Seafood enterprise propose to solve difficulty in paying tax for wastage

Manufacturing, processing goods at French costumes lady development one member company limited (Vietnam). Photo: T.H

According to reflection of enterprises, at Clause 4, Article 10 of Decree No.134/2016/ND-CP dated 1/9/2016 stipulated specifically some terms and measure to executes Export - Import Duty Law regulated that: “For wastage, substandard products, and overage raw material that have been imported for export processing, if it is not excess 3% of total weight of each material, actual import raw material under processing contract, it will be exempted from import duty for domestic consumption. However, it must be declared to pay VAT, excise tax, environment tax (if any) for Customs authority.”

By the above regulation, seafood enterprises indicated that the parameter “not excess 3%” is just apply only for “material and overage raw material that have been imported for export processing”. So it is not applied for “wastage, substandard products”.

However, according to Dispatch No.2767 dated 26/7/2017 of Import – Export Duty Department – General Department of Vietnam Customs sent to provincial Customs Departments guiding on wastage, sub standard product of processing contract mentioned that “For wastage, substandard products, and overage raw material that have been imported for export processing, if it is not excess 3% of total weight of each material, actual import raw material under processing contract, it will be exempted from import duty for domestic consumption”.

Hence, based on the above dispatch, Provincial Customs Departments issued a document to inform to enterprises and request to lodge a report of paying tax for wastage, substandard products, material and overage raw material.

Therefore, by this guidance, enterprises are faced with the problem that: “ In fact, in the seafood industry, when importing seafood materials for processing, the volume of wastage, sub standard product always accounting for 20% to 50% of total amount of import material (depend on items). Hence, prescribing the rate of 3% on the total quantity of material, actual import raw material (to be exempted from import duty) which applied for wastage, by-products of seafood industry is not suitable in comparison with the fact due to unrealistic rate.

Besides that, in the Clause 5 of Article 38 of Circular No. 38/2015 / TT-BTC dated 25/3/2015 stipulated that: For material, overage raw material that has been imported for export processing which is not excess 3% of total amount of material and actual import raw material, when using for sale, domestic consumption, it do not need to do Customs procedure for changing usage purpose. However, it must be declared to pay tax to the domestic tax authority in accordance with tax regulations.

Accordingly, with Circular No.38, the rate of 3% of total amount of raw material, actual import raw material is only applied to the material and average raw material excluding wastage and substandard products.

In the spirit of Resolution 19-2016 / NQ-CP and Resolution 19-2017 / NQ-CP by the Government on improving the business environment, removing difficulties for businesses, VASEP propose to the General Department of Vietnam Customs to review and propose the Ministry of Finance to issue specific guidance for Clause 4, Article 10 of Decree 134 on "Tax exemption for imported goods for processing and processing for export production" in order to make it more realistic. Accordingly, the rate of 3% of materials and average raw material (already imported for processing) to be exempted from tax excludes wastage and substandard products.

In the short term, VASEP requested the General Department of Vietnam Customs to issue instruction document in order to guide Customs Department to apply Dispatch No.2767 for imported seafood materials for processing, including only raw materials and overage raw material and excluding wastage and substandard products.