How to handle export processing enterprises forgetting to open a corresponding import declaration

Customs official of Bac Ninh Customs Branch at work (Bac Ninh Customs Department). Photo: Quang Hung

Mistakes from enterprise

According to Dragonjet Vietnam Co., Ltd., from 2014 to 2020, the Company made transactions to purchase tools and equipment (hammers, pliers, screws, belts, printers, electric wires, cables, UPS, switches, etc.) used for production and factory repair from domestic enterprises in Vietnam (type B11). Domestic enterprises have registered on-site export declarations to sell goods to the company and the sales transaction between the two parties completed.

However, after reviewing customs documents, the company found that due to the lack of knowledge of the import-export staff, there was a mistake in not opening a corresponding import declaration for the goods purchased from the domestic market.

Dragonjet Vietnam Co., Ltd. stated that because the exchange of goods between the export processing enterprise and the domestic enterprise is an import-export relationship, when the export processing enterprise purchases goods from the domestic market, the domestic enterprise declares and pays taxes.

The failure to register an on-site declaration when purchasing goods from a domestic enterprise by an export processing enterprise is due to lack of knowledge and failure to comply with customs procedures, so it is only subject to administrative sanctions in the customs field according to regulations.

Dragonjet Vietnam Co., Ltd. also believes that the above behavior does not cause tax loss, because the nature of the goods is used by the company to serve the production of export processing enterprises, not consumed in the domestic market; the company performs the export type B11 (business export) which is not subject to tax refund, tax-free collection, so the exporting enterprise does not commit tax fraud.

Dragonjet Vietnam Co., Ltd. shared that the company's failure to register a corresponding customs declaration when purchasing goods from domestic enterprises does not fall under the tax determination case according to the provisions of Point k, Clause 4, Article 17 of Decree 126/2020/ND-CP.

Dragonjet Vietnam Co., Ltd. commits that all goods are only used for the company's own production, not for domestic consumption, and some items are still in the company.

According to the records, Dragonjet Vietnam Co., Ltd. is an export processing enterprise (which has been inspected and confirmed to meet the conditions for supervision and confirmation of facilities and production capacity according to the regulations on conditions of export processing enterprises).

Dragonjet Vietnam Co., Ltd. has completed the payment and delivery of goods of on-site export declarations and has put them into use for production, replacement, repair, and installation at the company, with warehouse receipts and warehouse delivery receipts for installation and production, and at the same time commits to using them for the right purposes of the export processing enterprise. The Customs authority has not discovered any misuse of the goods brought into the company.

Physical inspection is required

At Clause 2, 3, Article 75 of Circular 38/2015/TT-BTC, amended and supplemented at Clause 51, Article 1 of Circular 39/2018/TT-BTC, regulating customs procedures for imported and exported goods of export processing enterprises; at Point a, b, Clause 5, Article 86 of Circular 38/2015/TT-BTC, amended and supplemented at Clause 58, Article 1 of Circular 39/2018/TT-BTC, regulating the responsibilities of importers and exporters in carrying out customs procedures for on-site imported and exported goods.

Comparing with the regulations, trade in goods between export processing enterprises and domestic enterprises, when domestic enterprises open export declarations, export processing enterprises must open corresponding import declarations. In case of not opening corresponding import declarations, it will not comply with the above regulations, and the on-site export declaration will be suspended on the system.

Regarding the handling of on-site export declarations without corresponding on-site import declarations, the General Department of Customs has issued many documents guiding local customs departments to inspect and determine the actual status of goods for tax assessment and handling of violations.

Regarding tax policy, Clause 1, Article 4 and Clause 1, Article 5 of the Law on Export Tax and Import Tax; Clauses 1 and 5, Article 21 of Decree 29/2008/ND-CP amended and supplemented in Article 1 of Decree 164/2013/ND-CP and Clauses 1 and 5, Article 30 of Decree 82/2018/ND-CP clearly stipulate the boundaries for non-tariff zones and Article 26 of Decree 35/2022/ND-CP stipulates separate provisions applicable to export processing zones and export processing enterprises.

According to the General Department of Customs, if an export processing enterprise meets the definition of a non-tariff zone (confirmed by the competent Customs authority to meet the conditions for customs inspection and supervision), it will enjoy investment incentives and tax policies for a non-tariff zone. Imported goods of an export processing enterprise for production or use in an export processing enterprise are not subject to import tax.

Comparing with the above regulations, according to the General Department of Customs, if Dragonjet Vietnam Co., Ltd. is an export processing enterprise (meeting the non-tariff zone) purchasing goods from the domestic market to serve production or use in an export processing enterprise, the imported goods from the domestic market of Dragonjet Vietnam Co., Ltd. for production or use in an export processing enterprise are not subject to tax, the company does not have to declare and pay tax.

If a domestic enterprise sells goods to Dragonjet Vietnam Co., Ltd. and has opened an on-site export declaration of type B11 (export for business); The company did not open a corresponding on-site import declaration, which is not in compliance with the regulations on customs procedures stated in Article 86 of Circular 38/2015/TT-BTC, amended and supplemented in Clause 58, Article 1 of Circular 39/2018/TT-BTC, leading to the on-site export declaration being suspended on the system.

Based on the principle of the nature of the activity and transaction to determine tax obligations stated in Clause 4, Article 5 of the Law on Tax Administration 2019; regulations on tax determination for imported and exported goods in Clause 1, Article 17 of Decree 126/2020/ND-CP, in the case that Dragonjet Vietnam Co., Ltd. has not complied with the regulations on customs procedures, but it does not lead to the company incurring tax obligations for imported and exported goods;

The company's goods still meet the conditions of non-taxable objects, the Customs authority has no basis to re-determine method of tax calculation, then the goods is not subject to tax determination according to the provisions of Clause 1, Article 17 of Decree 126/2020/ND-CP.

The General Department of Customs assigns the Bac Ninh Customs Department (where the company is headquartered and opened the declaration) to direct the relevant branch to inspect Dragonjet Vietnam Co., Ltd and assess whether the company's failure to open a corresponding import declaration affects the inspection and supervision of the Customs authority over the non-taxable goods of the export processing enterprise and whether there are signs of fraud to avoid fulfilling tax obligations.

Based on the inspection results, the nature and level of the case, the customs will handle violations according to regulations (if any). At the same time, Bac Ninh Customs Department is asked to review of similar cases of Dragonjet Vietnam Co., Ltd. to ensure compliance with the provisions of law and guiding documents of the General Department of Customs.