Exemption of duties on goods imported for further processing and processed exports in Vietnam

Pursuant to Article 10 of Decree 134/2016/ND-CP, amended by Clause 4, Article 1 of Decree 18/2021/ND-CP, providing for exemption of duties on goods imported for further processing and processed exports in Vietnam as follows:

1. Goods imported for further processing and processed exports under processing contracts that are exempt from export and import duties specified in Clause 6 Article 16 of the Law on Export and import duties include:

a) Raw materials, semi-finished products, supplies (including those for manufacture of packages of exports), imported components that are incorporated into the exports or used during the processing of exports not incorporated into the exports, including those imported by the processor to execute the processing contract;

b) Goods imported as samples that are not traded or used;

c) Machinery and equipment imported for processing under a processing contract;

d) Imported finished products that are attached on processed products or packed with processed products as a whole for export according to the processing contract or appendices thereof and are considered raw materials or supplies imported for processing;

dd) Components and parts imported for repair of processed exports under warranty according to the processing contract or appendices thereof and are considered raw materials or supplies imported for processing;

e) Goods imported for further processing but are permitted to be destroyed in Vietnam and have been destroyed in reality.

Goods imported for further processing and used as gifts shall be exempt from duties in accordance with Article 8 of this Decree.

When the processing contract expires, it is not required to re-export goods imported for processing. Imported goods that are not re-exported shall be dutiable;

g) Processed products that are exported to a foreign country, a free trade zone or an organization or individual in Vietnam as requested by the hirer.

Processed exports are exempt from export duties as prescribed by this Point if they are entirely processed from imported goods. In case processed exports are made of dutiable domestic raw materials or supplies, export duties on the value of raw materials or supplies incorporated into the products at the duty rates applied to such raw materials or supplies shall be paid when the products are exported.

2. Basis for determination of eligibility for duty exemption:

a) The taxpayer has a processing contract that is conformable with regulations of Decree No. 69/2018/ND-CP. The taxpayer shall specify the number of the processing contract and its appendices on the customs declaration.

b) The taxpayer or processor hired by the taxpayer has the right to ownership or enjoyment of the processing facility in Vietnam and equipment in the facility and has submitted the facility notification, the processing contract, sub-processing contract and their appendices to the customs authority in accordance with customs law. In case these documents are not submitted on schedule, the taxpayer shall only incur administrative penalties for customs offences as per regulations.

c) In case the taxpayer (that has a processing contract) assigns another organization or individual (hereinafter referred to as “third party”) that satisfies the requirements specified in Point b of this Clause to process some or all of the stages, then receive the semi-finished products for further processing or receive the finished products for export, the taxpayer will be exempt from import duty on the imports assigned to the sub-processor.

In case the taxpayer (that has a processing contract) assigns all or part of the imports or semi-finished products that are processed from imports to a third party in a free trade zone or a foreign country, the imports or semi-finished products are exempt from export duties. The products that are imported into Vietnam after being processed overseas are subject to import duties according to Point d Clause 1 Article 11 of this Decree. The products that are imported into the domestic market of Vietnam after being processed in the free trade zone are subject to import duties as prescribed in Clause 2 Article 22 of this Decree.

d) The taxpayer (that has a processing contract) shall report the use of duty-free imports in accordance with customs laws.

dd) The quantity of imports used for processing the products that have been exported to a foreign country or a free trade zone that is exempt from import duties is the quantity of goods imported in for processing the exported products in reality.

Regulations of Point g and Point h of this Clause shall apply to goods imported for processing products that are exported to another domestically located organization or individual (outside of free trade zones), and in-country processed imports.

e) Goods imported for further processing, scrap and refuses produced during processing that are returned to the foreign hirer are exempt from export and import duties.

Goods imported for further processing, processed products, scrap and refuses produced during processing that are permitted to be destroyed and have been destroyed in reality are exempt from import duties.

In case goods are imported for manufacture of outward processing but processed products are not exported or redundant imports are not exported, the taxpayer shall register a new customs declaration, declare and pay tax to the customs authority according to the duty rates and dutiable values of imports at the time of registration of the customs declaration, except for gifts specified in Article 8 of this Decree.

g) The quantity of imported goods that are used for processing in-country exports in reality will be exempt from import duties if the in-country exporter has sent the customs authority a notification (Form No. 22 in Appendix VII hereof) of the customs declaration of the in-country imports within 15 days from the day on which customs clearance is granted to the in-country exports.

If the in-country exporter fails to submit the notification to the customs authority by the deadline, the in-country exporter shall register a new customs declaration, declare and pay duties on the imports used for processing the in-country exports at the rates and dutiable values of the imports that are applicable when the new customs declaration is registered.

If the in-country exporter submits a notification of the customs declaration of the in-country imports to the customs authority after duties are paid, the paid duties shall be settled in accordance with regulations of law on settlement of overpaid tax.

h) Goods that are imported in-country for processing according to the customs declaration shall be exempt from import duties if the importer satisfies the requirements specified in Point a and Point b of this Clause. If goods that are imported in-country for other purposes, the in-country importer shall declare and pay duties at the rates and dutiable values of the in-country imports that are applicable when the declaration is registered.

In case the in-country importer has paid import duties, used the in-country imports for manufacture of goods for export and exported the goods to a foreign country or a free trade zone in reality, paid import duties will be refunded in accordance with Article 36 of this Decree.

3. Import duties shall be charged upon machinery, equipment, raw materials, supplies, components and processed products on which processing charges are paid by the foreign party.

4. Scraps and refuses produced during the processing of exports shall be exempt from import duties when they are sold domestically. The taxpayer does not have to follow customs procedures but shall declare and pay VAT, excise tax, environment protection tax (if any) to the tax authority in accordance with tax laws.

5. Procedures for granting duty exemption are specified in Article 31 of this Decree.

While following procedures for in-country export of the goods specified in this Article, in addition to the duty exemption application specified in Article 31 of this Decree, the in-country exporter shall also submit the document requesting delivery of goods in Vietnam of a foreign entity: 01 photocopy

Best Regards!