Credit institutions must declare and pay taxes before collateral settlement

During the handling of goods of Thuy Dat JSC that were mortgaged at the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)-Thanh Nam Branch (BIDV Thanh Nam), Ha Nam Ninh Customs Department encountered a problem on tax amount of the duty-free goods, which determines bad debt according to Resolution 42/2017/QH14 and tax refund procedures.

Thuy Dat JSC is a customer of BIDV Thanh Nam and had an overdue debt as bad debt in May 2017. The company was unable to repay the debt and had to hand over the collateral. BIDV Thanh Nam sold the collateral to collect the debt.

Ha Nam Ninh Customs officers check goods at the warehouse. Photo: H.Nu

Regarding the authority to determine bad debt according to Resolution 42/2017/QH14 of the National Assembly on piloting bad debt settlement of credit institutions, the State Bank on April 20, 2022, issued Official Dispatch 2428 guiding this problem. Ha Nam Ninh Customs Department is requested to follow the dispatch, according to the General Department of Customs.

As for the tax policy when selling collateral, Clause 5, Article 25 of Decree 08/2015 dated January 21, 2015 of the Government has amended and supplemented in Clause 12, Article 1 of Decree 59/2018 dated April 20, 2018 of the Government stipulates: if exports or imports are classified as regulated entities required to pay export and import taxes, excise duties, value-added taxes, green taxes but then subject to changes in entities that are not required to pay taxes or in purposes for which exports and imports are exempted from paying taxes, new customs declarations shall be submitted instead.

Policies on management of exports and imports and policies on taxes levied on exports and imports shall be implemented at the time when new customs declarations are registered, except cases where all of polices on management of exports and imports have been fully implemented at the time when the initial customs declaration is registered.

Also according to point b, point d, clause 1, Article 21 of Circular 38/2015 of the Ministry of Finance as amended and supplemented in Clause 10, Article 1 of Circular 39/2018, “Domestic sale or repurposing of goods that have undergone export or import procedures is only permitted after the declarant has completed customs procedures for the new customs declaration; In case of domestic sale or repurposing of exports or imports, the taxpayer shall declare and pay taxes and fines (if any) as prescribed.”

At point m, Clause 4, Article 17 of Decree 126/2020/ND-CP dated October 19, 2020 of the Government stipulating the imposition of tax liability by the customs: “The imports are exempt from tax or pledged by the declarant as collateral for loans; Collateral is liquidated to recover debts but the taxpayer has not prepared a new customs declaration, has not fully paid tax in accordance with customs laws.”

Point b, clause 6, Article 17 of Decree 126/2020 stipulates that imports that are eligible for tax exemption or not subject to tax are put up as collateral for a loan on which the taxpayer has defaulted; imports are distrained and put up for auction under a decision of a competent authority or the court, the tax payment deadline shall be the issuance date of the decision on tax liability imposition.

Point a, Clause 8, Article 17 of Decree 126/2020/ND-CP stipulates the responsibilities of tax declarants: " In case the imports are exempt from tax or pledged by the declarant as collateral for loans; the collateral is liquidated to recover debts but the taxpayer has not prepared a new customs declaration, has not fully paid tax as prescribed in Point m Clause 4 of this Article, the credit institution shall pay tax on behalf of the declarant.

Clause 6, Article 30 of Decree 126/2020/ND-CP stipulates the duties and powers of commercial banks: “In case imports are exempt from tax or not subject to tax, pledged by the taxpayer as collateral for loans and have to be liquidated by the commercial bank to recover debts, the commercial bank shall provide information about the collateral for the customs authority to impose tax liability, which will be paid by the commercial bank on behalf of the taxpayer.

Reviewing the above provisions, in case imports are exempt from tax or not subject to tax, and pledged by the taxpayer as collateral for loans but have to be liquidated by the credit institutions to recover debts and the taxpayer has not declared and fully paid tax to the customs authority, the credit institution must make a new declaration and fully pay tax to the customs authority before collateral settlement.

In case the credit institution fails to prepare a new customs declaration and to make tax payment to the customs authority or the credit institution fails to declare it by itself, they shall provide information to the customs authority for tax assessment in accordance with the provisions of Article 17 of Decree 126/2020. Credit institutions are obliged to fully pay the taxes, late payment interest and fines to the customs authority in accordance with the law on tax administration.

Accordingly, the tax payable by BIDV Thanh Nam is the tax that Thuy Dat JSC must pay according to the provisions of law on duty-free goods, but the purpose of use is changed before the bank auctions the collateral, so it tax refund is not implemented.