Ho Chi Minh City Customs checks imported raw materials for processing. Photo: T.H

According to the General Department of Vietnam Customs, point b, clause 2, Article 12 of Decree 134/2016/ND-CP, supplemented and amended in Clause 6, Article 1 of Decree 18/2021/ND-CP of the Government (effective April 25, 2021) stipulates: “The taxpayer importing goods as prescribed in Clause 1 of this Article shall deliver all imported goods to an organization that owns more than 50% of the charter capital or the total number of ordinary shares of taxpayers who manufacture or process products and then receive the products for export, they are exempt from import duty on imported goods that are delivered for production or processing (including cases where organizations hire another unit that manufactures or re-processes one or several stages of the exported product).”

Organizations that undertake product processing and production must have the right to own or use the production, processing facilities, machinery and equipment at the production facilities in the territory of Vietnam.

Taxpayers must notify the customs authority about the production or processing establishments of the manufacturing or processing organizations in accordance with the provisions of the customs law.

In case the taxpayer notifies the production or re-processing establishment of the unit that receives the production, re-processing or contract for production or re-processing exceeding the prescribed time limit, he/she shall be sanctioned administrative violation in the customs field.

In which, tax exemption procedures should comply with Article 31 of Decree 134/2016/ND-CP as amended and supplemented in Clause 6, Article 1 of Decree 18/2021/ND-CP.

Compared with the above regulations, the General Department of Vietnam Customs said that in the case of the tobacco import and export company, because it is not the unit that owns more than 50% of the charter capital or the total number of ordinary shares of the manufacturing companies (Tobacco Import-Export Company is just a branch of Vietnam National Tobacco Corporation) it does not meet the conditions to be exempt from import duty on goods for export production.