MOF guiding tax policy for goods temporarily imported for re-export

On 31 May 2019, the Ministry of Finance issued official letter no. 6250/BTC-CST to answer the Japanese Embassy  about the tax policy for goods temporarily imported for re-export.

The contents as below:

On March 29, 2019, the Ministry of Finance received the Diplomatic note No.J.F: 476/2019 on May 10, 2019 of the Japanese Embassy asking about the tax policy for goods temporarily imported for re-export. In this regard, the Ministry of Finance has the following opinions:

  1. Regarding policies on import and export tax for goods temporarily imported for re-export:

– At Point a, Clause 9, Article 16 of the Law on Export Tax and Import Tax No. 107/2016 / QH13 stipulating tax exemption for temporarily imported, re-exported or temporarily exported and re-imported goods within a certain period of time for:  Goods temporarily imported or exported to participate in fairs, exhibitions, product introduction, sports or art events, or other events; machinery and equipment temporarily imported for re-export for testing, research and development; machinery and equipment, tools temporarily imported or exported to be used for certain period of time or serve overseas processing, except for machinery, equipment, tools, vehicles permitted to be temporarily imported too serve investment projects, construction, installation, or manufacture;;”

– At Point d, Clause 1, Article 19 of the Law on Import and Export Taxes No. 107/2016 / QH13 stipulates the following cases of tax refund:: Any taxpayer who has paid tax on machinery, equipment, tools, vehicles of organizations and individuals that are permitted to be temporarily imported for re-export, except for those rented to execute investment projects, construction and installation, manufacture, when they are re-exported to abroad or exported to a free trade zone.

The amount of import duty refunded depends on the remaining value of goods when they are re-exported according to the period of time over which they are used or stay in Vietnam. If the goods are no longer usable, import duty shall not be refunded.

Tax shall not be refunded if the refundable amount is below the minimum level specified by the Government”.

Thus, construction machinery, bulldozers, ships …. of Japanese contractors temporarily importing – re-exporting to implement ODA projects in Vietnam are not subject to import tax exemption, so they must pay Import duty when temporarily imported, when re-exporting such product, import tax refund is equivalent to the remaining use value of the goods.

– Regarding conditions of application of special preferential import tax rates under the Trans-Pacific Partnership and Progress Partnership (CP-TTP):

At Point b, Clause 3, Article 5 of the Import Tax Export Law No. 107/2016 / QH13 stipulating in principle the application of special preferential import tax rates for imported goods as follows: ”  Special preferential rates apply to imports originated in any country or group of countries or territories that have an agreement on special preferential import duties with Vietnam; goods that are imported from a free trade zone to the domestic market and originating in a country or group of countries or territories that have an agreement on special preferential import duties with Vietnam.

Pursuant to Point b, Clause 3, Article 5 of the Law on Import Tax and Export Tax No. 107/2016 / QH13 above and based on the Comprehensive and Trans-Pacific Partnership Agreement (hereinafter referred to as the CP-TTP Agreement) which Vietnam and Japan are the signatories to, the Japanese Contractor temporarily imports goods from Japan to meet the rules of origin of goods and other conditions specified in the CP-TTP Agreement. The products shall apply special preferential tax rates under the CP-TTP Agreement, when re-exporting it will be refunded the import tax corresponding to the remaining use value of the goods.

  1. About the value added tax for machinery and equipment goods temporarily imported for re-export

In Clause 20, Article 5 of the Law on Value Added Tax No. 13/2008 / QH12 stipulates that subjects not subject to tax include: Goods transferred out of border gate or transited via the Vietnamese territory; goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials imported for the production or processing of goods for export under contracts signed with foreign parties; goods and services traded between foreign countries and non-tariff areas and between non-tariff areas.”.

Based on the above provisions, Japanese machinery and supplies goods temporarily imported for re-export are not subject to value-added tax.

  1. Regarding the special consumption tax policy for machinery and supplies temporarily imported for re-export

– At Point c, Clause 2, Article 3 of the Law on Special Consumption Tax No. 27/2008 / QH12, stipulating objects not subject to special consumption tax including: Goods temporarily imported for re-export and temporarily exported for re-import which are not subject to import duty or export duty within the time limit specified in the law on import duty and export duty”.

– In Clause 1, Article 2 of the Special Consumption Tax Law No. 27/2008 / QH12, the objects subject to special consumption tax include:

“ Article 2. Taxable objects

  1. Goods:

a/ Cigarettes, cigars and other tobacco preparations used for smoking, inhaling, chewing, sniffing or keeping in mouth;

b/ Liquor;

c/ Beer;

d/ Under-24 seat cars, including cars for both passenger and cargo transportation with two or more rows of seats and fixed partitions between passenger holds and cargo holds;

e/ Two- and three-wheeled motorcycles of a cylinder capacity of over 125 cm3;

f/ Aircraft and yachts;

g/ Gasoline of all kinds, naphtha, reformade components and other components for mixing gasoline;

h/ Air-conditioners of 90,000 BTU or less;

i/ Playing cards;

j/ Votive gilt papers and votive objects.

– In Clause 1, Article 8 of the Law on Special Consumption Tax No. 27/2008 / QH12, the cases of special consumption tax reimbursement include:

“1. Excise taxpayers may have the paid tax amounts refunded in the following cases:

a/ Goods temporarily imported for re-export:

b/ Goods which are raw materials imported for export production and processing;

c/ Finalization of overpaid tax amounts upon merger, consolidation, separation, split-up. dissolution, bankruptcy, ownership change, enterprise transformation or operation termination;

d/ Upon issuance of tax refund decisions by competent agencies under law. and cases of excise tax refund under treaties to which the Socialist Republic of Vietnam is a contracting party.

The excise tax refund under Points a and b of this Clause is applicable only to actually exported goods.”

Pursuant to the provisions on the above-mentioned special consumption tax policies and the provisions of Clause 9, Article 16 of the Law on Export Tax and Import Tax No. 107/2016 / QH13:

 (i) If machinery and supplies are not cars, motorcycles, airplanes, yachts, air conditioners and petrol, the types specified in Clause 1, Article 2 of the Special Consumption Tax Law are temporarily imported for re-export to implement the project is not subject to special consumption tax.

(ii) If machinery and supplies temporarily imported for re-export for project implementation  are goods subject to special consumption tax specified in Clause 1, Article 2 of the Law on Special Consumption Tax and subject to paying import tax and export tax , the product shall be subject to special consumption tax when temporary import and it shall be entitled to refund the paid special consumption tax when re-exporting under the provisions of Clause 1, Article 8 of the Law on Special consumption Tax.

The Ministry of Finance reply to the Japanese Embassy for acknowledge /.

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