Amend Decree 134/2016 / ND-CP: Amend tax exemption regulations for exported goods to process

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Customs activities at Thai Nguyen Customs Branch, Bac Ninh Customs Department. Photo: T.Trang.

Inadequacies in implementation

According to analysis of the Drafting Committee, the review shows that the categories of goods exempted from export tax stipulated in Clause 1, Article 11 of Decree No. 134/2016 / ND-CP are wider than those stipulated in Clause 6, Article 16 of Law No. 107/2016 / QH13 (Law only stipulates tax exemption for raw materials, supplies and components, but the Decree also includes products for making samples, machinery and equipment for implementation) and have provisions that are narrower than the provisions of the Law and are not consistent with the nature of the policy.

Specifically, the Law provides for exemption of export taxes on raw materials, supplies and components (except for exported goods which are natural resources, minerals, products with a total value of mineral resources plus energy costs, accounting for 51% of the cost of products or more). However, the decree further provides that no export tax is exempted for goods subject to export tax. Accordingly, the scope of the current Decree is narrower than the Law.

In addition, the Law on Import Tax and Export Tax stipulates that goods exported through Vietnamese border gates are subject to export tax, except for a number of objects specified in Clause 4, Article 2 of Law 107/2016/ QH13 and Decree No. 125/2017 / ND-CP specifying 211 commodity groups with export tax rate of 0% or more.

Accordingly, it is understood that most of the goods exported from Vietnam for processing are not exempted from export tax. On the other hand, the provision of no export tax exemption for goods subject to export or import duty for processing is not in accordance with the nature of the duty-free policy.

According to the opinions of local Customs, for Point a of Clause 1 and Clause 3 of Article 11, there are difficulties in determining the rate of 51% for goods processed for export which are total value mineral resources plus energy costs accounting for 51% or more of the cost of the product.

Moreover, according to analysis of the Drafting Board, there is no provision in Clause 1, Article 11 of Decree 134 for cases where domestic enterprises hire export processing enterprises and then receive products back. If export-processing enterprises must pay export tax as applied to export of goods for overseas processing, this provision shall be inappropriate for enterprises in the territory of Vietnam.

Fix for transparency in policy

From these inadequacies, in order to be transparent in policy and in accordance with the provisions of Tax Law No. 107/2016 / QH13, the Drafting Board has proposed amendment of and addition to Clause 1, Article 11 as follows:

"1. Goods exported for processing and processed products imported under processing contracts shall be exempt from export tax and import tax according to the provisions of Clause 6, Article 16 of the Law on Export Tax and Import Tax, including:

a / Raw materials, supplies and components being natural resources and minerals, products with total natural resources and mineral resources, plus energy costs accounting for 51% of the cost price of products or more for export shall not be exempt from export tax except for cases of exports into the non-tariff area for processing under processing contracts.

The determination of exported goods with the total value of natural resources and minerals plus energy costs of less than 51% of product cost shall be based on the provisions on the determination of products with total natural resources and minerals plus energy costs accounting for 51% of the cost of products or more, as stipulated in the Government's Decree No. 146/2017 / ND-CP dated 15 December 2017 amending and supplementing a number of articles of the Decree No. 100/2016 / ND-CP dated 1 July 2016 and Decree No. 12/2015 / ND-CP dated 12 February 2015 of the Government stipulating the objects not subject to VAT

b / Raw materials, supplies and components are not used for sale, exchange or consumption but for use as sample goods only;

c / Products ordered for overseas processing, when being re-imported into Vietnam, shall be exempt from import tax on the value of raw materials, supplies and components subject to the import tax rates of processed products".

In addition, the Drafting Board also amended and supplemented Clause 2, Article 11 on the basis for identifying exempted goods in order to be transparent in the policy and in line with the provisions of Tax Law No. 107/2016 / QH13 for the management of Customs.

The value or quantity of raw materials, supplies and components exported corresponding to processed products not re-imported shall be subject to export tax at the rate of the imported raw materials, supplies and components.

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When making final settlement, taxpayers shall have to accurately and truthfully declare the value or quantity of tax-exemption for raw materials, supplies and componentsactually used for the production of processed goods and the value or quantity of imported raw materials, supplies and components which are entitled to tax exemption.