The relevant Decree No. 134/2016/ND-CP (“Decree 134”) has unclear provisions especially regarding the tax exemption for goods imported for processing and export production which causes difficulties for enterprises during execution.
To solve matters, the government issued Decree No. 18/2021/ND-CP (“Decree 18”) amending Decree 134. The main requirements for exemption are:
Duty exemption for goods imported for processing, products processed for export
Goods imported for processing, processed products for export under processing contracts are exempt from customs tariffs. Processed products for export are exempt from the export tariff when exported overseas or to a non-tariff zone or in the case of an on-spot export if they are processed from imported materials only.
Grounds for determining the duty exemption of goods:
- Register processing contract with authority, declare the number of the registered contract in the customs declaration forms
- Having the ownership or rights of use of the processing facilities, equipment attached to them in Vietnam and notify the authority accordingly
- Processing contract holder which re-assigns a third party for processing (outsourcing), notifies the authority on outsourcing the contract and the re-processor must qualify for condition (b) above
- Imported goods for processing are exported
- Report on the settlement of the duty-free imported goods
In addition, special handling is applied:
- Scrap returned to the ordering party or destroyed in Vietnam with inspection of the authority or consumed domestically is exempt from import duty. For goods imported for processing, but the surplus or finished products are not exported, the enterprise must make a new customs declaration and pay import duty accordingly.
- For goods imported for processing and being on-spot exported, import duties are exempt if the exporter informs the authorities about the completion of customs procedures of the corresponding importer within 15 days of the exportation date.
- On-spot imported goods for processing are exempt from import duty if the importer satisfies conditions a and b above.
Duty exemption for imported goods for export production
Goods imported to produce export goods are exempt from import tariffs.
Grounds for determining the duty exemption of goods:
- Having the ownership or rights of use of the processing facilities, equipment attached to them in Vietnam and notify the authority accordingly
- Imported goods are used for export production and have been exported
- Report on settlement of the imported duty-free goods
- In case of reproducing or re-processing by a third party, the enterprise notifies the authority of the contract and the facilities of the third party
Furthermore, Decree 18 provides additional guidance:
- Imported goods for export production are exempt from import duties if the exporter notifies the authority that the importer has completed the customs declaration within 15 days from the exportation date.
- In case of reproducing or re-processing by a third party, the enterprise must be involved in part of the process or deliver only part of the materials to a third party, except for delivering all materials to the third party when the enterprise owns a 50% capital share or more in the third party.
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