Amending Decree 134/2016/ND-CP: Amending regulation on tax exemptions for gifts, presents and letters of guarantee

The officers of Customs Sub-Department of Cai Lan port (the Customs Department of Quang Ninh) were guiding import tax policy for the businesses. Photo: T.Trang.

Amending the regulations on tax exemption for gifts and presents

At Point b, Clause 2, Article 8 of Decree No. 134/2016/ND-CP: “Gifts and presents given by foreign organizations and individuals to Vietnamese agencies and organizations funded by the State budget under the law on the budget; Gifts and presents for humanitarian or charity purposes with their customs value not exceeding 30,000,000 VND shall be exempted from tax not exceeding 4 times per year. In case of exceeding the duty-free quotas of agencies and organizations funded by the State budget, the Finance Ministry shall decide on tax exemption on a case-by-case basis”.

However, the Customs office said that in the process of tax exemption for gifts and presents for the regulation "the customs value not exceeding 30 million VND shall be exempted from tax not exceeding 4 times per year’, the regulation was leading to two ways of understanding: The first way was the only regulation attached to gifts, presents for humanitarian, charity purposes; The second was also associated with the gifts, presents of foreign organizations and individuals to Vietnamese agencies and organizations which are funded by the State budget under the budget law.

According to the analysis of the drafting committee, the Law on Export Tax, Import Tax regulated that the gifts and presents in the norms would be exempted from tax, and in excess of the norms, the surplus must be paid except in two cases: The agencies, organizations which were funded by the State budget and were permitted by the competent State agencies to receive, or for humanitarian purposes. The Law also assigned the Government to guide the tax exemption norms and the competence to grant the tax exemption in case of exceeding the quotas for the above two cases. However, Point b, Clause 2 of Article 8 only regulated the tax exemption authority of the Ministry of Finance in cases where the amount of tax exemption of agencies and organizations funded by the State budget was exceeded, they had not regulated the authority to deal with the tax exemption in cases of exceeding the tax exemption norms for the gifts, presents for humanitarian or charity purposes.

Therefore, in order to clarify the policy and create favorable conditions for implementation, the drafting committee proposes to amend and supplement Point b, Clause 2, Article 8 as follows: "the customs valuation norms which shall be exempt from tax on gifts, presents of foreign organizations and individuals to the Vietnamese agencies and organizations funded by the State budget under the budget law, the gifts and presents for humanitarian and charity purposes are maximum of 30 million VND and no more than 4 times a year. In cases where the tax exemption level is exceeded, the Finance Ministry shall decide on tax exemption on a case-by-case basis."

Comments on this content, the Customs of provinces and cities are consistent with the draft. Particularly, the Hai Phong Customs commented that the draft amendment should remove the "tax exemption no more than 4 times a year" in Point a, Clause 2, Article 8 of Decree No. 134/2016/ND-CP. The reason was that the regulation on exempt from tax not more than 4 times a year was difficult to check because the customs central management system had not counted or warned Vietnamese individuals or organizations declaring gifts and presents of foreign organizations in the customs procedures or for carrying out the customs procedures for exporting the gifts, presents to the foreign organizations and individuals that were exempted from tax. Therefore, when carrying out the customs procedures at the border gate, the Customs officers could not know in that year whether the organizations or individuals had been exempted from tax and how many tax exemptions in order to make for the next tax exemption.

Amending the regulations on letter of guarantee

As reflected by the Customs, Decree 134/2016/ND-CP had not specified the authority to guide the contents of the letter of guarantee, specifically, Point d, Clause 2, Article 4 of Decree 134/2016/ND-CP only stipulated: "The contents of the letter of guarantee, the submission of the letter of guarantee and the inspection, supervision and treatment of the letter of guarantee shall comply with the provisions of law on tax administration". Therefore, in order to have a legal basis for implementing the Decree, the General Department of Customs has proposed to amend and supplement Article 4 to clarify the above contents.

Following the recommendations of the General Department of Customs, the drafting committee has proposed an amendment and addition to Article 4 of Decree 134/2016/ND-CP as follows: Time limit for tax payment, guarantee and deposit of payable tax amount.

"1. The time limit for tax payment specified in Article 9 of the Law on Export Tax and Import Tax shall apply to the import and export goods subject to the tax according to the provisions of tax law.

2. Tax guarantees for the import or export goods shall be effected in one of two forms: private guarantee or common guarantee.

a) Private guarantee means that the credit institutions operating under the provisions of the Law on Credit Institutions commit to guarantee the fulfillment of the obligation to pay tax amounts for a customs declaration on the import or export goods. The guarantee duration shall not exceed the time limit prescribed in Clause 1, Article 9 and Point e, Clause 9, Article 16 of Law on Export Tax and Import Tax;

b) Common guarantee means that the credit institutions operating under the provisions of the Law on Credit Institutions commit to guarantee the fulfillment of the obligation to pay tax amounts for two customs declarations of export or import goods or more at one or more Customs Sub-Departments. General guarantees shall be deducted and restored in proportion to the paid tax amounts. The general guarantee duration shall be applied to 2 declarations or more, but for one declaration, it shall not exceed the time limit prescribed in Clause 1, Article 9 and Point e, Clause 9, Article 16 of Law on Export Tax and Import Tax.

3. The guarantee letter shall be issued by the credit institutions which have the function of providing a bank guarantee in accordance with the provisions of the Law on Credit Institutions and shall be submitted to the Customs offices where the customs declaration is made in paper or by electronic mode, and must meet fully the following contents and requirements: Name of the credit institution, address, telephone number, tax identification number, code of credit institution releasing the guarantee issued by the State Bank; The name of the taxpayer or the individual or organization acting on behalf of the taxpayer, address, telephone number, tax identification number; Guarantee amount and guarantee duration shall be as stipulated in clause 2 of this article.

Guarantee validity: It shall be counted from the date the letter of guarantee takes effect until the guaranteed tax amount, late payment and fine (if any) has been remitted into the State budget fully or the goods have re-exported; The guaranteeing credit institution shall be responsible for the term of the guarantee.

Upon the expiration of the guarantee duration for each tax declaration, if the tax payers still fails to pay tax and the late payment money (if any), the guaranteeing credit institutions shall be responsible for paying tax fully, and/or late payment money instead of the tax payers into the State budget. If the guaranteeing credit institution fails to comply with its commitments, the Customs office shall notify not to admit this credit institution for guaranteeing subsequent lots of export or import goods.

In case where the guaranteeing credit institution files a written request to stop using the common guarantee (revocable): Before proposing on the suspension of the use of the common guarantee, the credit institution or tax payer shall have to pay fully taxes and late payment money of declarations which have been used for the common guarantee into the State budget. The Customs office shall examine and issue a document to accept to stop the common guarantee after tax amounts, late payment and fines (if any) of the declarations which have been used for the common guarantee, have been paid into the State budget fully".

The Ministry of Finance have collected the comments of the Customs in provinces and cities for the above-said amending context, the majority of opinions have agreed with these amendments and supplements.