On 05 April 2019, The General Department of Vietnam Customs issued letter no.1966 / TCHQ-TXNK regarding instructions on import and export tax and VAT for export processing enterprise (EPE). The content is as follow:
The General Department of Vietnam Customs received the Official Letter No. CVN / GDO / 21012019 dated January 21, 2019 of Canon Vietnam Co., Ltd regarding import tax and value added tax. In this regard, the General Department of Vietnam Customs has the following opinions:
a.Pursuant to Point c, Clause 4, Article 2 of the Law on Import Tax and Export Tax No. 107/2016 / QH13 prescribed “ c) Goods exported from a free trade zone to abroad; goods imported from abroad to a free trade zone and used within such free trade zone; goods transported from one free trade zone to another” is not Taxed goods.
Pursuant to Clause 2, Article 2 of the Law on Import Tax and Export Tax No. 107/2016 / QH13 thì “ goods imported from free trade zones into the domestic market.” is Taxed goods.
Pursuant to Clause 1, Article 4 of the Law on Import Tax and Export Tax No. 107/2016 / QH13: “ Free trade zone means an economic zone located within Vietnam’s territory, established in accordance with law, having a definite geographic boundary, and separated from the outer area by hard fences in order to facilitate customs inspection and customs control by the customs authority and relevant agencies with regard to exports and imports, inbound and outbound vehicles and passengers; the trading relationship between the free trade zone and the outside area is consider exportation and importation.”
Pursuant to Clause 2, Article 2 of Decree No. 134/2016 / ND-CP dated September 1, 2016 of the Government regulating taxable objects, including: “2. … goods imported from export processing enterprises, export processing zones, tax-suspension warehouses, bonded warehouses and other free trade zones defined in Clause 1 Article 4 of the Law on Export and import duties into the domestic market..”
Pursuant to Point c, Clause 1, Article 10 of Decree No. 134/2016 / ND-CP dated September 1, 2016 of the Government stipulating Goods imported for further processing and processed exports under processing contracts exempt from export and import duties.
Based on the above provisions:
– If Canon Vietnam Co., Ltd. is an export processing enterprise ( satisfying the provisions of Clause 1, Article 4 of the Law on Export Tax and Import Tax No. 107/2016 / QH13), mold and jig are provided under processing contract for domestic enterprises to carry out the processing contract, the temporary import of mold and jig into Vietnam shall be exempted from import tax.
– In case Canon Vietnam Co., Ltd. is an export processing enterprise (satisfying the provisions of Clause 1, Article 4 of the Law on Import and Export Tax No. 107/2016 / QH13), it will lend molds and jig to domestic enterprises for production of components under leasing contracts of machinery and equipment, the temporary import of mold and jig into Vietnam shall be not exempted from import tax
b.Regard to the proposed amendments to the policy:
The General Department of Customs acknowledges the company’s proposal to study and coordinate with relevant units to consider when amending the Import and Export Tax Law, ensuring the compliance with the provisions of law and creating favorable benefits for businesses.
Pursuant to Clause 1 Article 9 of Circular No. 219/2013 / TT-BTC dated December 31, 2013 of the Ministry of Finance stipulating: :
“1. 0% VAT is applied to exported goods and services; construction and installation overseas and in free trade zones; international transport; exported goods and services that are not subject to VAT, except for the cases in Clause 3 of this Article, in which 0% VAT is not applied.
Exported goods and services are those that are sold to overseas organizations and individuals and are consumed outside Vietnam, sold to the entities in free trade zones, or sold to foreign customers as prescribed by law.
b) Exported services include the services directly provided for overseas organizations and individuals and are consumed overseas; the services provided for the entitiesin free trade zonesand consumed within the free trade zones”.
Based on the above provisions, in case of repairing mold components that domestic enterprise provide to Canon Vietnam Co., Ltd. are implemented and consumed outside the non-tariff area (repaired at the establishment of domestic enterprise) is not subject to 0% VAT rate as guided in Article 9 of Circular No. 219/2013 / TT-BTC dated December 31, 2013 of the Ministry of Finance.
The General Department of Customs answers to Canon Vietnam Co., Ltd for information and action.