Where raw materials and goods are imported for production and processing of exports, it is not a case of goods which are subsequently imported and exported under the provisions of Law No. 106/2016 / QH13 and Decree No. 100/2016 / ND-CP because of these imported raw materials and goods no longer remain as they were when exported.

The Ministry of Finance receives problems from a number of business associations on guiding VAT refunds for raw materials and goods imported for production and processing of export goods and requests to clearly guide Point 3 of Official Letter No. 16836 / BTC-TCHQ dated December 12, 2017 on tax treatment for export declarations arising from July 1, 2016 onwards.

Regarding this issue, The Ministry of Finance gives the following opinions:

Clause 3, Article 1 of Law No. 106/2016 / QH13 amending and supplementing a number of articles of the Law on VAT, the Law on Special Consumption Tax and the Law on Tax Administration (takes effect from July 1, 2016) There are provisions on VAT reimbursement as follows:

"2. Business establishments in the month or quarter which have exported goods and services, if having input VAT amount not yet deducted from VND 300 million or more, shall be refunded VAT monthly or quarterly, except for cases of imported goods. for export, goods exported must not be exported in the geographical areas of customs operation according to the provisions of the Customs Law ... ".

Clause 6, Article 1 of Decree No. 100/2016 / ND-CP dated July 1, 2016 of the Government detailing and guiding the implementation of a number of articles of the Law Amending and Supplementing a Number of Articles of the VAT Law The Law on Special Consumption Tax and the Law on Tax Administration provide for VAT refunds as follows:

“3. Business establishments in the month (for case of monthly declaration) and quarter (for quarterly declaration) that have exported goods and services with input VAT not yet deducted from VND 300 million and upward, they are entitled to VAT reimbursement by month or quarter; if in the month and quarter the input VAT amount not yet deducted is less than VND 300 million, it may be deducted in the following month and quarter; in case both goods and services are exported and both domestically consumed goods and services are available after clearing against payable tax amounts and input VAT amounts that have not yet been deducted of exported goods and services If the remaining import value is VND 300 million or more, the business establishment will get tax refund.

Business establishments must separately account the input VAT amount used for production and trading of exported goods and services; in case it cannot separately account, the input VAT amount shall be determined according to the ratio between the turnover of exported goods and services on the total turnover of goods and services of VAT periods calculated from the tax period subsequent to the preceding tax refund period to the current tax refund request period.

Business establishments are not entitled to tax reimbursement in cases where the goods are subsequently imported and exported, and goods are not exported at customs operation areas according to the provisions of the Customs Law and guiding documents ".

Based on the above provisions, the case of raw materials and goods imported for production and processing of exports is not the case of goods which are subsequently imported and exported under the provisions of Law No. 106/2016 / QH13 and Decree No. 100/2016 / ND-CP because these imported raw materials and goods are no longer kept as they were when exported.

Competence to handle VAT refund

Clause 20, Article 5 of the Law on VAT stipulates: “Raw materials imported for production and processing of exported goods under export or production contracts signed with foreign parties ”are not subject to VAT.

Clause 64, Article 1 of Circular No. 39/2018 / TT-BTC dated April 20, 2018 of the Ministry of Finance amending and supplementing a number of articles in Circular No. 38/2015 / TT-BTC dated March 25, 2015 of the Ministry of Finance (effective from June 5, 2018) amending Article 131 of Circular No. 38/2015 / TT-BTC as follows:

"Article 131. Procedures for handling overpaid tax, late payment interest and fines

1. Taxes, late payment interest and fines for imports and exports are determined to be overpaid according to Article 47 of the Law on Tax Administration of November 29, 2006, amended and supplemented in Clause 13 Article 1 of the Law Amending and Supplementing a Number of Articles of the Law on Tax Administration of November 20, 2012; Point a, Clause 1, Article 29 of Decree No. 83/2013 / ND-CP ...

“3. Responsibilities of customs authorities

The customs authority where the overpaid tax, late payment interest, and fines are incurred shall check via electronic data processing system.If the taxpayer's declaration is correct, the taxpayer will give feedback information on the declaration that has been accepted for taxpayers.

In case the determination of taxpayers' declarations is inaccurate, the customs office shall reply information refusing to receive dossiers through the customs electronic data processing system.

In case the paper dossier of the customs office receives, inspects and compares the content of the taxpayer's request with the provisions of law on tax administration, if determining that it is not eligible for tax refund or late payment payment, overpaid fines, the customs authorities notice form No. 12 / TBKTT / TXNK Appendix VI issued with the Circular within 8 working hours.

Within 05 (five) working days from the date of receipt of a valid dispatch from the taxpayer requesting a refund of tax, late payment interest, and overpaid fines, the customs authority shall issue a decision to refund the tax, Late payment interest, fines for overpaid according to form No. 09 / QDHT / TXNK, Appendix VI and notify taxpayers. In case of ineligible for tax refund, notices shall be made according to form No. 12 / TBKTT / TXNK in Appendix VI to this Circular.

4. The handling of overpaid tax, late payment interest and fines shall comply with the provisions of Article 132 of this Circular. The overpaid VAT amount is handled simultaneously with the import tax (if any) ”.

Pursuant to the above provisions, cases where goods are raw materials, supplies and components imported for production or processing of exported goods under production or export processing contracts signed with foreign parties (belonging to VAT taxable subject  according to Clause 20, Article 5 of the Law on VAT), has paid VAT at the stage of importation, the paid VAT shall be determined as overpaid tax and the customs authority shall refund the tax according to Clause 64, Article 1 of Circular No. 39/2018 / TT-BTC.

In case goods are raw materials, supplies and components imported for production or processing of exported goods not under processing contracts signed with foreign parties (not subject to VAT under the provisions of Clause 20, Article 5 of the Law on VAT), upon importation, enterprises must declare and pay VAT according to regulations, when exporting goods subject to the VAT rate of 0% and tax agencies shall refund VAT on Export goods as prescribed.

Customs offices and tax authorities shall check the actual records of enterprises to make tax refund under regulations.