Are auxiliary border gates, openings the areas of customs operation?

Export and import activities at Co Sau opening, Cao Loc district, Lang Son province. Picture: H.Nu

VAT is not refunded

At present, the implementation of export and import activities through auxiliary border gates and openings is carried out in accordance with Decree 187/2013/ND-CP detailing the implementation of the Commercial Law regarding international trading and activities of purchasing, selling, processing and transiting goods with foreign countries; Decision No. 52/2015/QD-TTg on management of border trading activities with border countries; Circular 05/2014/TT-BCT dated January 27th, 2014 of the Ministry of Industry and Trade regulating activities of temporary import for re-export, temporary export for re-import and transfer of goods.

Accordingly, the current legal regulations allow the export, import of goods through the area of auxiliary border gate, the opening was announced by the provincial People's Committee, decided to open; It allows traders to carry out export and import activities and have the infrastructure to meet the requirements of state management.

However, as stipulated in Article 1 of the Law on Amendment of and Addition to a Number of Articles of the Law on VAT, the Law on Special Consumption Tax and the Law on Tax Administration, "Business establishments in the month and quarter have export goods and services if having an input VAT amount not yet withheld at 300 million VND or more, the VAT amount shall be refunded on a monthly or quarterly basis, except for cases where the export goods are exported, the exported goods are not exported at the geographical areas of customs operation should be in accordance with the Customs Law".

Pursuant to Clause 6, Article 1 of the Government's Decree No. 100/2016/ND-CP of July 1st, 2004, detailing and guiding the implementation of a number of articles of the Law amending and supplementing a number of articles of the Law VAT, the Law on Special Consumption Tax and the Law on Tax Administration, then: "Business establishments shall not be entitled to tax reimbursement in cases where the imported goods are then exported and export goods are not exported at the shipping area should be in accordance with the provisions of the Customs Law and the guiding documents". As stipulated at Point b, Clause 4, Article 1 of Circular 130/2016/TT-BTC dated 12th August 2016 guiding Decree No. 100/2016/ND-CP: "Business establishments are not entitled to refund of tax in cases where the goods are then exported, the export goods shall not be exported at the geographical areas of customs operation under the provisions of the Customs Law and the Government's Decree No. 01/2015/ND-CP of January 2nd, 2015. The Government shall issue detailed regulations on the scope of customs operation areas and responsibilities for coordination in the prevention and combat of smuggling and illegal cross-border goods transportation and guiding documents".

This leads to enterprises conducting export and import operations through auxiliary border gates, openings and clearance points, but these points are not within the boundaries of the border gates listed in the Appendix of the scope of operation. The customs office at the border gate of inland and waterway in the border area issued together with Decree No. 01/2015/ND-CP. Therefore, when exporting to these locations will not be refunded VAT.

There are 3 views

In the process of amending and supplementing Decree No. 01/2015/ND-CP relating to auxiliary border gates, the current opening has three different views.

Firstly, it should be the same as Decree 01/2015/ND-CP (not supplementing auxiliary border gates, openings and customs clearance points). This view holds that the preservation of such regulations is consistent with Article 7 of the Customs Law of 2014, ensuring the stability of existing areas does not depend on the change of Provincial People's Committees; To limit the fraudulence in VAT refund, not to affect the state budget and achieve the tax policy's objectives in the recent past; cost incurred: The state budget does not have to pay for the installation of facilities, equipment and technical facilities that meet the requirements of automatic clearing and connection of the National Single Window mechanism.

Secondly, keeping the same (as the first point of view) does not create equality for businesses, so it is necessary to have the principles stipulated in Article 9 of Decree No. 01/2015 / ND-CP. The "auxiliary border gates and border crossings are established under the decisions of the People's Committees of the border provinces and have their customs offices, infrastructures and customs clearance techniques, customs inspection and supervision" shall be determined as the customs operation area. According to some localities, it is not allowed to export enterprises through this area is not create equality between enterprises, affecting the interests of enterprises.

At present, customs procedures for goods passing through border gates or border gates are carried out in the geographical areas of customs operation (main border gates) within their respective geographical areas according to Decree No. 01/2015 ND-CP. The existing import and export border gates now serve mainly as export points for agricultural products (rice, tapioca, cassava starch etc.), aquatic products, pigs and some types of export and import to re-export. The import to Vietnam through the auxiliary border gate, the opening is very limited.

For some auxiliary border gates, border crossings in the border provinces of Laos and Cambodia are mainly timber, usually only in the dry season. While timber is currently on hold when the Lao and Cambodian governments issue a "ban on export" directive and strict control. For payments in trading activities at border gates, border crossings, they are mainly paid via cross-border payment, direct payment, via the current account.

Regarding the refund of a VAT of some enterprises, some localities reported that for enterprises carrying out import-export activities through the area already announced by the provincial People's Committee, VAT shall not be considered.

According to the provisions of Clause 1, Article 1 of the Law on Export Tax, import duty 2016, enterprises shall still be entitled to tax deduction under regulations. However, for a tax refund is not allowed.

Pursuant to Clause 5, Article 5 of the Ministry of Finance's Circular No. 219/2013/TT-BTC dated December 31st, 2013, guiding cases where VAT is not required to be declared and calculated: "Enterprises or cooperatives shall pay VAT by the method of deduction of sale of products of cultivation, husbandry, aquaculture and marine products, which have not yet been processed into other products or are only preliminarily processed for enterprises or cooperatives at the stage of commercial business, they must not be declared or pay VAT. On the added value invoice, the price line shall be inscribed with the VAT-exclusive price, the others should be deleted.

In cases where enterprises or cooperatives pay VAT by the method of deduction for sale of products of cultivation, husbandry and aquaculture, which have not yet been processed into other products or are simply processed to other subjects such as households and fishery and other organizations and individuals shall declare and pay VAT at the rate of 5% as guided in Clause 5, Article 10 of this Circular".

Pursuant to Clause 11, Article 14 of Circular No. 219/2013/TT-BTC "Input VAT on goods and services used for activities of providing goods and services not declaring and paying VAT as guiding at the Article 5 of this Circular (except for Clauses 2 and 3 of Article 5) shall be fully deducted". Pursuant to Clause 1 of Article 1 of the Law on Export Tax and Import Tax 2016, enterprises shall still be entitled to tax deduction according to regulations in cases where export is not conducted in the geographical areas of customs operation.

Based on the fact that the export goods via this area mainly are agricultural products, fishery products, pigs etc., has an input VAT of 0% (purchased by farmers), the VAT amount only arises when businesses buy and sell one another. Therefore, when refunding VAT, beneficiaries are some enterprises.

According to Decision No. 52/2015/QD-TTg on management of border trading activities with bordering countries; Circular No. 05/2014/TT-BCT dated January 27th, 2014 of the Ministry of Industry and Trade regulating activities of temporary import for re-export, temporary export for re-import and transfer of goods; Circular 52/2016/TT-BCT guiding the implementation of Decision 52/2015/QD-TTg etc., only companies "get" in the list of provincial People's Committee announced to be allowed to go through this border area. Therefore, in order to ensure fairness for other companies, the Law on Export Taxes and Import Taxes provides a measure "by area" to consider VAT refund.

The practice of combating and smuggling of trade frauds has shown that the situation of smuggling and illegal transportation of goods across borders is complicated and smugglers often take advantage of this place (the location of the thin forces, infrastructure, technical equipment is not fully installed, roads are difficult) to carry goods turn, short out. In particular, some enterprises take advantage of the State's incentives for VAT refunds, forging customs dossiers, selling invoices, and over drafting goods in order to receive large amounts of VAT refunds, thus causing losses to the banks. State books such as cases of violation occurred in An Giang province.

Under the provisions of Clause 2, Article 7 of the Customs Law of 2014, "Within the geographical areas of customs operation, the customs offices shall have to inspect, supervise and control goods and transport means and handle the violations of customs legislation in accordance with Vietnamese law and treaties to which Vietnam is a contracting party. "

Thus, in case of identifying auxiliary border gates and openings for inclusion in the decree, customs offices must arrange forces, facilities and techniques in this area (24/24). However, in the spirit of Resolution No. 39-NQ/TW dated 19th April, 2015 on reducing staffing and restructure the contingent of cadres, civil servants and employees, the Customs Department from now to 2020 will proceed to reduce 10% of recent total staffing.

Thirdly, it is necessary to study and supplement a number of auxiliary border gates and openings satisfying a number of conditions on infrastructure and people etc., in the Appendix of the scope of customs operation areas at the road border gates and inland waterway transportation in border areas, promulgated together with Decree No. 01/2015/ND-CP.

This viewpoint suggests that some auxiliary border gates and openings, if meeting the conditions such as adequate infrastructure, full customs, quarantine, border control, large import and export capacity that are set up in strict accordance with the order and procedures prescribed by law, international treaties on border gates, reach agreement with neighboring countries, consult with ministries and branches when they are established, with the consent of the Prime Minister etc., must be recognized as the customs operation area.

The auxiliary border gates, openings which are not established law when it is recognized in a decree document will result in the reaction of the neighbouring country. At the same time when the regulation is universal, the principle of a second opinion would lead to the case that all sub-gates, the "Customs" openings must be permanent 24/24. This would cause huge wastage on staffing and finances. But if the problem is not resolved, the customs office that manages the area will be responsible. For the first view, it would not be appropriate for the customs as well as for the customs forces to perform their duties there.