Removing difficulties in tax exemption and refund policies for export processing enterprises

Ninh Binh Customs inspects production activities at export processing enterprises. Photo: H.Nu

Businesses stated that, according to the instructions in Official Dispatch 4032/TCHQ-GSQL dated August 16, 2021 of the General Department of Customs, for imported goods that must be re-exported according to type code B13- Export of imported origin (which have not been processed or manufactured), businesses should note when declaring export declarations at the "Notes section" on the electronic export declaration or the "other notes" box of the paper declaration, businesses must clearly declare "Goods subject to non - export tax payment, import tax refund according to regulations".

Businesses believe that, if they follow the instructions of Official Dispatch 4032/TCHQ-GSQL, for re-export declarations under type code B13 without noting and accurate noting that "Goods subject to non- export tax payment, import tax refund according to regulations", businesses face risk of not receiving import tax refund.

Businesses propose that import tax and VAT refund for imported goods that must be re-exported to the supplier or exported to a third country or exported to a non-tariff zone according to type B13 will be implemented if the goods meet the regulations in Article 34, Decree 134/2016/ND-CP even though the B13 re-export declarations do not note the information "Goods subject to non-export tax payment or import tax refund according to regulations" in the “Notes section” on the re-export declaration .

In this regard, the General Department of Customs believes that import tax refund for imported goods that must be re-exported shall comply with the provisions of Article 19 of the Law on Export Tax and Import Tax and Article 34 of Decree 134/2016/ND-CP amended and supplemented in Decree 18/2021/ND-CP. Official Dispatch 4032/TCHQ-GSQL is only a document guiding the declaration of criteria on the customs declaration, not a basis to refuse tax refund to businesses. Therefore, for tax refund, the Customs agency will be based on prevailing legal regulations, policies and specific cases of businesses.

According to businesses, prevailing regulations do not have clear instructions on the tax payment deadline in case of tax assessment for the amount of imported raw materials and supplies imported for export processing and manufacturing (including export processing) arising a negative difference between the actual quantity of inventory and the quantity of inventory declared to the Customs agency. Businesses propose that there should be specific regulations as a basis for customs declarants to pay taxes and calculate late payment interest (if any).

Also according to businesses, at the time of tax assessment, the Customs agency and the customs declarant could not determine exactly which the original import declaration is taxed goods belonged to. At the same time, when goods are taxed due to a negative difference, the amount of taxed goods is considered no longer in the original state, so it is appropriate to apply point b, clause 6 instead of point c, clause 6, Article 1 of Decree 126/2020/ND-CP. Businesses also believe that, because the regulations do not have clear instructions on the tax payment deadline, the tax payment deadline will be described in the tax assessment decision and the late payment interest will not be charged if the customs declarant pays in full according to the time limit  in the tax assessment decision.

Responding to the issues raised by businesses, the General Department of Customs said that Point a, Clause 6, Article 17 of Decree 126/2020/ND-CP very specifically stipulates the tax payment deadline.

In addition, import and export goods which are taxed but the tax declarant does not declare it on the customs declaration or declares it on the customs declaration but the customs declaration is canceled according to the provisions of law on customs, imported goods that have been processed and manufactured no longer keep status quo, imported goods that are tax-exempted or non-taxable can be pledged or mortgaged as collaterals for loans because the tax declarant cannot afford to repay debt and is treated by credit institutions according to the provisions of law, imported goods which are distrained for auction according to decisions of competent authorities, judgments and decisions of the Court, must pay tax and the tax payment deadline is the date of signing the tax assessment decision.

In the case of tax assessment for goods imported for export processing and production, imported goods that are not subject to tax, and other goods that are included in many different customs declarations but are still in the same state when imported, the customs cannot determine the exact quantity of goods according to each import declaration, then the declaration to apply the tax payment deadline is the last import declaration with the same goods subject to tax assessment during the inspection and audit period.

In case the quantity of goods subject to tax assessment in the final import declaration is smaller than the quantity of goods subject to tax assessment, the difference in the quantity of goods subject to tax assessment is calculated according to the tax payment deadline of the adjacent previous declaration with the same goods subject to tax assessment.

Enterprises propose that the Customs authority considers the tax refund case "Taxpayers have paid import tax but the goods must be re-exported, taxpayers will receive a tax refund but pay import and export tax” stipulated in the point C, Clause 1, Article 19 , Law on Export Tax and Import Tax for approval in the following cases: Raw materials provided by domestic enterprises to an export processing enterprise under processing contracts are raw materials purchased domestically, with clear and complete invoices and documents and paid VAT according to regulations; an export manufacturing enterprise hires another export processing enterprise to process partial imported materials and then re-imports processed products to export abroad or to non-tariff zone; an export processing enterprise hires an export manufacturing enterprise to manufacture partial imported materials and re-imports processed to export abroad or non-tariff zone.

According to the General Department of Customs, Article 19 of the Law on Export Tax and Import Tax; Article 10, Article 12, Article 33, Article 34, Article 35, Article 36, Article 37 Decree 134/2016/ND-CP amended and supplemented in Decree 18/2021/ND-CP regulating import and export tax refund stipulates that imported products which are outsourced, manufactured, and assembled in non-tariff zones using imported raw materials and components from abroad into Vietnam must pay import tax at the tax rate, taxable value of imported goods.

The General Department of Customs emphasized that, considering current regulations, outsourced products in non-tariff zones imported into domestic Vietnam must pay import tax according to regulations. Imported processed products which are exported abroad or further processed in Vietnam and then exported abroad, are not subject to import tax refund cases as prescribed in the law on import and export taxes.