MINISTRY OF FINANCE OF VIETNAM
GENERAL DEPARTMENT OF VIETNAM CUSTOMS
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SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
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No: 2588/TCHQ-GSQL
Re: opinions contributed
to draft amendment to Article 35 of Decree No. 08/2015/ND-CP
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Hanoi, May 29, 2023
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To:
- Tax Departments of
provinces and central-affiliated cities.
- Legal Department;
- Inspectorate Department;
- Import - Export Duty Department;
- Post Clearance Audit Department;
- Anti-smuggling and Investigation Department;
- Risk Management Department.
Implementing the
conclusion of Deputy Prime Minister Le Minh Khai in Notice No. 39/TB-VPCP dated
February 20, 2023 of the Government Office on in-country import and export as
prescribed in Article 35 of Decree No. 08 /2015/ND-CP: “The Ministry of
Finance shall take charge and cooperate with relevant agencies in reviewing and
completing the draft Decree and at the same time evaluating and summarizing the
implementation of regulations on in-country exports and
imports specified in Clause 1, Article 35 of Decree No. 08/2015/ND-CP. To
be specific: it is necessary to clearly state the legal basis, implementation
results, strengths and weaknesses, impacts and remedial measures. On that
basis, it is required to report to the Government Standing Committee for consideration
and provision of opinions on the promulgation of the Decree on amendments to
some Articles of Decree No. 08/2015/ND-CP and treatment directions for
regulations of in Clause 1, Article 35 of Decree No. 08/2015/ND-CP", the
General Department of Vietnam Customs has made a report on assessment and
summary of the implementation of regulations on customs procedures for
in-country exports and imports specified in Clause 1, Article 35 of
Decree No. 08/2015/ND-CP. In this assessment report, the General Department of
Vietnam Customs has provided details about the legal basis over each period and
assessed the current situation, strengths and weaknesses of customs procedures
and tax policies applicable to in-country exports and imports; at the same
time, recommended amendments to Article 35 of Decree No. 08/2015/ND-CP. To be
specific:
1. All regulations on in-country export and import specified
in Article 35 of Decree No. 08/2015/ND-CP shall be annulled.
2. Cases specified in Points a and b, Clause 1, Article 35 of
Decree No. 08/2015/ND-CP will be elaborated by corresponding Articles specified
in Circular No. 38/2015/TT-BTC (amended by Circular No. 39/2018/TT-BTC) related
to processing of goods in Vietnam under contracts with foreign traders (to be
conformable with the legal system on trade and foreign trade management) and
export and import of goods of export processing enterprises and enterprises in
free trade zones and the inland area (to be conformable with regulations of
Article 28 of the Commercial Law, Clause 4, Article 3 of the Law on Foreign
Trade Management, Clause 6, Article 4 of the Law on Customs, Clause 4, Article
26 of Decree No. 35/2022/ND-CP and Clause 1, Article 4 of the Law on Import and
Export Duties).
However, with a view to
ensuring consistency with the relevant legal system without discriminatory
policies on goods transactions that have the same nature, it is recommended
that the competent authority should consider annulling regulations on
in-country import and export of goods processed in Vietnam under contracts with
foreign traders specified in the Commercial Law, the Law on Foreign Trade
Management and Decrees on provision of guidance on the implementation since
these processed goods are owned by foreign traders. Hence, when such goods are sold
in the Vietnam market, it is required to comply with commercial sale contracts
and regulations of Point c, Clause 1, Article 35 of Decree No. 08/2015/ND-CP.
Therefore, the annulment
of regulations in Article 35 of Decree No. 08/2015/ND-CP means that it is
necessary to also review and annul regulations related to in-country import and
export specified in other relevant laws. To be specific: it is required to
review and propose amendments to the Commercial Law and the Law on Foreign
Trade Management to annul regulations on in-country export and import of goods
processed in Vietnam under contracts with foreign traders; review and amend the
Law on Import and Export Duties and VAT related to regulations on taxed goods,
tax refund for in-country imports and exports, foreign contractor withholding
tax, corporate income tax...
3. It is required to propose policies to replace customs
procedures for in-country imports and exports;
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(1) If goods are
processed in Vietnam under contracts with foreign traders but are sold by
foreign traders to organizations or individuals in Vietnam, the act of
purchasing processed products from foreign traders and then selling them
another trader in Vietnam performed by the processor or another Vietnamese
trader shall be considered as purchase and sale between two domestic
enterprises. In this case, the processor shall repurpose the processed goods
and pay import duty and other taxes as if the goods were imported from abroad.
(2) If there are
transactions of goods produced from raw materials imported for production of
exports that are exempt from import duties with foreign organizations or
individuals but such goods are delivered in Vietnam as designated, these
transactions shall be considered as transactions between two domestic
enterprises. In this case, enterprises importing raw materials for production
of exports shall repurpose raw materials that are imported and exempt from
duties and pay other taxes according to regulations.
In two aforesaid cases,
in order to collect corporate income tax on revenues generated in Vietnam,
foreign traders without presence in Vietnam shall sign contracts with agents in
Vietnam to collect related taxes.
(3) Regarding normal
trade: A foreign trader without presence in Vietnam shall sign an agency
contract or use a VAT invoice. The VAT invoice shall bear the taxpayer
identification number (TIN)/name of the foreign trader and TIN/name of the
Vietnamese enterprise designated to receive goods in Vietnam.
(*) Strengths
- Goods purchased
and sold in Vietnam are managed properly;
- Collecting import
duties on goods processed and produced for export upon repurposing.
(*) Weaknesses
- It is required to
change management methods of tax authorities and banking agencies for
international payments.
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- It is difficult to
handle tax refund in case imported raw materials, supplies and components are
purchased and sold domestically but then used for manufacture of products that
are exported in reality.
The General Department of
Vietnam Customs encloses the following documents:
(i) Report on assessment
and summarization of the implementation of customs procedures for in-country
exports and imports specified in Clause 1, Article 35 of Decree No.
08/2015/ND-CP and proposal for amendments;
(ii) Draft amendments to
Article 35 of Decree No. 08/2015/ND-CP.
Units are required to
give their specific opinions about each content, propose handling plans (if
any) and send their opinions to the General Department of Vietnam Customs
before June 13, 2023 for consolidation and submission to the Ministry of
Finance and report to the Government in a
prompt manner. A soft copy of opinions shall be sent to email:
anhptp@custom.gov.vn. Contact point: Pham Thi Phuong Anh, phone number:
0917793233./.
PP. DIRECTOR GENERAL
DEPUTY DIRECTOR GENERAL
Nguyen Van Tho
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Amendments to regulations on in-country export and import
specified in Article 35 of Government’s Decree No. 08/2015/ND-CP dated January,
21 2015
Implementing the
conclusion of Deputy Prime Minister Le Minh Khai in Notice No. 39/TB-VPCP dated
February 20, 2023 of the Government Office on collection of and explanation
about opinions of Government members on the draft Decree on amendments to some
Articles of Government’s Decree No. 08/2015/ND-CP dated January 21, 2015 on
specific provisions and guidance on enforcement of the Customs Law on customs
procedures, examination, supervision and control procedures for in-country
import and export, the General Department of Vietnam Customs assesses and
summarizes the implementation of regulations on in-country imports and exports
specified in Clause 1, Article 35 of Decree No. 08/2015/ND-CP and proposes
amendments. To be specific:
I. Legal basis
1. Regulations on in-country import and export from 1998 to
present
a) In 1998
Pursuant to point 7,
section "Specific provisions" of Joint Circular No.
23/1998/TTLT-BTM-TCHQ dated December 31, 1998 between the Ministry of Trade and
the General Department of Customs on export and import procedures of foreign
direct investment enterprises (FDI enterprises):
“7. Regarding the
export to foreign customers of goods which are, however, not exported out of
Vietnam, the exporting enterprise is entitled to deliver such goods directly to
another domestic establishment as nominated by the foreign purchaser:
a. Exports:
Goods exported by a
FDI enterprise to a foreign company shall be products specified in the
enterprise’s investment license, produced by that enterprise and included in
the approved annual export plan (according to Decision No. 321/1998/QD-BTM
dated March 14, 1998 and Decision No. 625/1995/QD-BTM dated June 1st,
1998 of the Ministry of Trade).
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i. If the
goods-receiving domestic enterprise is a FDI enterprise:
The goods shall be raw
materials used for the enterprise’s production and be included in the approved
annual import plan.
ii. If the domestic
goods-receiving enterprise is a Vietnamese enterprise:
The goods may be
production raw materials or goods in service of the enterprise’s trade, which
must conform with the business lines stated in its business registration certificate,
the import-export management policy and the tax policy applicable to imports.
Thus, the above-mentioned
Circular does not contain definitions of in-country import and export, but
foreign enterprises are entitled to designate FDI enterprises to deliver goods
to domestic enterprises (including Vietnamese enterprises and FDI enterprises).
b) In 2000
The Ministry of Trade
issued Circular No. 22/2000/TT-BTM dated December 15, 2000 (replacing Circular
No. 23/1998/TTLT-BTM-TCHQ). In this Circular, there are 02 cases of in-country
import and export:
(1) Foreign enterprises
appoint FDI enterprises to deliver goods to domestic enterprises (including
Vietnamese enterprises and FDI enterprises).
(2) Foreign contractors
appoint FDI enterprises (as subcontractors) to purchase and sell domestic
products to perform construction and installation works in Vietnam.
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c) In 2003
Following the direction
from the Prime Minister in Official Dispatch No. 660/CP-KTTH dated June 14,
2002 on taxes on in-country imports and exports, on December 17, 2002, the
Ministry of Finance issued Decision No. 153/2002/QD-BTC on customs procedures
for in-country exports and imports and in-country export and import
declarations. In this Decision, Clause 1 of Section I stipulates:
“In-country exports
and imports mean goods produced in Vietnam by enterprises (including FDI
enterprises) and sold to foreign traders but delivered to other enterprises in
Vietnam under the designation by such foreign traders.
In addition, the Decision
provides for conditions, dossiers and customs procedures for in-country imports
and exports;
d) In 2005
- Pursuant to the
Commercial Law No. 36/2005/QH11:
+ Hiring parties are
entitled to sell, destroy, donate or give as gifts on the spot processed
products, leased or lent machinery and equipment, raw materials, auxiliary
materials, redundant supplies, faulty products and discarded materials
according to agreements and regulations of law (specified in Article 181).
+ Processors
are entitled to export on spot processed products; leased or borrowed
machinery and equipment, raw materials, materials, redundant supplies, faulty
products and discarded materials under the authorization of hiring parties
(specified in Article 182).
- Pursuant to Article 15
of Government’s Decree No. 154/2005/ND-CP dated December 15, 2005 on
elaboration of the implementation of some Articles of the Customs Law on
customs procedures, inspection and supervision: “Goods exported on the spot
which are considered as exports and goods imported on the spot which are
considered as imports shall comply with legal regulations on imports and
exports management and tax policies for imports and exports.”
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d) From 2015 to
present
dd.1) Customs law
With some regulations on
in-country import and export of Decree No. 154/2005/ND-CP retained while others
replaced, Article 35 of Decree No. 08/2015/ND-CP provides for cases considered
as in-country import and export. On that basis, the Minister of Finance has
elaborated customs procedures for in-country imports and exports in accordance
with Article 86 of Circular No. 38/2015/TT-BTC dated March 25, 2015 amended by
Circular No. 39/2018/TT-BTC dated April 20, 2018.
dd.2) Tax law
- Pursuant to Article 2
of the 2016 Law on export and import duties: In-country imports and exports are
taxed goods and the Government has the responsibility to regulate this Article.
On that basis, the
Government issued Decree No. 134/2016/ND-CP dated September, 01 2016 (amended
by Decree No. 18/2021/ND-CP dated March 11, 2021). In this Decree, Clause 3
Article 2 provides for application of duty rates on in-country exports and
imports
- Regarding Decrees on
application of FTA tariff schedules:
+ Regarding
bilateral free trade agreements, imports shall be eligible for the special
preferential import tariff rates if they fully meet conditions, including the
condition that they are consigned directly from the exporting country to
Vietnam.
+ Regarding
multilateral trade agreements, imports shall be eligible for the special
preferential import tariff rates if they fully meet conditions, including the
condition that they are consigned directly from the exporting country to
Vietnam or they are imported from a free trade zone of Vietnam to
domestic market.
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dd.3) Law on foreign
trade management
- In 2017, the National
Assembly ratified the Law on Foreign Trade Management, which does not contain
regulations on in-country export and import. However, Decree No. 69/2018/ND-CP
on elaboration of some Articles of the Law on Foreign Trade Management contains
regulations on in-country export and import applicable to goods processed in
Vietnam under contracts with foreign traders. To be specific:
+ Pursuant to Point e,
Clause 1 Article 42: “The hiring party is entitled to carry out
in-country export of processed products; leased or borrowed machinery and
equipment; oversupplied materials; and scrap and waste according to agreements
between involved parties, in accordance with applicable regulations of law on
management of export and import of goods, and shall fulfill tax liabilities and
other financial obligations as per the law.
- + Pursuant to Point e,
Clause 2 Article 42 on rights and obligations of the processor: “The
processor shall carry out procedures for in-country export of processed
products, leased or borrowed machinery and equipment, oversupplied materials,
waste and scrap as authorized by the hiring party”.
* Comments and
remarks: Thus, the 2005 Commercial Law
allows processing enterprises in Vietnam to carry out some in-country
import-export activities (including sale, destruction, gift giving and export);
The 2001 Customs Law and other Laws do not contain regulations on in-country
import and export; However, according to the documents under the Law (aforesaid
Decrees and Circulars), in-country import and export activities have been
regulated since 1998 and subsequent documents have been amended in order to
ensure compliance with commercial practice and facilitate trade in goods. Since
2015, in-country export and import have been regulated by several Government's
Decrees (including Decree No. 08/2015/ND-CP, Decree No. 134/2016/ND-CP, Decree
No. 209/2013/ND-CP and Decree No. 69/2018/ND-CP); while the Law on Export and
Import Duties stipulates that in-country import and export are dutiable.
Therefore, with regard to exports and imports, there are discrepancies between
the laws on trade and foreign trade and the laws on export and import duties.
2. International experience in in-country import and export
Customs authorities of
countries including Japan and Korea do not provide for in-country export and
import. The Kyoto and Istanbul Conventions do not have regulations on
in-country export and import.
Via discussions at the 24th meeting
of ASEAN on customs procedures and trade facilitation, ASEAN member countries
had the opinion that according to the nature, in-country import and export
shall not considered as normal import and export since goods are not transported
across borders or customs territories. In-country import and export are
domestic transactions with the participation of foreign traders as
intermediaries (performing domestic distribution and trade). Therefore,
domestic tax authorities shall be responsible for management of these
transactions and they are not required to follow customs procedures.
Thus, in the world, goods
are only imported and exported in the form of normal export and import (imports
and exports must be transported through border checkpoints or customs
territories). The in-country import and export only exist in Vietnam.
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a) Pursuant to Article 28
of the Commercial Law No. 36/2005/QH11:
“1. Export of goods
means the bringing of goods out of the territory of the Socialist Republic of
Vietnam or into special zones in the Vietnamese territory, which are regarded
as customs-controlled areas according to regulations of law.
2. Import of goods
means the bringing of goods into the territory of the Socialist Republic of
Vietnam from foreign countries or special zones in the Vietnamese territory,
which are regarded as customs-controlled areas according to regulations of law.
b) Pursuant to Clause 4,
Article 3 of the 2017 Law on Foreign Trade Management: “Customs-controlled
area” means a geological area in the territory of Vietnam that is
established in accordance with regulations of Vietnam law and international
treaties to which the Socialist Republic of Vietnam is a signatory and the
exchange of products between this area and the remaining territory of Vietnam
or foreign countries are considered as import and export activities.”
c) Pursuant to Clause 6,
Article 4 of the 2014 Law on Customs: "Goods include
movable assets with headings and subheadings according to the Vietnamese list
of imports and exports which may be imported, exported, transited or retained
in customs areas.
d) Pursuant to Clause 4,
Article 26 of Government’s Decree No. 35/2022/ND-CP dated May 28, 2022 on
management of industrial parks and export processing zones in Vietnam: “Any
trade in goods between export processing enterprises and other areas within the
territory of Vietnam, except free trade zones, shall be defined as an export
and import relation, unless otherwise stipulated in point c of this Clause, and
except in the cases where completion of customs procedures prescribed in law on
customs is not required”.
The customs area scope is
specified in Decree No. 01/2015/ND-CP dated January 02, 2015 amended by
Government's Decree No. 12/2018/ND-CP dated January 23 2018.
Thus, according to the
above-mentioned regulations, imports and exports shall be brought to/out of the
territory of Vietnam or brought to/out of customs-controlled areas (export
processing zones, export processing enterprises, free trade zones and bonded
warehouses) or stored in customs areas (according to regulations of Decree No.
01/2015/ND-CP amended by Decree No. 12/2018/ND –CP, including border checkpoint
economic zones with enterprises producing and trading goods (processed goods
and goods produced for export) subject to customs supervision and control).
Accordingly, customs authorities shall only carry out customs procedures for
imports and exports in the aforesaid cases, including goods processed in
Vietnam under processing contracts and sold to Vietnamese organizations or
individuals by the foreign hirers; and goods traded under the sale and purchase
contract between domestic enterprises and export processing enterprises or
enterprises located in free trade zones; (specified in Points a and b, Clause
1, Article 35 of Decree No. 08/2015/ ND-CP). In-country exports and
imports traded between Vietnamese enterprises and overseas organizations or individuals
without presence in Vietnam, and delivered under the designation arrangement
between foreign traders and other enterprises in Vietnam (specified in Point c
Clause 1, Article 35 of Decree No. 08/2015/ ND-CP) shall not be subject to
management by customs authorities.
4. Opinions on tax policies applicable to in-country import
and export:
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Before this date, the Law
on Import and Export Duties No. 45/2005/QH11 and Government's Decree No.
87/2010/ND-CP dated 13/8/20210 do not have separate regulations on tax policies
applicable to in-country export and import. Article 15 of Government’s Decree
No. 154/2005/ND-CP dated December 15, 2005 stipulates that in-country goods
which are considered as exports and in-country goods which are considered as
imports, thus have to comply with regulations on management of imports and
exports and tax policies applicable to imports and exports. Thus, tax policies
applicable to in-country exports and imports are the same as those applicable
to imports and exports. In case of in-country export and import, it is required
to declare and pay import and export duties in accordance with the law on
import and export duties.
4.2. After the
effective date of Decree No. 08/2015/ND-CP
a. Regulations in the
law on import and export duties:
Pursuant to Clauses 2 and
3 Article 2 of Law No. 107/2016/QH13 on Import and Export Duties:
“Article 2. Taxed
goods
2. Goods exported from
the domestic market into free trade zones; goods imported from free trade zones
into the domestic market.
3. Goods in-country
exported-imported; goods exported and imported by enterprises exercising their
right to export, import, or distribute.
Pursuant to Clauses 2 and
3 Article 2 of Decree No. 134/2016/ND-CP dated September 01, 2016:
“Article 2. Taxed
goods
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3. Provisions of the
Government's Decree No. 08/2015/ND-CP dated January 21, 2015 shall apply to the
exports delivered to domestic processors specified in Clause 3 Article 2 of the
Law on Export and Import Duties.
Pursuant to Clause 3
Article 3 of Decree No. 134/2016/ND-CP dated September 01, 2016 amended by
Clause 1 Article 1 of Government’s Decree No. 18/2021/ND-CP dated March 11,
2021:
“3. Application of
duty rates on in-country exports and imports
a) In-country exports
shall apply the export duty rates specified in the Government’s Decree No.
122/2016/ND-CP dated September 01, 2016 on schedules of import tariffs and
preferential import tariffs, list of
goods and its flat tax, compound tariff, and out- of - quota import tariff, Government’s Decree No. 57/2020/ND-CP dated
May 25, 2020 on amendments to some Articles of Decree No. 122/2016/ND-CP
, and Government’s Decree No. 125/2017/ND-CP dated November 16, 2017 on
amendments to some Articles of Decree No. 122/2016/ND-CP , their
amendments and replacements (if any).
b) In-country imports
(except goods imported from free trade zones prescribed in Point c of this
Clause) shall apply the preferential import tariff rates specified in Decree
No. 125/2017/ND-CP, Decree No. 57/2020/ND-CP, their amendments and
replacements (if any).
Pursuant to Point g,
Clause 1, Point dd, Point g, Point h, Clause 2, Clause 5, Article 10 of Decree
No. 134/2016/ND-CP dated September 01, 2016 amended by Clause 4, Article 1 of
Government's Decree No. 18/2021/ND-CP dated March 11, 2021:
“Article 10.
Exemption of duties on goods imported for further processing and processed
exports
1. Goods imported for
further processing and processed exports under processing contracts that are
exempt from export and import duties specified in Clause 6 Article 16 of the
Law on Export and import duties include:
a) Processed products
that are exported to a foreign country, a free trade zone or an organization or
individual in Vietnam as requested by the hirer.
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2. Basis for
determination of eligibility for duty exemption:
dd) The quantity of
imports used for processing the products that have been exported to a foreign
country or a free trade zone that is exempt from import duties is the quantity
of goods imported in for processing the exported products in reality.
Regulations of Point g
and Point h of this Clause shall apply to goods imported for processing
products that are exported to another domestically located organization or
individual (outside of free trade zones), and in-country processed imports.
g) The quantity of
imported goods that are used for processing in-country exports in reality will
be exempt from import duties if the in-country exporter has sent the customs
authority a notification (Form No. 22 in Appendix VII hereof) of the customs
declaration of the in-country imports within 15 days from the day on which
customs clearance is granted to the in-country exports.
If the in-country
exporter fails to submit the notification to the customs authority by the
deadline, the in-country exporter shall register a new customs declaration,
declare and pay duties on the imports used for processing the in-country
exports at the rates and dutiable values of the imports that are applicable
when the new customs declaration is registered.
If the in-country
exporter submits a notification of the customs declaration of the in-country
imports to the customs authority after duties are paid, the paid duties shall
be settled in accordance with regulations of law on settlement of overpaid tax.
h) Goods that are
imported on the spot for processing according to the customs declaration shall
be exempt from import duties if the importer satisfies the requirements
specified in Point a and Point b of this Clause. If goods that are imported on
the spot for other purposes, the in-country importer shall declare and pay
duties at the rates and dutiable values of the in-country imports that are
applicable when the declaration is registered.
In case the in-country
importer has paid import duties, used the in-country imports for production of
goods for export and exported the goods to a foreign country or a free trade
zone in reality, paid import duties will be refunded in accordance with Article
36 of this Decree.
5. Procedures for
granting duty exemption are specified in Article 31 of this Decree.
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Pursuant to Points dd, e,
g and h Clauses 2 and 3 Article 12 of Decree No. 134/2016/ND-CP dated September
01, 2016 amended by Clause 6, Article 1 of Government's Decree No.
18/2021/ND-CP dated March 11, 2021:
“Article 12.
Exemption of duties on goods imported for production of domestic exports
2. Basis for
determination of eligibility for duty exemption:
d) The quantity
of imports used for processing the products that have been exported to a
foreign country or a free trade zone that is exempt from import duties is the
quantity of goods imported in for processing the exported products in reality.
Regulations of Points
e, g and h of this Clause shall apply to the imports used for production of
products that are exported to another domestically located organization and
individual (outside of free trade zones), in-country exports and imports.
e) The quantity of
imported goods that are used for producing in-country exports in reality will
be exempt from import duties if the in-country exporter has sent the customs
authority a notification (Form No. 22 in Appendix VII hereof) of the customs
declaration of the in-country imports within 15 days from the day on which
customs clearance is granted to the in-country exports.
If the in-country
exporter fails to submit the notification to the customs authority by the
deadline, the in-country exporter shall register a new customs declaration,
declare and pay duties on the imports used for producing the in-country exports
at the rates and dutiable values of the imports that are applicable when the
new customs declaration is registered.
If the in-country
exporter submits a notification of the customs declaration of the in-country
imports to the customs authority after duties are paid, the paid duties shall
be settled in accordance with regulations of law on settlement of overpaid tax.
g) In-country exports
are not exempt from export duties. The in-country exporter shall register
the in-country export declaration, declare and pay export duties at the rates
and values of the in-country exports that are applicable when the declaration
is registered.
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In case the in-country
importer has paid import duties, used the in-country imports for production of
goods for export and exported the goods to a foreign country or a free trade
zone in reality, paid import duties will be refunded in accordance with Article
36 of this Decree.
3. Procedures for
granting duty exemption are specified in Article 31 of this Decree.
While following
procedures for in-country export of the goods specified in this Article, in
addition to the duty exemption application specified in Article 31 of this
Decree, the in-country exporter shall also submit the document requesting
delivery of goods in Vietnam of a foreign entity: 01 photocopy
Pursuant to Clause 4
Article 2 of Government's Decree No. 18/2021/ND-CP dated March 11, 2021:
“Article 2.
Implementation
4. Transition clauses
on in-country exports and imports:
The duty rates on
in-country exports and imports prescribed in Clause 1 Article 1 of this Decree
shall be applied from the effective date of the Law on Export and Import Duties
No. 107/2016/QH13.”
b. Regulations in the
law on value-added tax:
Pursuant to Article 9 and
Article 17 of Circular No. 219/2013/TT-BTC dated December 31, 2013 of the
Ministry of Finance on guidance on implementation of the Law on Value-Added Tax
and the Government's Decree No. 209/2013/ND-CP dated December 18, 2013 on
provision of guidance on some Articles of the Law on Value-Added Tax.
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- Cases of export
under regulations of law:
+ Forwarded processed
goods under trade laws on international goods trade and export processing.
+ In-country exports
under regulations of law:
Article 17. Conditions for deduction and refund of input VAT in some cases
of deemed export
2. Compulsory
documents for in-country exports under regulations of law:
a) A sale contract or
a processing contract requiring goods to be delivered to a recipient in
Vietnam;
b) A customs declaration
of in-country imports and exports that have gone through customs
procedure;
c) A VAT invoice or
export invoice specifying the buyer’s name, recipient, and delivery address in
Vietnam;
d) Goods sold to
foreign traders and delivered to a location in Vietnam shall be paid with
convertible foreign currencies by bank transfer. Wire transfer receipts shall
comply with this Clause 3 Article 16 of this Circular. If the appointed
recipient is authorized by the foreign party to pay the exporter, the currency
used for payment shall comply with the laws on foreign currencies;
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If any of the
compulsory documents for forwarded processed goods and in-country exports is
missing, VAT shall be paid as if they are sold domestically.
c. Foreign contractor
withholding tax policies:
Pursuant to Clauses 1 and
2 Article 1 of Circular No. 60/2012/TT-BTC and Clauses 1 and 2 Article 1 of
Circular No. 103/2014/TT-BTC on regulated entities, especially Clause 2:
“Foreign entities providing goods in Vietnam in the form of in-country import
and export and earning income in Vietnam under contracts between them and
Vietnamese enterprises (except for cases in which goods are processed and then
returned to foreign entities) or providing goods under the DDP, DAT, DAP
delivery conditions (incoterms). Hence, a foreign entity providing goods in the
form of in-country import and export (except for cases in which goods are
processed and then returned to foreign entities) is subject to foreign
contractor withholding tax.
* Pursuant to the
aforesaid regulations on tax policies and in consideration of cases related to
application of regulations in Clause 1 Article 35 of Government's Decree No.
08/2015/ND-CP dated January 21, 2015: Goods
imported within the country for processing are considered as in-country imports
and exports as designated by the hiring party and regardless of the presence of
a resident representative in Vietnam. The tax policy applicable to in-country
exports and imports shall be implemented according to the corresponding
declaration
II. Current status of
in-country import and export
1. In-country exports and imports value under regulations in
Clause 1 Article 35 of Decree No. 08/2015/ND-CP
Table 1: Data on import-export turnover and revenues from
import and export duties by years
Year
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Total import turnover (Mil. USD)
Total amount of export duty
(billion VND)
Total amount of import duty
(billion VND)
2018
243.480
236.690
8.577,8
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2019
264.190
253.070
8.554,6
54.045,95
2020
282.660
262.700
7.395,0
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2021
336.310
332.230
8.379,7
51.121,34
2022
371.330
358.900
10.425,1
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(Source: Customs IT and Statistics Department)
Table 3: In-country export statistics
Year
Quantity of customs declarations
(sheet)
In-country export turnover
(Mil. USD)
Percentage (%)/export turnover
The amount of export duty to be collected
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Percentage (%)/export duty
2018
1.152.589
37.232,01
15,29
44,8
0,52
2019
1.305.790
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16,31
50,8
0,59
2020
1.406.831
45.440,39
16,08
69,1
0,93
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1.450.695
37.847,44
11,25
103,4
1,23
2022
1.670.023
65.257,17
17,58
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1,22
(Source: Customs IT and Statistics Department)
Table 4: In-country import statistics
Year
Quantity of customs declarations (sheet)
In-country import turnover (Mil. USD)
Percentage (%)/export turnover
The amount of import duty to be collected
Percentage (%)/import duty
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1.218.211
29.911,7
12,64
659
10,12
2019
1.379.274
46.027,6
18,19
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8,67
2020
1.514.737
49.719,3
18,93
1.565
3,56
2021
1.569.520
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12,04
4.433
2,82
2022
1.775.652
72.205,4
20,12
6.537
1,2
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The table shows that the
average in-country import-export turnover within 05 years reached about 15,84%
compared to the total turnover of all types of import and export. To be
specific:
- In 2018: The in-country
import-export turnover reached about 67,14 billion USD/total import-export
turnover (480,17 billion USD), accounting for 13,98%. Total revenues from
in-country import and export duties reached 703,61 billion VND, accounting for
1,11% of total revenues from import and export duties.
- In 2019: The in-country
import-export turnover reached about 89,12 billion USD/total import-export
turnover (517,26 billion USD), accounting for 17,23%. Total revenues from
in-country import and export duties reached 1.576,4 billion VND, accounting for
2,52% of total revenues from import and export duties.
- In 2020: The in-country
import-export turnover reached about 95,16 billion USD/total import-export
turnover (545,36 billion USD), accounting for 17,45%. Total revenues from
in-country import and export duties reached 1.634 billion VND, accounting for
3,18% of total revenues from import and export duties.
- In 2021: The in-country
import-export turnover reached about 77, 861 billion USD/total import-export
turnover (668,54 billion USD), accounting for 11,65 % (the complicated
developments of the COVID-19 epidemic at this period have affected the
in-country import-export turnover, so there is a decrease in the in-country
import-export turnover compared to that of 2020. Total revenues from in-country
import and export duties reached 4.536,1 billion VND, accounting for 7,62 % of
total revenues for import and export duties.
- In 2022: The in-country
import-export turnover reached about 137,46 billion USD/total import-export
turnover (730,2 billion USD), accounting for 18,83%. Total revenues from
in-country import and export duties reached 6.663,65 billion VND, accounting
for 8,88% of total revenues for import and export duties.
However, the in-country
import-export turnover is not included in the annual import-export turnover.
2. Customs procedures and data on each case:
Customs procedures for
in-country exports and imports shall comply with regulations in Article 35 of
Decree No. 38/2015/ND-CP and Article 86 of Circular No. 38/2015/TT-BTC dated 25
March 2015 of the Ministry of Finance (amended by Circular No. 39/2018/TT-BTC
dated April 20, 2018). There are 3 scenarios as follows:
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In this case, the
processed goods are owned by the foreign hirer. When a domestic enterprise
wishes to purchase these goods, the hiring party shall appoint the processor to
deliver the goods in Vietnam after the end of the contract; the domestic buyer
shall pay the foreign hirer for the goods directly or via the processor. In
this case, the goods are not moved across the border of Vietnam. This is normal
trade and it conforms to Articles 181 and 182 of the Commercial Law and Article
42 of Decree No. 69/2018/ND-CP.
Data on custom declaration and in-country export turnover
of goods
Year
Quantity of customs declarations (sheet)
Turnover (Mil. USD)
Percentage (%)/export turnover
The amount of duty to be collected (VND)
Percentage (%)/export duty
2018
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7.747,96
3,18
284.112.268,4
0,003
2019
249.120
8.028,6
3,04
492.050.341,6
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2020
260.114
8.184,8
2,9
37.319.756,5
0,001
2021
136.990
4.585,8
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6.778.292,7
0,0001
2022
27.698
5.965,7
1,61
-
-
(Source: Customs IT and Statistics Department)
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Year
Quantity of customs declarations
Turnover (Mil. USD)
Percentage (%)/import turnover
The amount of duty to be collected (VND)
Percentage (%)
2018
205.004
5.512,40
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48.159.198.325,4
0,09
2019
243.288
7.622,11
3,01
313.254.957.002,2
0,58
2020
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7.852,85
2,99
151.954.964.179,3
0,35
2021
130.578
4.311,77
1,3
333.155.012.472,5
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2022
22.951
4.075,67
1,14
1.613.421.762,4
0.003
(Source: Customs IT and Statistics Department)
Scenario 2: Goods are traded between a domestic enterprise and an
export processing enterprise or an enterprise located in a free trade zone
(according to Point b, Clause 1 Article 35 of Decree No. 08/2015/ND-CP).
This is normal
export/import and it conforms to regulations of Article 28 of the Commercial
Law, Clause 4, Article 3 of the Law on Foreign Trade Management, Clause 6,
Article 4 of the Customs Law and Clause 4, Article 26 of Decree No.
35/2022/ND-CP. On the other hand, in this case, Decree No. 31/2018/ND-CP on
origin of goods allows the issuance of C/O for exported Vietnamese goods.
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Year
Quantity of customs declarations (sheet)
Turnover (Mil. USD)
Percentage (%)/export turnover
The amount of duty to be collected (VND)
Percentage (%)/export duty
2018
286.827
10.896,2
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33.304.559.509,04
0,39
2019
334.191
14.794,1
5,6
37.536.945.378,02
0,44
2020
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16.061,5
5,68
51.381.013.093,42
0,69
2021
564.052
15.511,1
4,61
89.596.399.767,01
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2022
764.857
27.882,4
7,51
116.767.666.781,91
1,12
(Source: Customs IT and Statistics Department)
Data on custom declaration and in-country import turnover
of goods
Year
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Turnover (Mil. USD)
Percentage (%)/import turnover
The amount of duty to be collected (VND)
Percentage (%)
2018
146.334
6.601,19
0,24
131.419.662.390,179
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2019
170.503
10.976,37
0,36
192.660.310.933,383
4,34
2020
193.091
11.625,44
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362.322.540.070,393
4,43
2021
202.905
9.382,66
2,21
1.127.961.427.283,98
2,82
2022
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15.182,92
1,23
794.319.906.974,312
4,23
(Source: Customs IT and Statistics Department)
Scenario 3: Goods are traded between a Vietnamese enterprise and a
foreign entity without presence in Vietnam, and delivered under the designation
arrangement between the foreign entity and another enterprise in Vietnam
(according to Point c Clause 1 Article 35 of Decree No. 08/2015/ND-CP).
This is normal trade on
the basis of two separate sale contracts. Vietnamese enterprise A signs a
contract to purchase goods from a foreign enterprise that has no presence in
Vietnam; then the foreign enterprise purchases goods from Vietnamese enterprise
B and designates the delivery of goods to Vietnamese enterprise A; In this case,
the goods can be raw materials for production of exports or other products, or
for domestic consumption or implementation of projects on investment or
construction of works. Vietnamese enterprise B will receive money for purchase
of goods from the foreign enterprise and Vietnamese enterprise A shall pay to
the foreign enterprise. In this case, the goods are not moved across the border
of Vietnam. This regulation is not consistent with the commercial law and the
law on foreign trade management.
In addition, pursuant to
Point d, Clause 2 of Article 2 of the Law on Corporate Income Tax No.
14/2008/QH12 on taxable objects: “Foreign enterprises without permanent
establishments I Vietnam shall pay tax on taxable incomes generated in Vietnam.”
Thus, if a foreign enterprise without presence in Vietnam supplies services,
provides and distributes goods, etc., it shall pay corporate income tax and
foreign contractor withholding tax.
Data on custom declaration and in-country export turnover
of goods
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Quantity of customs declarations (sheet)
Turnover (Mil. USD)
Percentage (%)/export turnover
The amount of duty to be collected (VND)
Percentage (%)/export duty
2018
652.513
18.587,94
7,63
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0,13
2019
722.479
20.269,36
7,67
12.810.332.313,33
0,15
2020
750.124
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7,5
17.679.418.499,42
0,24
2021
749.653
17.750,91
5,28
13.769.238.027,15
0,16
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877.468
31.409,02
8,46
10.377.930.131,16
0,1
(Source: Customs IT and Statistics Department)
Data on custom declaration and in-country import turnover
of goods
Year
Quantity of customs declarations (sheet)
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Percentage (%)/import turnover
The amount of duty to be collected (VND)
Percentage (%)
2018
866.874
17.798,08
7,52
479.277.434.216,46
0,88
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965.483
27.429,13
10,84
1.019.680.355.790,45
1,89
2020
1.064.658
30.240,98
11,51
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2,39
2021
1.236.038
26.313,73
7,92
2.971.609.495.509,31
5,81
2022
1.521.207
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14,75
5.740.568.653.234,62
8,89
(Source: Customs IT and Statistics Department)
According to the above
data, revenues from import and export duties in the case specified in Point c,
Clause 1, Article 35 of Decree No. 08/2015/ND-CP accounts for the highest
proportion in the total in-country import and export duties.
3. Assessment of current regulations on in-country import and export
procedures
a) Regarding customs
procedures
a.1) Strengths:
- This regulation
facilitates not only commercial activities of foreign traders without presence
in Vietnam, but also those of Vietnamese enterprises. Instead of having to pay
the transportation costs when exporting the goods from Vietnam or to a bonded
warehouse and re-importing them, in order to facilitate commercial activities
of foreign traders who have no presence in Vietnam, the law of Vietnam provides
a special regulation. According to this regulation, with regard to goods that
are specified in commercial sale and purchase contracts but are not exported or
imported via Vietnam's border checkpoints, customs procedures shall be carried
out inland and tax policies shall be applied as prescribed.
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- The implementation of
in-country import-export customs procedures enables enterprises to carry out
international payment activities because they have export and import
declarations that have been certified by customs authorities (except for the
case where the payment is made before the goods is delivered).
a.2) Weaknesses:
- In-country import and
export custom procedures do not reflect the nature of exports and imports in
accordance with the commercial law and the law on trade and foreign trade
management. According to these laws, imports and exports shall be carried
across the border of Vietnam; on the other hand, including them in
import-export turnover is not accurate because they are not exported or
imported in reality. At the export and import stage, policies on management of
in-country imports and exports are the same as those on management of normal
imports and exports (commodity policies, specialized inspection), although by
nature, in-country imports and exports are goods that are domestically
transported.
- Enterprises can take
advantage of policies to commit commercial fraud, because Decree No.
90/2007/ND-CP on exercise of export and import rights stipulates that:
“1. After a foreign
trader without a presence in Vietnam is granted a certificate of registration,
it shall register a taxpayer identification number with the tax department of
the province or central-affiliated city where such trader was issued with its
certificate.
2. When exercising the
right to export [and/or] import, a foreign trader without a presence in Vietnam
shall discharge obligations regarding tax, fees and charges, and other
financial obligations or implement security measures in compliance with the law
of Vietnam before goods are granted customs clearance; and the foreign trader
shall be responsible for exported [and/or] imported goods in accordance with
the law of Vietnam.”
In fact, according to
Point c Clause 1 Article 35 of Decree No. 08/2015/ND-CP, allowing foreign
entities without presence in Vietnam to carry out in-country import and export
procedures means they also have the right to distribute goods in Vietnam.
However, according to regulations of Decree No. 90/2007/ND-CP, a foreign
trader without presence in Vietnam shall obtain the export, import and
distribution rights, while according to point c, Clause 1, Article 35 of Decree
No. 08/2015/ND-CP, a foreign entity without presence in Vietnam is not required
to carry out the licensing procedure, thereby leading to the failure to collect
corporate income tax on revenue-generating transactions in Vietnam.
- There are difficulties
for customs authorities in management and monitoring because in-country export
declarations are separate from in-country import declarations. The location for
carrying out in-country export and import procedures may be two different
Customs Sub-Departments. This is very difficult in cooperation and monitoring
since taxes are mainly collected at the in-country import stage.
- There is a large amount
of unprocessed and suspended in-country export/import declarations on the
system due to various reasons, including the reason that the enterprise
incorrectly declares information on the system or the in-country importer does
not open the import declaration.
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b.1) Strengths:
- In case of carrying out
in-country import and export procedures, tax policies applicable to in-country
imports and exports (goods that are not moved across the border of Vietnam)
shall be the same as those applicable to normal imports and exports.
Accordingly, processed goods, when carrying out in-country import and export
procedures, are exempt from taxes and taxes on goods imported for production of
exports will be refunded if the in-country imported products can continue
to be used for production and exported to foreign countries. Thus, the
application of customs procedures for in-country imports and exports will
enable enterprises to handle tax issues and take advantage of incentives on
import and export duties and VAT.
- The tax calculation for
the in-country import declaration shall comply with Clause 3, Article 2 of the
2016 Law on Import and Export Duties, which stipulates that in-country imports
are subject to taxes. Taxes and fees on these goods shall be fully collected as
if they are exported/imported across the border of Vietnam according to
regulations of the tax law;
- Regarding VAT:
Exporters are eligible for 0% VAT and tax deduction or refund of input
VAT (if any).
b.2) Weaknesses:
- In case enterprises
fail to carry out in-country import procedures, import duties may not be
collected.
- Risks of transfer
pricing: it is possible that some FDI enterprises will take advantage of
Vietnam's incentive policies in order to declare increased value and tax
payable when carrying out in-country import procedures, and reduce tax payable
overseas in order to maximize profits of the corporation, multinational company
or group of related companies on the basis of reduction in tax liabilities.
- Regarding VAT:
According to applicable regulations, in-country exports are eligible for 0%
VAT. However, it is unreasonable, because there are foreign trade transactions
but the goods are not actually exported out of the territory of Vietnam.
- Regarding corporate
income tax: The corporate income tax cannot be collected from foreign entities
without presence in Vietnam since they are not regulated by the law on
corporate income tax.
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According to the
aforesaid analysis, General Department of Vietnam Customs has opinions as
follows:
According to applicable
regulations in Clause 1, Article 35 of Decree No. 08/2015/ND-CP, the cases
specified in Points a and b have been clearly specified in the Law; the case
specified in Point c, Clause 1, Article 35 of this Decree has been specified in
Government’s Decrees.
In order to unify state
management of customs, according to the nature of transactions of goods,
General Department of Customs proposes amending Article 35 of Decree No.
08/2015/ND-CP as follows:
1. All regulations in Article 35 of Decree No. 08/2015/ND-CP
shall be annulled.
In fact, Point c, Clause
1, Article 35 shall be annulled since in-country imports and exports specified
in Point a, Point b, Clause 1, Article 35 of Decree No. 08/2015/ND-CP have been
specified in the Commercial Law and the Law on Foreign Trade Management.
Therefore, customs procedures for these two cases shall be specified in
corresponding Articles in Circular No. 38/2015/TT-BTC (amended by Circular No.
39/2018/TT-BTC) related to processing of goods in Vietnam under contracts with
foreign traders (to be conformable with the legal system on trade and foreign trade
management) and export and import of goods of processing enterprises and
enterprises in free trade zones and the inland area (to be conformable with
regulations of Article 28 of the Commercial Law, Clause 4, Article 3 of the Law
on Foreign Trade Management, Clause 6, Article 4 of the Law on Customs, Clause
4, Article 26 of Decree No. 35/2022/ND-CP and Clause 1, Article 4 of the Law on
Import and Export Duties).
- However, with a view to
ensuring consistency with the relevant legal system without discriminatory
policies on goods transactions that have the same nature, it is recommended
that the competent authority should consider annulling regulations on
in-country import and export of goods processed in Vietnam under contracts with
foreign traders specified in the Commercial Law, the Law on Foreign Trade
Management and Decrees on provision of guidance on the implementation since
these processed goods are owned by foreign traders. Hence, when such goods are
sold in the Vietnam market, it is required to comply with commercial sale
contracts and regulations of Point c, Clause 1, Article 35 of Decree No.
08/2015/ND-CP.
Therefore, the annulment
of regulations in Article 35 of Decree No. 08/2015/ND-CP means that it is
necessary to also review and annul regulations related to in-country import and
export specified in other relevant laws. To be specific: it is required to
review and propose amendments to the Commercial Law and the Law on Foreign
Trade Management to annul regulations on in-country export and import of goods
processed in Vietnam under contracts with foreign traders; review and amend the
Law on Import and Export Duties and VAT related to regulations on taxed goods
and tax refund for in-country imports and exports.
2. It is required to propose policies to replace customs
procedures for in-country import and export;
2.1. In case the
Commercial Law and the Law on Foreign Trade Management have not been amended
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(1) If goods are
processed in Vietnam under contracts with foreign traders but are sold by
foreign traders to organizations or individuals in Vietnam, the act of
purchasing processed products from foreign traders and then selling them
another trader in Vietnam performed by the processor or another Vietnamese
trader shall be considered as purchase and sale between two domestic
enterprises. In this case, the processor shall repurpose the processed goods
and pay import duty and other taxes as if the goods were imported from abroad.
(2) If goods are produced
from raw materials imported for production and export that are exempt from
import duties and there are transactions with foreign organizations or
individuals but such goods are delivered in Vietnam as designated, these
transactions shall be considered as transactions between two domestic
enterprises. In this case, the enterprise importing raw materials for production
and export shall repurpose raw materials that are imported and exempt from
duties, and pay other taxes according to regulations.
In two aforesaid cases,
in order to collect corporate income tax on revenues generated in Vietnam, the
foreign trader without presence in Vietnam shall sign a contract with an agent
in Vietnam to collect related taxes.
(3) Regarding normal
trade: A foreign trader without presence in Vietnam shall sign an agency
contract or use a VAT invoice. The VAT invoice shall bear the taxpayer
identification number (TIN)/name of the foreign trader and TIN/name of the
Vietnamese enterprise designated to receive goods in Vietnam.
(*) Strengths
- Goods purchased
and sold in Vietnam are managed properly;
- Collecting import
duties on goods processed and produced for export upon repurposing.
(*) Weaknesses
- It is required to
change management methods of tax authorities and banking agencies for
international payments.
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- It is difficult to
handle tax refund in case raw materials, supplies and components are imported
but they are not domestically sold and are exported in reality.
3. It is required to propose amendments to the system of
relevant laws:
The annulment of
regulations on in-country import and export specified in Point c, Clause 1,
Article 35 of Decree No. 08/2015/ND-CP means that it is necessary to also
review and annul regulations related to in-country import and export specified
in other relevant laws. To be specific:
(1) It is proposed to
amend the Commercial Law and the Law on Foreign Trade Management to annul
regulations on in-country import and export of goods processed in Vietnam under
contracts with foreign traders in order to be legally synchronous and avoid
discriminatory policies on goods transactions that have the same nature;
It is proposed to amend
the Law on Import and Export Duties to annul regulations on taxed goods for
in-country imports and exports because Clause 3, Article 2 of this Law
stipulates that these imports and exports are subject to taxes,
(2) It is proposed to
amend the tax law:
+ Regarding VAT, it is
proposed to annul regulations on VAT rates, VAT deduction or refund applicable
to in-country exports since Decree No. 209/2013/ND-CP stipulates that these
exports are eligible for 0% VAT, tax deduction and refund.
+ Regarding corporate
income tax: it is proposed to add the regulation on a case where if a foreign
trader without presence in Vietnam generates revenues in Vietnam but does not
carry out customs procedures, the foreign contractor withholding tax and
corporate income tax shall be collected via an agent in Vietnam.
+ Regarding personal
income tax: It is proposed to add the regulation on a case where if a foreign
trader without presence in Vietnam generates revenues in Vietnam, he/she shall
pay personal income tax.
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Units are required to
give their specific opinions about these problems./.
DRAFT AMENDMENTS TO ARTICLE 35 OF DECREE NO. 08/2015/ND-CP
ON IN-COUNTRY IMPORT AND EXPORT
Regulations in Article 35 of Decree No. 08/2015/ND-CP.
Proposed amendments
Reasons for amendments
Article 35. Customs
procedures for in-country exports and imports
1. In-country imports
and exports:
a) Those are processed
in Vietnam under a processing contract and sold to Vietnamese organizations
or individuals by the foreign hirer;
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c) Those are traded
between a Vietnamese enterprise and a foreign entity without presence in
Vietnam, and delivered under the designation arrangement between the foreign
entity and another enterprise in Vietnam.
2. The Minister of
Finance has elaborated customs procedures that in-country exports and imports
must follow.
1. All regulations on in-country export and import specified
in Article 35 of Decree No. 08/2015/ND-CP shall be annulled.
Accordingly, customs authorities shall not carry out customs procedures
for goods purchased and sold between two Vietnamese traders designated by
foreign traders to deliver and receive goods in the domestic market.
Article 35.
Customs procedures for in-country exports and imports
1. In-country
imports and exports:
a) Those are processed in Vietnam under a processing
contract and sold to Vietnamese organizations or individuals by the foreign
hirer;
b) Those are traded
between a domestic enterprise and an export processing enterprise or an
enterprise located in a free trade zone;
c) Those are traded
between a Vietnamese enterprise and a foreign entity without presence in
Vietnam, and delivered under the designation arrangement between the foreign
entity and another enterprise in Vietnam
2. The Minister of
Finance has elaborated customs procedures that in-country exports and imports
must follow.
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3. It is required to
propose policies to replace customs procedures for in-country imports and
exports:
Since in-country import
and export are domestic purchase and sale, inland tax authorities shall be
responsible for management and collection of taxes via such purchase and
sale. To be specific:
(1) If goods are
processed in Vietnam under contracts with foreign traders but are sold by
foreign traders to organizations or individuals in Vietnam, the act of
purchasing processed products from foreign traders and then selling them
another trader in Vietnam performed by the processor or another Vietnamese
trader shall be considered as purchase and sale between two domestic
enterprises. In this case, the processor shall repurpose the processed goods
and pay import duty and other taxes as if the goods were imported from
abroad.
(2) If goods are
produced from raw materials imported for production and export that are
exempt from import duties and there are transactions with foreign
organizations or individuals but such goods are delivered in Vietnam as
designated, these transactions shall be considered as transactions between
two domestic enterprises. In this case, the enterprise importing raw
materials for production and export shall repurpose raw materials that are
imported and exempt from duties, and pay other taxes according to
regulations.
In two aforesaid cases,
in order to collect corporate income tax on revenues generated in Vietnam,
foreign traders without presence in Vietnam shall sign contracts with agents
in Vietnam to collect related taxes.
(3) Regarding normal
trade: A foreign trader without presence in Vietnam shall sign an agency
contract or use a VAT invoice. The VAT invoice shall bear the taxpayer
identification number (TIN)/name of the foreign trader and TIN/name of the
Vietnamese enterprise designated to receive goods in Vietnam.
(*) Strengths
- Goods purchased
and sold in Vietnam are managed properly;
- Collecting import
duties on goods processed and produced for export upon repurposing.
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- It is required to
change management methods of tax authorities and banking agencies for
international payments.
- Export producing and
processing enterprises shall pay taxes and make payment before delivering
goods to other enterprises in Vietnam.
- It is difficult to
handle tax refund in case raw materials, supplies and components are imported
but they are not domestically sold and are exported in reality.
- The 2005 Commercial
Law only contains regulations on in-country import and export of goods
processed in Vietnam under contracts with foreign traders:
+ Hiring parties may
sell, destroy, donate or give as gifts on the spot processed products, leased
or lent machinery and equipment, raw materials, auxiliary materials,
redundant supplies, faulty products and discarded materials according to
agreements and regulations of law (specified in Article 181 of the 2005
Commercial Law).
+ Processors may
export on spot processed products; leased or borrowed machinery and
equipment, raw materials, materials, redundant supplies, faulty products and
discarded materials under the authorization of hiring parties (specified
in Article 182 of the 2005 Commercial Law).
- The 2018 Law on
Foreign Trade Management does not contain regulations on in-country export
and import. Decree No. 69/2018/ND-CP on elaboration of some Articles of the
Law on Foreign Trade Management provides for on-the-spot export and import
applicable to goods processed in Vietnam under contracts with foreign
traders. To be specific:
+ Pursuant to Point e,
Clause 1 Article 42: “The hiring party is entitled to carry out
in-country export of processed products; leased or borrowed machinery and
equipment; oversupplied materials; and scrap and waste according to
agreements between involved parties, in accordance with applicable
regulations of law on management of export and import of goods, and shall
fulfill tax liabilities and other financial obligations as per the law”.
+ Pursuant to Point e,
Clause 2 Article 42 on rights and obligations of the processor: “The
processor shall carry out procedures for in-country export of processed
products, leased or borrowed machinery and equipment, oversupplied materials,
waste and scrap as authorized by the hiring party”.
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However, according to
the documents under the Law (aforesaid Decrees and Circulars), in-country
import and export activities have been regulated since 1998 and subsequent
documents have been amended in order to ensure compliance with commercial
practice and facilitate trade in goods. Since 2015, in-country export and
import have been regulated by several Government's Decrees (including Decree
No. 08/2015/ND-CP, Decree No. 134/2016/ND-CP, Decree No. 209/2013/ND-CP and
Decree No. 69/2018/ND-CP); while the Law on Export and Import Duties
stipulates that in-country import and export are dutiable Therefore, with
regard to exports and imports, there are discrepancies between the laws on
trade and foreign trade and the laws on export and import duties.
Thus, by nature, the
purchase and sale between two Vietnamese traders who are designated by
foreign traders to deliver goods in Vietnam are domestic sale and purchase.
In this case, the goods are not moved across the border checkpoints or border
of Vietnam as if they were imported and exported and they are domestically
moved. Conducting customs procedures for in-country imports and exports
is not appropriate because there is no any law that stipulates this problem.
The customs procedure is conducted to facilitate domestic purchase and sale
of these imports and exports and collect taxes (if any) including import and
export duties or foreign contractor withholding tax. However, the nature of
this transaction is not accurately reflected in this case.
Therefore, it is proposed
to annul all regulations in Article 35 of Decree No. 08/2015/ND-CP.
However, the annulment
of regulations on in-country import and export specified in Point c, Clause
1, Article 35 of Decree No. 08/2015/ND-CP means that it is necessary to also
review and annul regulations related to in-country import and export
specified in other relevant laws. To be specific:
(1) It is proposed to
amend the Commercial Law and the Law on Foreign Trade Management to annul
regulations on in-country import and export of goods processed in Vietnam
under contracts with foreign traders in order to be legally synchronous and
avoid discriminatory policies on goods transactions that have the same
nature;
It is proposed to amend
the Law on Import and Export Duties to annul regulations on taxed goods for
in-country imports and exports because these imports and exports are subject
to taxes according to regulations in Clause 3, Article 2 of this Law,
(2) It is proposed to
amend the tax law:
+ Regarding VAT, it is
proposed to annul regulations on VAT rates, VAT deduction or refund
applicable to in-country exports since Decree No. 209/2013/ND-CP stipulates
that these exports are eligible for 0% VAT, tax deduction and refund.
+ Regarding corporate
income tax: The regulation on a case where if a foreign trader without
presence in Vietnam generates revenues in Vietnam but does not carry out
customs procedures, the foreign contractor withholding tax and corporate
income tax must be collected via an agent in Vietnam shall be added.
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(3) Regarding payment
via bank: in case of use of the customs declaration for payment, the customs
declaration may be replaced by a commercial contract or an invoice used in
purchase and sale of goods.
It is required to
collect opinions about the following contents:
- Relevant regulations
to be amended (relevant units);
- Tax policies to be amended when the method
of managing in-country imports and exports is changed; (Agencies shall
collect opinions from the General Department of Taxation, Department of Tax
Policy, Import - Export Duty Department);
- Contents of taxes to
be specified in this case.