The recent Decree No. 18/2021/ND-CP (“The Decree”) amends a number of articles of the previous Decree No. 134 of 2016, detailing the provisions and measures to implement the Law on Import Duty and Export Duty. Throughout the almost 5 years of implementation, customs authorities and private organizations involved in import and export activities have discovered and clashed with unclear provisions. The new Decree, which has been effective since April 25th, 2021, introduces the relevant amendments regarding the exemption of export and import duties of goods in line with international treaties to which Vietnam is a member.
Firstly, it is important to outline the import/export business environment in Vietnam. Enterprises that mostly deal with export-related activities, including the production of export goods and the provision of related services, are often located in Export Processing Zones (EPZ). These industrial zones are under special treatment and separated by entry-exit gates and under the supervision, inspection and control of customs. Trade between EPZs and other Vietnamese territories are deemed as import-export exchanges, requiring the application of the Law on Export and Import Duties and the relevant guiding regulations.
An “Export Processing Enterprise” (EPE) refers to enterprises which were established and operating inside an EPZ, or those operating inside an industrial zone or economic zone specializing in manufacturing exported goods. EPE are entitled to preferential treatment and may also enjoy particular incentives and exemptions of custom duties other than benefitting from the facilitation through the necessary custom procedures.
Regarding the exemption of duties granted by international treaties, according to Article 29 of the Decree, the determination of eligible goods should be based on the types and quantities of goods specified in a treaty or, if not otherwise specified, by confirmation documents issued . In these cases, enterprises using tax-free goods must submit a written request to the agency proposing the signing of or joining a treaty or a specialized management agency to ask for confirmation of such eligible goods. The agency must subsequently reply within 15 days upon receiving the request or refuse the confirmation, in cases in which the goods concerned are not covered by the international treaty.
The Decree supplemented a number of conditions to qualify for duty exemptions for goods imported to be used for processing, manufacturing & on-spot export products, which enterprises should be aware of. It is now required to notify an on-spot export declaration to the customs authorities within 15 days in order to be granted the tax exemption for such goods. In cases of failing to notify within the due date, the exporting entity shall be required to re-purpose its imported goods, declare and pay the related tax.
According to the Decree, goods imported under contract manufacturing models are eligible for import duty exemptions even when the materials are sent to local vendors for processing. However, an import duty exemption will only approved if the production of the exported goods is partially outsourced or a portion of the imported materials are sent to local vendors for processing and the importers fulfill relevant customs procedures.
Moreover, the Decree clarifies circumstances under which imported goods must be re-exported. This opens the possibility for imported goods that would be re-exported for trading purposes to be eventually eligible for import duty refunds.
Annually, within 90 days prior to the end of a fiscal year, organizations and individuals shall notify their use of duty-free goods during the fiscal year to the customs office, until the whole project is terminated or the goods have been re-exported or when the use purposes of goods has been changed, used for domestic sale, or have been destroyed. Further details on Decree No. 18/2021/ND-CP are available via the Government’s website portal.