Shortcomings in implementation of procedures to convert from ordinary enterprises to export processing enterprises

Quang Ngai customs official inspected imported raw material of export processing enterprise. Photo: Thu Hòa

Pursuant to Clause 2, Article 78 of Circular No. 38/2015/TT-BTC dated March 25, 2015 amended in Clause 54, Article 1 of Circular No. 39/2018/TT-BTC dated April 20, 2018 of the Ministry of Finance, if an enterprise changes its form from an enterprise which does not enjoy the policy of export processing enterprises (EPE) to an EPE, the enterprise must report on the number of raw materials and supplies in stock and the customs authorities should inspect the raw materials and supplies in stock and handle tax in accordance with regulations.

Before converting, the enterprise is responsible for paying all outstanding taxes and debts to the customs authority. Customs authorities only apply tax and customs policies to EPEs after they have fulfilled their tax and customs obligations with the customs authority and are granted a certificate as an export processing enterprise by competent authorities. In case raw materials, supplies, machinery and equipment imported for processing for foreign traders or raw materials and supplies imported for export production, if after being converted to an EPE, they continue to manufacture and export products, they are not required to declare and pay taxes to the customs authority.

At the same time, Clause 1, Article 30 of Decree 82/2018/ND-CP dated May 22, 2018 of the Government on "regulating on the management of industrial parks and economic zones" stipulates that: ".... EPEs are specified in investment registration certificate or in the document of a competent agency in the case that not required to implement procedure of granting investment registration certificate. The investment registration agency is responsible to collect opinions of customs authority that are satisfying the conditions for customs inspection and supervision before granting the investment registration certificate or certifying in document to the investors.”

Procedures and conditions for certifying the ability to satisfy customs inspection and supervision conditions must comply with the provisional guidance of the General Department of Vietnam Customs in Document No.3778/TCHQ-GSQL dated June 9, 2020 “guiding the implementation of inspection contents to confirm the ability to satisfy customs inspection and supervision conditions/”

This means that to convert from the type of enterprises that do not enjoy the EPE policy to the EPE, two requirements must be fulfilled: it must meet the conditions of customs inspection and supervision in accordance with Document No. 3778/TCHQ-GSQL and get the confirmation by customs authority. At the same time, it is required to close inventory and fulfill all tax and customs obligations with the customs authority and be granted the certificate of EPE by the competent authority.

For the first requirement, when the enterprise converts its type, the firm is proactively implemented in satisfying the conditions and requirements, so the implementation is relatively easy. However, for the second requirement, when implementing, there would be some problems, the following shortcomings that needed to be guided more clearly.

Firstly is the procedures about forms. The closing of inventory that needs to follow which forms and regulations is not regulated currently, easily leading to inconsistent methods, causing confusion for customs authorities and enterprises.

Secondly, the time limit, process, authority and responsibility of the firm. The responsibility of the customs authority in inspection when implementing procedures for closing inventory, checking and concluding for implementing this requirement should be guided and have specific regulations, to avoid the documents and requirements of enterprises being prolonged.

Thirdly, after closing the inventory, it is certain that Customs and other competent agencies need to have time to complete the inspection, enterprises also need time to fulfill their obligations because in this period (from the time of closing the inventory to the time when all tax and customs obligations have been fulfilled with the customs authority and certified by a competent authority as an EPE), the enterprise cannot stop its business activities. So, during this period, firms must apply the type of policies of the EPEs or not.

The difficulties and shortcomings in the implementation of converting from enterprises that do not enjoy the policies of EPEs to EPEs to be overcome soon to ensure investment attraction, facilitating production activities of businesses, to avoid embarrassment, lack of uniformity of the Customs and more importantly, to meet the administrative reform tasks under the guidelines of the Party and Government.