions of Article 31 of Decree 134.