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MINISTRY OF
FINANCE OF VIETNAM
GENERAL DEPARTMENT OF CUSTOMS
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THE SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom – Happiness
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No. 2587/TCHQ-GSQL
Re: proposed amendments to Article 35 of
Decree No. 08/2015/ND-CP
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Hanoi, May 29,
2023
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To:
- Office –Ministry of Finance;
- Legal Department
- Tax Policy Department
- International Cooperation Department
- General Department of Taxation
Pursuant to Deputy Prime Minister Le Minh Khai’s
Notification No. 39/TB-VPCP dated 20/02/2023 issued by Office of the Government
regarding in-country export and import, regulations of 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, assess the
implementation of regulations on in-country exports and imports specified in
Clause 1 Article 15 of Decree No. 08/2015/ND-CP, specifying legal basis,
results, achievements and failures, impacts and proposed measures. On this
basis report to the Standing Committee of the Government for consideration of
promulgation of a Decree on amendments to Decree No. 08/2015/ND-CP and what to
do with regulations in Clause 1 Article 35 of Decree No. 08/2015/ND-CP”, General
Department of Customs has submitted a report on implementation of regulations
on customs procedures for on in-country exports and imports in Clause 1 Article
35 of Decree No. 08/2015/ND-CP. In this report, General Department of Customs
specified the legal basis in each period, reality, advantages and disadvantages
of customs procedures and tax policies applied to in-country exports and
imports, proposed amendments to Article 35 of Decree No. 08/2015/ND-CP towards:
1. Annulment of all regulations on in-country
export and import in Article 35 of Decree No. 08/2015/ND-CP.
2. The cases specified in Point a and Point b
Clause 1 Article 35 of Decree No. 08/2015/ND-CP are regulated by corresponding
Articles of Circular No. 38/2015/TT-BTC (amended by Circular No.
39/2018/TT-BTC) on inward processing (to comply with regulations of law on commerce
and foreign trade management), export and import of goods between export
processing enterprises (EPEs), enterprises in free trade zones and the domestic
market (to comply with Article 28 of the Law on Commerce, 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 Export and Import Duties).
However, in order to ensure uniformity of relevant
laws and equality of policies on transaction of goods of the same nature, we
hereby propose that competent authorities consider annulling regulations on
in-country export and import of goods processed for foreign traders in the Law
on Commerce, the Law on Foreign Trade Management and their guiding Decrees
because the processed goods are owned by the hirer (the foreign party) and sold
in Vietnam’s market under sale contracts. This activity is not different from
regulations of Point c Clause 1 Article 35 of Decree No. 08/2015/ND-CP.
Therefore, annulling Article 35 of Decree No.
08/2015/ND-CP also means reviewing and annulling all relevant regulations of
law on in-country export and import, such as: reviewing and amending the Law on
Commerce and the Law on Foreign Trade Management to remove regulations on
in-country export and import regarding goods processed for foreign traders;
reviewing and amending the Law on Export and Import Duties, the Law on
Value-added Tax regarding subjects of taxation, refund of tax on in-country
exports and imports, foreign contractor withholding tax, corporate income tax,
etc.
3. Proposed replacement of customs procedures for
in-country exports and imports:
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(1) In case the goods processed for a foreign
trader have not been sold by the foreign traders to organizations and
individuals in Vietnam, the processor or the Vietnamese trader that buys the
processed goods from the foreign trader and sells them to other traders in
Vietnam shall conduct a trade transaction between two domestic enterprises; the
processor shall repurpose the processed goods, pay import duties and other
taxes similarly to imports.
(2) If the goods are manufactured from raw
materials imported for manufacture of domestic exports on which import duties
are have been exempted but delivered within Vietnam as assigned by the oversea
organization or individual, it shall be considered transaction between two
domestic enterprises; the enterprise that imported raw materials for
manufacture of domestic exports shall repurpose the imported raw materials and
fully pay the taxes thereon.
In the cases specified in (1) and (2), in order to
collect corporate income tax on revenues from trade transactions in Vietnam,
the foreign trader without commercial presence in Vietnam must pay tax by
signing a contract with an agent in Vietnam.
(3) For purely commercial business: The foreign
trader without commercial presence in Vietnam shall sign an agent contract or
use VAT invoices that specify the names and TINs of the foreign trader and the
enterprise Vietnam appointed to receive the goods in Vietnam.
(*) Strengths
- Goods traded in Vietnam are managed properly;
- Import duties can be collected on goods processed
and domestic exports after repurposing.
(*) Weaknesses
- It is necessary to change the management method
of tax authorities and banking authorities in international payment.
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- It is not clear how to refund tax if imported raw
materials, supplies and components are traded domestically but then used for
manufacture of goods that are exported in reality.
Enclosures:
(i) Report on implementation of customs procedures
for in-country exports and imports prescribed in Clause 1 Article 35 of Decree
No. 08/2015/ND-CP and proposed amendments;
(ii) Draft amendments to Article 35 of Decree No.
08/2015/ND-CP.
Units may send their comments and proposed
solutions (if any) to General Department of Customs before 13/6/2023 for
consolidation and reporting to the Ministry and the Government. Soft copies can
be sent to anhptp@custom.gov.vn (Ms. Pham Thi Phuong Anh), phone number:
0917793233./.
PP GENERAL
DIRECTOR
DEPUTY GENERAL DIRECTOR
Nguyen Van Tho
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Amendments to
regulations on in-country export and import in Article 35 of Decree No. 08/2015/ND-CP
Pursuant to Deputy Prime Minister Le Minh Khai’s
Notification No. 39/TB-VPCP dated 20/02/2023 issued by Office of the Government
in response to opinions of the Government's members on the draft Decree on
amendments to the Government’s Decree No. 08/2015/ND-CP elaborating the Law on
Customs regarding customs inspection, supervision and control of in-country
export and import, General Department of Customs has reviewed the
implementation of regulations on in-country exports prescribed in Clause 1
Article 35 of Decree No. 08/2015/ND-CP and propose amendments as follows:
I. Legal basis
1. Regulations on in-country export and import
since 1998
a) 1998
Paragraph 7 of “Specific provisions” of Joint Circular
No. 23/1998/TTLT-BTM-TCHQ dated 31/12/1998 between the Ministry of Trade and
General Department of Customs on procedures for export and import by foreign
direct investment (FDI) enterprises:
“7. For the export to foreign customers of goods
which are, however, not exported from 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 must be the products stipulated in the enterprise’s investment license
and made by that enterprise itself, which are included in the ratified annual
export plan (according to Decision No. 321/1998/QD-BTM dated 14/3/1998 and
Decision No.625/1995/QD-BTM of dated 01/6/1998 of the Ministry of Trade).
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i. If the goods-receiving domestic enterprise is
an FDI enterprise:
The goods must be the raw materials used for the
Enterprise’s production and included in the ratified 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 business, which must conform to the business
lines stated in its business registration certificate, the import-export
management policy as well as the tax policy applicable to import goods.”
b) 2000
The Ministry of Trade promulgated Circular No.
22/2000/TT-BTM on 15/12/2000, which replaces Circular No. 23/1998/TTLT-BTM-TCHQ
and has regulations on in-country export and import:
(1) The foreign enterprise appoints an FDI
enterprise to deliver goods to another enterprise in Vietnam (either an FDI
enterprise or Vietnamese enterprise).
(2) The foreign main contractor appoints an FDI
enterprise (subcontractor) to trade goods in Vietnam to execute a construction
or installation work in Vietnam.
Scenario (2) is a new content of Circular No.
22/2000/TT-BTM.
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Pursuant to the Prime Minister’s directive in
Official Dispatch No. 660/CP-KTTH dated 14/6/2002 regarding tax on in-country
exports and imports, the Ministry of Finance promulgated Decision No. 153/2002/QD-BTC
dated 17/12/2002 on customs procedures for in-country exports and imports and
in-country export and import declaration forms. Clause 1 Section 1 of the
Decision:
“In-country exports and imports are 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 also prescribes
conditions, documentation and customs procedures for in-country exports and
imports.
d) 2005
- Law on Commerce No. 36/2005/QH11:
+ According to Article 181, hirers (processes) have
the rights to “sell, destroy, donate or give as gifts processed products within
the country, leased or lend machinery and equipments, raw materials,
auxiliary materials, redundant supplies, faulty products and discarded
materials according to agreements and provisions of law.”
+ According to Article 182, processors have the
rights to “export the processed products, leased or borrowed machinery and
equipment, raw materials, materials, redundant supplies, faulty products and
discarded materials within the country under the authorization of the
hirers (processes).”
- Article 15 of the Government’s Decree No.
154/2005/ND-CP dated 15/12/2005 elaborating some Articles of the Law on Customs
on customs procedures, customs supervision and inspection: “In-country exports
are considered exports and in-country imports are considered imports, thus they
must comply with regulations of law on management of imports and exports and
tax policies on imports and exports.”
The Decree also prescribes the basis for
determination of in-country exports and imports and assigns the Ministry of
Finance to provide specific guidelines for customs procedures applicable to
in-country exports and imports.
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dd.1) Customs laws:
With an aim to inherit and replace regulations on
in-country export and import of Decree No. 154/2005/ND-CP, Article 35 of Decree
No. 08/2015/ND-CP has specific regulations on the cases of in-country export
and import. On this basis, the Minister of Finance has established customs
procedures for in-country exports and imports in Article 86 of Circular No.
38/2015/TT-BTC dated 25/3/2015, which is amended by Circular No. 39/2018/TT-BTC
dated 20/4/2018.
dd.2) Tax laws:
- Article 2 of the 2016’s Law on Export and Import Duties
prescribes that in-country exports and imports are subject to tax and assigns
the Government to elaborate these regulations.
On this basis, the Government promulgated Decree
No. 134/2016/ND-CP dated 01/9/2016 (amended by Decree No. 18/2021/ND-CP dated
11/3/2021), Clause 3 Article 2 of which specifies the rates of tax on
in-country exports and imports.
- Regarding Decrees providing guidelines for
implementation of tariff schedules under Free Trade Agreements (FTAs):
+ Under bilateral FTAs, imports are eligible for
special preferential import duty rates if the conditions are fully satisfied,
including the condition that the goods are directly transported from the
exporting country into Vietnam.
+ Under multilateral FTAs, imports are eligible for
special preferential import duty rates if the conditions are fully satisfied,
including the condition that the goods are directly transported from the
exporting country into Vietnam or from Vietnam but only applicable to goods
imported from free trade zones into the domestic market.
dd.3) Foreign trade management laws
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+ Point e Clause 1 Article 42:
“The ordering party (the hirer) shall have the
rights 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 regulations of law
in force on management of export and import and fulfill tax liabilities and
other financial obligations as per the law”.
- Point e Clause 2 Article 42 on rights and
obligations of the ordering party: “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 ordering party”.
* Comments: In conclusion, only the 2005’s
Law on Commerce permits domestic processors to carry out certain in-country
export and import activities (such as selling, destroying, donating,
exporting); the 2001’s Law on Customs and other Laws do not have regulations on
in-country export and import. However, pursuant to the aforementioned Decrees
and Circulars, in-country export and import have been regulated since 1998 and
later documents are amended according to reality to facilitate trade in goods.
Since 2015, regulations on in-country export and import have been more specific
in the Government’s Decrees (such as Decree No. 08/2015/ND-CP, Decree No. 134/2016/ND-CP,
Decree No. 209/2013/ND-CP, Decree No. 69/2018/ND-CP). Meanwhile, regulations of
law on export and import duties specify that in-country export and import are
taxable. When it comes to in-country export and import, there are discrepancies
between trade laws and tariff laws.
2. Foreign laws on in-country export and import
Customs authorities of foreign countries such as
Japan and Korea do not have regulations on in-country export and import. Kyoto
and Istanbul Conventions do not have any clause about in-country export and
import.
During the 24th ASEAN’s meeting about
customs procedures and trade facilitation, all member states agree that by
nature they are not export and import since goods are not moved across the
border or customs territory and are purely domestic transactions participated
in by foreign traders as intermediaries (distributing, trading goods in the
domestic market). Therefore, these transactions are subject to the jurisdiction
of domestic tax authorities and do not have to follow customs procedures.
That means in other countries there are only
ordinary export and import of goods (the exports and imports have to cross
border checkpoints or customs territories). The concept of in-country export
and import only exists in Vietnam.
3. Regulations on export and import of goods
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“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 exclusive customs zones
according to the provisions 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 exclusive
customs zones according to the provisions of law.”
b) Pursuant to Clause 4 Article 3 of the 2017’s 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.”
d) Pursuant to Clause 4 Article 26 of the
Government’s Decree No. 35/2022/ND-CP on management of industrial zones and
export processing zones: “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”.
Customs areas are prescribed in the Government’s
Decree No. 01/2015/ND-CP dated 02/01/2015, which is amended by Decree No.
12/2018/ND-CP dated 23/01/2018.
Pursuant to the aforementioned regulations, exports
and imports must be brought from/into Vietnam’s territory or separate customs
areas (export processing zones, export processing enterprises, free trade
zones, bonded warehouses) or stored within customs areas (according to Decree
No. 01/2015/ND-CP, which is amended by Decree No. 12/2018/ND-CP, including
border-gate economic zones having enterprises manufacturing or selling
customs-supervised goods such as processed goods and domestic exports. This
means customs authorities only carry out customs procedures for exports and
imports in the aforementioned cases, including goods processed in Vietnam under
contracts and sold by foreign hirers to other organizations and individuals in
Vietnam, and goods traded between domestic enterprises and enterprises in
export processing zones or free trade zones (Point a and Point b Clause 1
Article 35 of Decree No. 08/2015/ND-CP). In case goods are traded between a
Vietnamese enterprise and a foreign trader without commercial presence in
Vietnam and is requested by the foreign trader to deliver or receive goods from
another enterprise in Vietnam (Point c Clause 1 Article 35 of Decree No.
08/2015/ND-CP), they will not be considered exports or imports under the
management of customs authorities.
4. Regarding tax policies on in-country export
and import:
4.1. Before the effective date of Decree No.
08/2015/ND-CP:
The Law on Export and Import Duties No.
45/2005/QH11, the Government’s Decree No. 87/2010/ND-CP dated 13/8/20210 do not
have regulations on tax policies on in-country export and import. Article 15 of
the Decree No. 154/2005/ND-CP prescribes that in-country exports are considered
exports and in-country imports are consider imports, thus subject to
regulations of law on management of exports and imports and tax policies on
exports and imports. This means tax policies on in-country exports and imports
are the same as those on exports and imports. Export and import duties on
in-country exports and imports shall be declared in accordance with regulations
of law on export and import duties.
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a. Regulations of law on export and import
duties:
Clause 2 and Clause 3 Article 2 of the Law on
Export and Import Duties No. 107/2016/QH13:
“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 indirectly exported-imported; goods
exported and imported by enterprises exercising their right to export, import,
or distribute.
Clause 2 and Clause 3 Article 2 of Decree No.
134/2016/ND-CP dated 01/9/2016:
“Article 2. Dutiable articles
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.”
Clause 3 Article 3 of the Government’s Decree No.
134/2016/ND-CP dated 01/9/2016, which is amended by Clause 1 Article 1 of
Decree No. 18/2021/ND-CP:
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a) In-country exports shall apply the export
duty rates specified in the Government’s Decree No. 122/2016/ND-CP , Decree No.
57/2020/ND-CP , Decree No. 125/2017/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).
Point g Clause 1, Points dd, g, h Clause 2, Clause
5 Article 10 of the Government’s Decree No. 134/2016/ND-CP dated 01/9/2016,
which is amended by Clause 4 Article 1 of Decree No. 18/2021/ND-CP:
“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:
g) 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.
Processed exports are exempt from export duties
as prescribed by this Point if they are entirely processed from imported goods.
In case processed exports are made of dutiable domestic raw materials or
supplies, export duties on the value of raw materials or supplies incorporated
into the products at the duty rates applied to such raw materials or supplies
shall be paid when the products are exported.
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.
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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.
h) Goods that are imported in-country 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 in-country 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 manufacture 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.
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.”
Points dd, e, g, h Clause 2 and Clause 3 Article 12
of the Government’s Decree No. 134/2016/ND-CP dated 01/9/2016, which is amended
by Clause 6 Article 1 of Decree No. 18/2021/ND-CP dated 11/3/2021:
“Article 12. Exemption of duties on goods
imported for manufacture of domestic exports
2. Basis for determination of eligibility for
duty exemption:
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Regulations of Points e, g, h of this Clause
shall apply to the imports used for manufacture of products that are exported
to another domestically located organization and individual (outside of free
trade zones), in-country exports and in-country imports.
e) The quantity of imported goods that are used
for manufacturing 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 manufacturing 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.
h) Goods that are imported in-country 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 Clause 2 Article 10 of this Decree. If goods that are imported
in-country 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.
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.”
Clause 4 Article 2 of the Government’s Decree No.
18/2021/ND-CP dated 11/3/2021:
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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 of law on VAT:
Article 9 and Article 17 of Circular No.
219/2013/TT-BTC of the Ministry of Finance and the Government’s Decree No.
209/2013/ND-CP:
“Article 9. Tax rate of 0%
- It is considered export in the following
cases:
+ Forwarded processed goods under trade laws on
international goods trade and export processing.
+ In-country exports defined by law.
Article 17. Conditions for deduction and
refund of input VAT in some cases where goods are considered exported
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a) 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 export
and import for which customs procedures have been completed;
c) A VAT invoice or export invoice specifying
the buyer’s name, recipient, and delivery address in Vietnam.
d) The goods sold to foreign traders and
delivered to a location in Vietnam must be paid with convertible foreign
currencies by bank transfer. Wire transfer receipts must 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 must
comply with the laws on foreign currencies
dd) The in-country exports of a FDI enterprise
must be conformable with the investment license.
…
If any of the compulsory documents for forwarded
processed goods and domestic exports is missing, VAT shall be paid as if they
are sold domestically.
c. Regarding foreign contractor withholding tax:
Clause 1 and Clause 2 Article 1 of Circular No.
60/2012/TT-BTC and Clause 1 and Clause 2 Article 1 of Circular No.
103/2014/TT-BTC on regulated entities: “2. Foreign entities providing goods in
Vietnam in the form of in-country export and earn income in Vietnam under
contracts between them and Vietnamese enterprises (except for the cases in
which goods are processed and then returned to foreign entities) or distribute
goods in Vietnam or provide goods under DP, DAT, DAP clauses of Incoterms, In
these cases, foreign organizations and individuals providing goods in the form
of in-country export and import (except processing and re-exporting goods) are
subject to foreign contractor withholding tax.
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II. Current situation of in-country export and
import
1. Data about in-country export and import
according to Clause 1 Article 35 of Decree No. 08/2015/ND-CP
Schedule 1:
Export and import turnover and duty collection by year
Year
Total export
turnover
(million USD)
Total import
turnover
(million USD)
Total export duty
(billion VND)
Total import duty
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2018
243.480
236.690
8.577,8
54.759,05
2019
264.190
253.070
8.554,6
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2020
282.660
262.700
7.395,0
43.955,00
2021
336.310
332.230
8.379,7
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2022
371.330
358.900
10.425,1
64.601,00
Schedule 3: In-country
export statistics
Year
Declaration
quantity
(sheet)
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(million USD)
% of export
turnover
Export duty
receivable
(billion VND)
% of export duty
2018
1.152.589
37.232,01
15,29
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0,52
2019
1.305.790
43.092,01
16,31
50,8
0,59
2020
1.406.831
...
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16,08
69,1
0,93
2021
1.450.695
37.847,44
11,25
103,4
1,23
...
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1.670.023
65.257,17
17,58
127,15
1,22
Source: Information
Technology and Customs Statistics Department
Schedule 4:
In-country import statistics
Year
Declaration
quantity
...
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% of export
turnover
Import duty
receivable (billion VND)
% of import duty
2018
1.218.211
29.911,7
12,64
659
10,12
...
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1.379.274
46.027,6
18,19
1.526
8,67
2020
1.514.737
49.719,3
18,93
...
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3,56
2021
1.569.520
40.008,2
12,04
4.433
2,82
2022
1.775.652
...
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20,12
6.537
1,2
Source: Information
Technology and Customs Statistics Department
Statistics show that average in-country export and
import turnover over 05 years is about 15,84% of total export and import
turnover, where:
- 2018: In-country export and import turnover was
approximately 67,14 billion VND out of a total turnover of 480,17 billion USD
(13,98%); Total collected duties from in-country export and import was 703,61
billion VND, making up 1,11% of total collected export and import duties.
- 2019: In-country export and import turnover was
approximately 89,12 billion VND out of a total turnover of 517,26 billion USD
(17,23%); Total collected duties from in-country export and import was 1.576,4
billion VND, making up 2,52% of total collected export and import duties.
- 2020: In-country export and import turnover was
approximately 95,16 billion VND out of a total turnover of 545,36 billion USD
(17,45%); Total collected duties from in-country export and import was 1.634 billion
VND, making up 3,18% of total collected export and import duties.
- 2021: In-country export and import turnover was
approximately 77,861 billion VND out of a total turnover of 668,54 billion USD
(11,65%). Turnover was lower than that of 2020 due to Covid-19. Total collected
duties from in-country export and import was 4.536,1 billion VND, making up
7,62% of total collected export and import duties.
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However, in-country export and import turnover is
not included in annual export and import turnover.
2. Customs procedures and statistics of specific
scenarios:
Customs procedures for in-country exports and
imports are carried out according to Article 35 of Decree No. 08/2015/ND-CP and
Article 86 of Circular No. 38/2015/TT-BTC (amended by Circular No.
39/2018/TT-BTC), including 3 scenarios:
Scenario 1: Point a Clause 1 Article 35 of
Decree No. 08/2015/ND-CP: Goods are processed in Vietnam under contract and
sold by the hirer to other organizations and individuals in Vietnam.
According to this point, under processing contracts
with the foreign trader, the products are owned by the overseas hirer. When a
domestic enterprise wishes to buy the products, the hirer will request the
processor to deliver them within Vietnam after the contract ends. The domestic
enterprise shall pay the overseas hirer directly or via the processor. In this
case, the goods do not cross Vietnam’s border. This is purely a trade activity
and is conformable with Article 181 and Article 182 of the Law on Commerce, and
Article 42 of Decree No. 69/2018/ND-CP.
Statistics on
declarations and in-country export turnovers
Year
Declaration
quantity (sheet)
Turnover (million
USD)
...
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Duty receivable
(VND)
% of export duty
2018
213.249
7.747,96
3,18
284.112.268,4
0,003
2019
...
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8.028,6
3,04
492.050.341,6
0,01
2020
260.114
8.184,8
2,9
37.319.756,5
...
...
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2021
136.990
4.585,8
1,36
6.778.292,7
0,0001
2022
27.698
5.965,7
...
...
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-
-
Source: Information
Technology and Customs Statistics Department
Statistics on
declarations and in-country import turnovers
Year
Declaration
quantity
Turnover (million
USD)
% of import
turnover
Duty receivable
(VND)
...
...
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2018
205.004
5.512,40
2,33
48.159.198.325,4
0,09
2019
243.288
7.622,11
...
...
...
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313.254.957.002,2
0,58
2020
256.988
7.852,85
2,99
151.954.964.179,3
0,35
2021
...
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4.311,77
1,3
333.155.012.472,5
0,65
2022
22.951
4.075,67
1,14
1.613.421.762,4
...
...
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Source: Information
Technology and Customs Statistics Department
Scenario 2: Point b Clause 1 Article 35 of Decree
No. 08/2015/ND-CP: Goods are traded between domestic enterprises and export
processing enterprises or enterprises in free trade zones.
Statistics on
declarations and in-country export turnovers
Year
Declaration quantity
(sheet)
Turnover (million
USD)
% of export
turnover
Duty receivable
(VND)
% of export duty
...
...
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286.827
10.896,2
4,48
33.304.559.509,04
0,39
2019
334.191
14.794,1
5,6
...
...
...
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0,44
2020
396.593
16.061,5
5,68
51.381.013.093,42
0,69
2021
564.052
...
...
...
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4,61
89.596.399.767,01
1,07
2022
764.857
27.882,4
7,51
116.767.666.781,91
1,12
...
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Statistics on declarations
and in-country import turnovers
Year
Declaration
quantity (sheet)
Turnover (million
USD)
% of import
turnover
Duty receivable
(VND)
%
2018
146.334
...
...
...
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0,24
131.419.662.390,179
2,79
2019
170.503
10.976,37
0,36
192.660.310.933,383
4,34
...
...
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193.091
11.625,44
0,82
362.322.540.070,393
4,43
2021
202.905
9.382,66
2,21
...
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2,82
2022
231.494
15.182,92
1,23
794.319.906.974,312
4,23
Source: Information
Technology and Customs Statistics Department
Scenario 3: Point c Clause 1 Article 35 of Decree
No. 08/2015/ND-CP: Goods are traded between Vietnamese enterprises and foreign
organizations and individuals without commercial presence in Vietnam and
appointed by foreign traders to deliver/receive goods to/from other enterprises
in Vietnam.
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Moreover, pursuant to Point d Clause 2 Article 2 of
the Law on Corporate Income Tax No. 14/2008/QH12: “Foreign enterprises without
Vietnam-based permanent establishments shall pay tax on taxable incomes
generated in Vietnam.”. Therefore, foreign enterprises without commercial
presence in Vietnam shall pay corporate income tax and foreign contractor
withholding tax when providing services, providing and distributing goods, etc.
Statistics on
declarations and in-country export turnovers
Year
Declaration
quantity (sheet)
Turnover (million
USD)
% of export
turnover
Duty receivable
(VND)
% of export duty
2018
...
...
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18.587,94
7,63
11.170.465.234,85
0,13
2019
722.479
20.269,36
7,67
12.810.332.313,33
...
...
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2020
750.124
21.194,08
7,5
17.679.418.499,42
0,24
2021
749.653
17.750,91
...
...
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13.769.238.027,15
0,16
2022
877.468
31.409,02
8,46
10.377.930.131,16
0,1
Source: Information
Technology and Customs Statistics Department
...
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Year
Declaration
quantity (sheet)
Turnover (million
USD)
% of import
turnover
Duty receivable
(VND)
%
2018
866.874
17.798,08
...
...
...
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479.277.434.216,46
0,88
2019
965.483
27.429,13
10,84
1.019.680.355.790,45
1,89
2020
...
...
...
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30.240,98
11,51
1.050.633.291.597,99
2,39
2021
1.236.038
26.313,73
7,92
2.971.609.495.509,31
...
...
...
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2022
1.521.207
52.946,78
14,75
5.740.568.653.234,62
8,89
Source: Information
Technology and Customs Statistics Department
The statistics reveal that collected export and
import duties in the scenario specified in Point c Clause 1 Article 35 of Decree
No. 08/2015/ND-CP have the highest proportion in the total duties on in-country
export and import.
3. Assessment of regulations on in-country
export and import procedures
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a.1) Advantages
- The application of procedures for in-country
export and import of Vietnamese goods has created a supply chain in Vietnam;
enterprises can utilize existing materials and shorten the time needed to put
goods into production, minimize costs and transport time, better protect goods
due to shorter transport distance, etc.
- Application of customs procedures for in-country
export and import facilitate international payment by enterprises since their
export and import declarations have been granted customs clearance by customs
authority (unless payment is made before delivery).
a.2) Disadvantages:
- It does not reflect the nature of exports and
imports according to regulations of law on commerce and foreign trade
management, which require goods to cross the border of Vietnam. On the other
hand, recorded turnover is not accurate because the goods are not exported or
imported in reality. However, the same management policies (classification,
inspection) also apply to in-country exports and imports as if they are
ordinary exports and imports despite they are only domestically circulated.
- Enterprises can abuse this to commit trade fraud.
Right to export and import prescribed by Decree No. 90/2007/ND-CP:
“1. After a foreign business entity without a
presence in Vietnam is granted a certificate of registration, it must register
a tax code number with the tax department of the province or city under central
authority where such business entity was issued with its certificate.
2. When exercising the right to export [and/or]
import, a foreign business entity without a presence in Vietnam must discharge
obligations regarding tax, fees and charges, and other financial obligations or
must implement security measures in compliance with the law of Vietnam before
goods shall be granted customs clearance; and the foreign business entity shall
be liable for exported [and/or] imported goods in accordance with the law of
Vietnam.”
Point c Clause 1 Article 35 of Decree No. 08/2015/ND-CP
allows foreign traders without commercial presence in Vietnam to complete
procedures for in-country export and import so they can exercise their right to
distribute goods in Vietnam. However, Decree No. 90/2007/ND-CP requires foreign
traders without commercial presence in Vietnam to obtain the right to export,
right to import and right to distribute, which are not required by Point c
Clause 1 Article 35. This leads to failure to collect corporate income tax on
transactions that generate revenue in Vietnam.
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- The quantity of suspended in-country import
declarations is high due to various reasons, including incorrect information
provided by enterprises or in-country importers’ failure to open import
declarations.
b) Regarding tax policies on in-country export
and import
b.1) Advantages
- Goods do not cross the border but still have to
follow in-country export and import procedures as if they are ordinary exports
and imports. The processed goods that are exported within the country are
eligible for tax exemption and the goods and the goods imported for manufacture
of domestic exports are eligible for tax refund if the in-country imports
continue to be used for manufacture and export. Thus the application of customs
procedures to in-country export and import enables enterprises to process tax
and take advantage of incentives in terms of export and import duties and VAT.
- VAT: Exporters are eligible for 0% VAT and have
input VAT (if any) deducted or refunded.
b.2) Disadvantages:
- Import duties might not be collected if
enterprises do not complete in-country import procedures.
- Risk of transfer pricing: It is possible that
some FDI enterprises will abuse Vietnam’s incentive policies to inflate values
and duties payable of goods while following in-country import procedures,
thereby reducing duties payable overseas and maximizing profits of the entire
conglomerate, multi-national company or group of related companies.
- VAT: According to applicable regulations,
in-country exports are eligible for 0% VAT. This is unreasonable since the
goods are not exported from Vietnam’s territory in reality and thus should not
be considered foreign trade.
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III. Proposals
Below are proposals of General Department of
Customs:
Pursuant to Clause 1 Article 35 of Decree No.
08/2015/ND-CP, the scenarios described in Points a and b are already prescribed
in separate Laws while the scenario described in Point c Clause 1 Article 35 of
the Decree is only regulated by the Government’s Decrees instead of Laws.
In order to ensure uniformity of state management
of customs, in consideration of the nature of goods trade, General Department
of Customs hereby proposes the following amendments to Article 35 of Decree No.
08/2015/ND-CP:
1. Annulment of the entire Article 35 of
Decree No. 08/2015/ND-CP.
The purpose is to annul Point c Clause 1 of Article
35: The cases of in-country export and import described in Point a and Point b
Clause 1 Article 35 of Decree No. 08/2015/ND-CP have been regulated by the Law
on Commerce and the Law on Foreign Trade Management, and corresponding customs
procedures are specified in Circular No. 38/2015/TT-BTC (amended by
39/2018/TT-BTC) regarding processing goods for foreign traders (to comply with
regulations of law on commerce and foreign trade management), export and import
between export processing enterprises, enterprises in free trade zones and the
domestic market (to comply with Article 28 of the Law on Commerce, 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 Export and Import Duties)
- In order to ensure uniformity of relevant laws
and equality of policies on transaction of goods of the same nature, it is
proposed that competent authorities consider annulling regulations on
in-country export and import of goods processed for foreign traders in the Law
on Commerce, the Law on Foreign Trade Management and their guiding Decrees
because the processed goods are owned by the hirer (the foreign party) and sold
in Vietnam’s market under sale contracts. This activity is not different from
regulations of Point c Clause 1 Article 35 of Decree No. 08/2015/ND-CP.
The annulment of Article 35 of Decree No. 08/2015/ND-CP
also means reviewing and annulling all relevant regulations of law on
in-country export and import, such as: reviewing and amending the Law on
Commerce and the Law on Foreign Trade Management to remove regulations on
in-country export and import regarding goods processed under contracts with
foreign traders; reviewing and amending the Law on Export and Import Duties,
the Law on Value-added Tax regarding subjects of taxation, refund of tax on
in-country exports and imports.
2. Proposed replacement of customs procedures
for in-country exports and imports:
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(1) In case the goods processed for a foreign
trader have not been sold by the foreign traders to organizations and
individuals in Vietnam, the processor or the Vietnamese trader that buys the
processed goods from the foreign trader and sells them to other traders in
Vietnam shall conduct a trade transaction between two domestic enterprises; the
processor shall repurpose the processed goods, pay import duties and other
taxes similarly to imports.
(2) If the goods are manufactured from raw
materials imported for manufacture of domestic exports on which import duties
are have been exempted but delivered within Vietnam as assigned by the oversea
organization or individual, it shall be considered transaction between two
domestic enterprises; the enterprise that imported raw materials for
manufacture of domestic exports shall repurpose the imported raw materials and
fully pay the taxes thereon.
In the cases specified in (1) and (2), in order to
collect corporate income tax on revenues from trade transactions in Vietnam,
the foreign trader that is not present in Vietnam must pay tax by signing a
contract with an agent in Vietnam.
(3) For purely commercial business: If the foreign
trader that is not present in Vietnam shall sign an agent contract or use VAT
invoices that specify the names and TINs of the foreign trader and the
enterprise Vietnam appointed to receive the goods in Vietnam.
(*) Strengths
- Goods traded in Vietnam are managed properly;
- Import duties can be collected on goods processed
and domestic exports after repurposing.
(*) Weaknesses
- It is necessary to change the management method
of tax authorities and banking authorities in international payment.
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- It is not clear to refund tax if imported raw
materials, supplies and components are exported in reality instead of
consumption.
3. Proposed amendments to relevant laws:
The annulment of regulations on in-country export
and import in Point Clause 1 Article 35 of Decree No. 08/2015/ND-CP also means
reviewing and annulling all relevant regulations of law on in-country export
and import, such as:
(2) Amending the Law on Commerce and the Law on
Foreign Trade Management to remove regulations on in-country export and import
of goods processed for foreign traders in order to ensure uniformity of law and
equality of policies on transaction of goods of the same nature;
Amending the Law on Export and Import Duties to
exclude in-country exports and imports from goods subject to export and import
duties (Clause 3 Article 2);
(2) Proposed amendments to tax laws:
+ Regarding VAT: Annul regulations on VAT rates or
VAT deduction/refund applicable to in-country exports and imports (Decree No.
209/2013/ND-CP prescribes that in-country exports are eligible to 0% VAT, VAT
deduction, refund).
+ Regarding corporate income tax: Require foreign
traders without commercial presence in Vietnam to pay foreign contractor
withholding tax and corporate income tax via agents in Vietnam if they earn
revenues in Vietnam.
+ Regarding personal income tax: Require foreign
traders without commercial presence in Vietnam to pay personal income tax if
they earn revenues in Vietnam.
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DRAFT AMENDMENTS
TO ARTICLE 35 OF DECREE NO. 08/2015/ND-CP REGARDING IN-COUNTRY EXPORT AND
IMPORT
Regulations of
Article 35 of Decree No. 08/2015/ND-CP.
Proposed
amendments
Reasons
Article 35. Customs procedures applied to in-country
exports and imports
1. In-country exports and imports include:
a) Goods processed in Vietnam under contract
manufacturing arrangements and sold by the foreign hirer to other
organizations and individuals in Vietnam;
b) Goods traded between domestic enterprises and
exporting and processing enterprises or enterprises in free trade zones;
c) Goods are traded between Vietnamese
enterprises and foreign organizations and individuals without commercial
presence in Vietnam and appointed by foreign traders to deliver/receive goods
to/from other enterprises in Vietnam.
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1. Annulment of all regulations on in-country
export and import in Article 35 of Decree No. 08/2015/ND-CP, meaning customs
authorities will no longer carry out customs procedures for goods are traded
between 02 Vietnamese traders appointed by foreign traders to deliver and
receive goods within Vietnam.
Article 35. Customs procedures applied to
in-country exports and imports
1. In-country exports and imports include:
a) Goods processed in Vietnam under contract
manufacturing arrangements and sold by the foreign hirer to other organizations
and individuals in Vietnam;
b) Goods traded between domestic enterprises
and exporting and processing enterprises or enterprises in free trade zones;
c) Goods are traded between Vietnamese
enterprises and foreign organizations and individuals without commercial
presence in Vietnam and appointed by foreign traders to deliver/receive goods
to/from other enterprises in Vietnam.
2. The Minister of Finance shall establish
customs procedures applied to in-country exports and imports
2. The cases specified in Point a and Point b
Clause 1 Article 35 of Decree No. 08/2015/ND-CP are regulated by
corresponding Articles of Circular No. 38/2015/TT-BTC (amended by Circular
No. 39/2018/TT-BTC) on inward processing (to comply with regulations of law
on commerce and foreign trade management), export and import of goods between
export processing enterprises, enterprises in free trade zones and the
domestic market (to comply with Article 28 of the Law on Commerce, 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 Export and Import Duties).
3. Proposed replacement of customs procedures
for in-country exports and imports:
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(1) In case the goods processed for a foreign
trader have not been sold by the foreign traders to organizations and
individuals in Vietnam, the processor or the Vietnamese trader that buys the
processed goods from the foreign trader and sells them to other traders in
Vietnam shall conduct a trade transaction between two domestic enterprises;
the processor shall repurpose the processed goods, pay import duties and
other taxes similarly to imports.
(2) If the goods are manufactured from raw
materials imported for manufacture of domestic exports on which import duties
are have been exempted but delivered within Vietnam as assigned by the
oversea organization or individual, it shall be considered transaction
between two domestic enterprises; the enterprise that imported raw materials
for manufacture of domestic exports shall repurpose the imported raw
materials and fully pay the taxes thereon.
In the cases specified in (1) and (2), in order
to collect corporate income tax on revenues from trade transactions in
Vietnam, the foreign trader that is not present in Vietnam must pay tax by
signing a contract with an agent in Vietnam.
(3) For purely commercial business: If the
foreign trader that is not present in Vietnam shall sign an agent contract or
use VAT invoices that specify the names and TINs of the foreign trader and
the enterprise Vietnam appointed to receive the goods in Vietnam.
(*) Strengths
- Goods traded in Vietnam are managed properly;
- Import duties can be collected on goods
processed and domestic exports after repurposing.
(*) Weaknesses
- It is necessary to change the management method
of tax authorities and banking authorities in international payment.
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- It is not clear to refund tax if imported raw
materials, supplies and components are exported in reality instead of
consumption.
- The 2005’s Law on Commerce only provides for
in-country export and import of goods processed for foreign traders:
+ According to Article 181 of the Law on
Commerce, hirers (processes) have the rights to “sell, destroy, donate or
give as gifts processed products within the country, leased or lend machinery
and equipments, raw materials, auxiliary materials, redundant supplies,
faulty products and discarded materials according to agreements and
provisions of law.”
+ According to Article 182 of the Law on
Commerce, processors have the rights to “export the processed products,
leased or borrowed machinery and equipment, raw materials, materials,
redundant supplies, faulty products and discarded materials within the
country under the authorization of the hirers (processes).”
- The 2018’s Law on Foreign Trade Management does
not contain regulations on in-country export and import. Decree No. 69/2018/ND-CP
elaborating the Law on Foreign Trade Management has regulations on in-country
export and import applicable to goods processed for foreign traders. To be
specific:
+ Point e Clause 1 Article 42: “The ordering
party shall have rights 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 regulations of law in force on management of export and
import and fulfill tax liabilities and other financial obligations as per the
law”.
+ Point e Clause 2 Article 42 on rights and
obligations of the ordering party: “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 ordering party”.
In short, only the 2005’s the Law on Commerce and
elaborating documents of the Law on Foreign Trade Management allow domestic
processors to carry out certain in-country export and import activities (such
as selling, destroying, donating, exporting); the 2001’s Law on Customs and
other Laws do not have regulations on in-country export and import.
However, pursuant to the some Decrees and
Circulars, in-country export and import have been regulated since 1998 and
later documents are amended according to reality to facilitate trade in
goods. Since 2015, regulations on in-country export and import have been more
specific in the Government’s Decrees (such as Decree No. 08/2015/ND-CP,
Decree No. 134/2016/ND-CP, Decree No. 209/2013/ND-CP, Decree No. 69/2018/ND-CP).
Meanwhile, regulations of law on export and import duties specify that
in-country export and import are taxable. When it comes to in-country export
and import, there are discrepancies between trade laws and tariff laws.
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Those are the reasons for our proposal to annul
Article 35 of Decree No. 08/2015/ND-CP.
However, the annulment of regulations on
in-country export and import in Point Clause 1 Article 35 of Decree No.
08/2015/ND-CP also means reviewing and annulling all relevant regulations of
law on in-country export and import, such as:
(1) Amending the Law on Commerce and the Law on
Foreign Trade Management to remove regulations on in-country export and
import of goods processed for foreign traders in order to ensure uniformity
of law and equality of policies on transaction of goods of the same nature;
Amending the Law on Export and Import Duties to
exclude in-country exports and imports from goods subject to export and
import duties (Clause 3 Article 2);
(2) Proposed amendments to tax laws:
+ Regarding VAT: Annul regulations on VAT rates
or VAT deduction/refund applicable to in-country exports and imports (Decree
No. 209/2013/ND-CP prescribes that in-country exports are eligible to 0% VAT,
VAT deduction, refund).
+ Regarding corporate income tax: Require foreign
traders without commercial presence in Vietnam to pay foreign contractor
withholding tax and corporate income tax via agents in Vietnam if they earn
revenues in Vietnam.
+ Regarding personal income tax: Require foreign
traders without commercial presence in Vietnam to pay personal income tax if
they earn revenues in Vietnam.
(3) Regarding wire transfer: If wire transfer is
made by using customs declarations, it should be replaced with payment via
commercial contracts or sale invoices.
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We need your comments on:
- Relevant regulations that need amending
(relevant units);
- How would tax policies change when the method for
management of in-country exports and imports is changed as described above
(General Department of Taxation, the Tax Policy Department, Export and Import
Duty Department);
- [Tax-related contents in this case.