Clarify the procedure on tax exemption and refunds in the case of entrusted import for business

Huu Nghi Customs officials received and guided enterprises to implement customs procedures. Photo: H.Nụ

Are components, raw materials and supplies exempted from tax?

Regarding importing machinery, equipment, supplies, components and raw materials to create fixed assets for the project or importing raw materials, supplies and components that cannot be produced domestically within five years to serve production, the General Department of Vietnam Customs said that, in Clause 11 Article 16 of the Law on Import Tax and Export Tax, goods are imported to create fixed assets of subjects entitled to investment incentives from import tax includes: Machinery and equipment; components, details, separate parts, spare parts for synchronous assembly or synchronous use with machinery and equipment; raw materials or supplies used to manufacture machines and equipment or to manufacture components, details, separate parts and spare parts of machines and equipment; specialised means of transport in the process line used for the production activities of the project and construction materials that cannot be produced in Vietnam.

Clause 13, Article 16 of the Law on Import Tax and Export Tax also stipulates raw materials, supplies and components that cannot be produced in the country are imported for production of investment projects on the list of industries and trades with special investment incentives or geographical areas with extremely difficult socio-economic conditions as prescribed by the law on investment, high-tech business, science and technology businesses, and scientific and technological organisations will be exempted from import tax for five years since the start of production.

This means the import tax exemption specified in this clause does not apply to investment projects in mining minerals, projects for production of products with total value of natural resources and minerals plus energy costs accounting for 51% or more of the product's cost; projects on production and trading of goods and services subject to the special consumption tax.

According to the provisions of Clause 5, Article 14 and Clause 4, Article 15 of Decree No. 134/2016/ND-CP: Dossiers and procedures for tax exemption in cases of tax exemption for imported goods to create fixed assets of subject entitled to investment incentives and exemption from import tax on raw materials, supplies and components that cannot be domestically produced within five years must comply with the provisions of Articles 30 and 31 of Decree 134/2016/ND-CP.

Also at point a, clause 2, Article 30 of Decree 134/2016/NDCP stipulates organisations and individuals using goods (project owners; owners of production and business establishments; owners of shipbuilding establishments; organisations, individuals engaging in oil and gas activities - or project owners), is the person who announces the list of import and export tax exemption. A dossier for tax exemption when implementing customs procedures includes one copy of entrustment contract in case of entrusted import and export of goods with a true-copy stamp of the authority. The project owner must notify the use of duty-free goods in the fiscal year to the customs authority where the list of duty-free goods is received no later than the 90th day from the end of the fiscal year.

Clause 14, Article 1 of Decree 18/2021/ND-CP supplements Point b, Clause 5, Article 31 of Decree 134/2016/ND-CP stipulating organisations and individuals are entrusted to import or win bids to import goods for supplying to customers. Subjects specified in Article 16 of the Law on Import Tax and Export Tax are exempt from import tax for entrusted consigned or bid-winning imported goods with the condition the price of goods under the entrustment contract or the price of the winning bid under the winning decision is not included in import tax. Further, Point b, Clause 1, Article 31a of Decree 134/2016/ND-CP is supplemented in Clause 15, Article 1 of Decree 18/2021/ND-CP, stipulating that the project owner is responsible for notifying the use of duty-free goods to the customs authority where the list of tax exemptions is received for cases in which the list of tax exemptions must be notified to the customs authority. The time and time limit for notifying on the list of tax exemption should comply with provisions of Point b, Clause 1, Article 31a.

Compared with the above regulations, according to the General Department of Vietnam Customs, Vinfast Manufacturing and Trading Co., Ltd. is exempt from import tax on importing goods to create fixed assets for the project, exempt import tax for raw materials and materials that cannot be produced domestically to produce investment projects within five years as prescribed.

The General Department of Vietnam Customs further noted that business to be exempt from import tax on imported raw materials, supplies and components for export production, entrusted organisations and individuals for importing goods to supply for Vinfast company with the condition price of goods under the entrustment contract does not include import tax. Tax exemption dossiers and procedures must comply with the provisions of Decree 134/2016/ND-CP as amended and supplemented in Decree 18/2021/ND-CP of the Government.

Procedures and preferential tax rates for entrusted businesss

In case of importing components, raw materials and supplies for the production and assembly of automobiles or the production and assembly of supporting industry products for automobile production and assembly, preferential tariff programmes specified in Article 7a and Article 7b of Decree 57/2020/ND-CP (referred to as Decree 57) have been clearly defined. The procedures for registration of participation in the programme and customs declaration when importing are specified in Clause 3, Article 2 of Decree 57 amending and supplementing Article 7a in Decree 122/2016/ND-CP and 125/2017/ND-CP stipulates preferential import tariff rates for automobile components imported under the preferential tariff programme for manufacture and assembly of cars. Therefore, Clause 2, Article 1 of Decree 57 supplementing Article 7b of Decree 122/2016/ND-CP stipulating preferential import tax rates for raw materials, supplies and components for production and processing ( assembly) supporting industry products that are prioritised for the development of the automobile manufacturing and assembling industry.

The case of a business having a certificate of eligibility for automobile production and assembly (entrusting business) entrusts another business to import (entrusted business) components, raw materials and supplies for automobile production and assembly or to manufacture and assemble supporting industry products prioritised for the development for the automobile manufacturing and assembly industry, entrusting businesses will carry out registration procedures to participate in the Preferential Tariff Programme and the Automotive Supporting Industry Preferential Tariff Programme.

The Customs authority shall inspect the production facilities of businesses registered to participate in the Automotive Supporting Industry Preferential Tariff Program. When carrying out import procedures, the entrusted business declares on the import customs declaration in accordance with the provisions of Clause 6, Article 7a, as supplemented in Clause 3, Article 2 of Decree 57, and Clause 6, Article 7b is added in Clause 2 of Article 2 of this Decree. 1 Decree 57. Regarding the declaration of the importer's name and the import entrustment, it should follow the instructions in Section 2, Appendix I issued with Circular 39/2013/TT-BTC amending and supplementing articles in the Circular Circular 38/2015/TT-BTC of the Ministry of Finance.

Regarding procedures for applying the 0% tax rate, according to the General Department of Vietnam Customs, in case an entrusting business registers to participate in the Automotive Preferential Tariff Program and meets conditions specified in Article 7a, they must submit the application and procedures apply the preferential tax rate of 0% of heading 98.49 as prescribed in Clause 7 Article 7a to enjoy the programme's incentives.

However, in case an entrusted business registers to participate in the Automotive Supporting Industry Preferential Tariff Program and meets the conditions specified in Article 7b, they shall submit dossiers and procedures for applying the preferential tax rate of 0% as prescribed in Clause 8 Article 7b to enjoy the program's incentives. Customs authorities will base on the results of dossier inspection of the entrusting business as stipulated. If they are satisfied the condition to apply for the programme, the customs authority will process to handle overpaid tax for businesses.