Decree 18/2021/ND-CP (hereinafter referred to as Decree 18) amends and supplements a number of articles of Decree 134/2016/ND-CP (hereinafter referred to as Decree 134), guides the provisions of the Law on Export Tax and Import Tax, with provisions aimed at encouraging enterprises to invest in Vietnam, including the provisions on tax exemption for goods imported to produce export goods.

Production activities at Song Hong Garment Joint Stock Company. Photo:H.N

Article 12 in Decree 134 does not provide for goods imported for export production that are allowed to be destroyed in Vietnam and actually destroyed. Decree 18 adds a provision that goods imported for export production which have been actually destroyed in Vietnam are also exempt from import tax in order to be consistent with the regulations on processed goods.

Decree 18 supplements the provision that goods imported for export production, waste and rejects created during export production which are allowed to be destroyed and are actually destroyed in accordance with the law on Customs, are also exempt from import tax in order to be consistent with the regulations on processed goods

Specifically, taxpayers deliver imported goods to hire other organizations or individuals (having the right to own or use the production facility, machinery and equipment at the manufacturing establishment) for production or re-processing, also exempt from tax.

The representative of the Import-Export Tax Bureau emphasized that this regulation aimed to ensure equal treatment between the type of production and type of processing according to the Prime Minister's Directive No. 25/CT-TTg dated August 31, 2018, but also ensure strict management, avoid fraud and take advantage of processing to import duty-free goods for improper purposes. This regulation is built on the basis of inheriting the Government's Resolution No. 178/NQ-CP of December 12, 2020, in accordance with Clause 7, Article 16 of the Law on Import Tax and Export Tax and this regulation is concretized to handle problems arising in reality last time.

When applying this provision in practice, the representative of the Import-Export Tax Bureau notes enterprises regarding Points a1 and a2, Clause 1, Article 12, the taxpayer must In production activity, the re-processing unit only implements one or more stages. Also point a3 stipulates that taxpayers are only assigned a part of imported goods.upplies) to outsource all stages.

The representative of the Import-Export Tax Bureau stated for example, if importing 100m of fabric, it is only allowed to bring about 40m (a part) to hire garment into complete clothes. The remaining 60m of fabric must be sewn into finished products by themselves.

At the same time, under this provision, the taxpayer is allowed to hire re-processing in the non-tariff zone or abroad.

Decree 18 has supplemented the provision of Point b, Clause 2, Article 12 of Decree 134 that taxpayers deliver imported goods to hire other organizations owning more than 50% of the charter capital or the total number of ordinary shares to be re-processed, then receiving the products for export, they will be exempt from import tax on imported goods for production or processing in order to ensure the management of the reprocessed goods of the parent company or subsidiary in accordance with the regulations.

In Article 189 of the Law on Enterprises 2014, “A company is considered the parent company of another company if it falls into one of the following cases: a) Owning more than 50% of charter capital or total number of common shares information of that company”.

Decree 18 also amends and supplements the provision that taxpayers for import to produce for export deliver a part or all of imported goods or semi-finished goods that are processed from all imported goods to hire other organizations and individuals to re-process in the non-tariff zone or abroad, the imported goods and semi-finished goods being re-processed are exempt from export tax and apply the tax policy for the processed products re-imported in Vietnam consistent with regulations on processed goods. In addition, Decree 18 clarifies the responsibility of taxpayers to finalize the use of tax-exempt import goods.

Along with that, Decree 18 supplements regulations on tax treatment and customs procedures for goods imported for export production but products are not exported, or excess imports that are not exported, taxpayers must register new customs declarations, declare and pay tax with the Customs offices according to the tax rate and taxable value of imported goods at the time of registration of new customs declarations (unless gifts or presents specified in Article 8 of this Decree) to conform with Clause 12, Article 1 of Decree 59/2018/ND-CP on goods with repurposing changes.

The representative of the Import and Export Tax Bureau emphasized that Decree 18 not only supplemented regulations on import and export goods in the non-tariff zone, but also additionally provided that on-spot exporters must notify the Customs authorities about information on customs declarations of corresponding on-spot imported products that have completed import procedures within 15 days from the date of customs clearance for on-spot exported products to apply tax policies to goods exported on the spot, ensure strict management of on-spot export and import declarations, improve taxpayers' responsibility and ensure transparency of customs procedures.

In addition, the Decree supplements the regulation on on-spot imported products registered in the processing type exempt from import tax to conform with the provisions of Clause 6, Article 16 of the Law on Import Tax and Export Tax. If the Customs declarant registers another form, they must pay tax.