Exemption of duties on goods imported for manufacture of domestic exports in Vietnam

Pursuant to Clause 6, Article 1 of Decree 18/2021/ND-CP regulating exemption of duties on goods imported for manufacture of domestic exports in Vietnam as follows:

1. Goods imported for manufacture of domestic exports are exempt from import duties as prescribed in Clause 7 Article 16 of the Law on Export and import duties, including:

a) Raw materials, supplies (including those for manufacture of packages of exports), components, semi-finished products imported incorporated into the exports or used during the manufacture of exports without being incorporated into the exports;

b) Finished products that are imported for packaging, labeling or attaching to exports or packaging with exports as a whole;

c) Components and parts imported for repair of exports under warranty;

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

dd) Goods imported for manufacture of domestic exports but are permitted to be destroyed in Vietnam and have been destroyed in reality.

2. Basis for determination of eligibility for duty exemption:

a) The taxpayer has the right to ownership or right to enjoyment of the facility in Vietnam where domestic exports are manufactured and equipment therein. The taxpayer has submit the notification of the manufacturing facility and equipment therein; notification of the hired manufacturer or processor’s manufacturing facility, the manufacturing or processing contract to the customs authority in accordance with customs law. In case the notification is not submitted on schedule, the taxpayer shall only incur administrative penalties for customs offences.

The taxpayer assigns the imports mentioned in Clause 1 of this Article to a third party that has the right to ownership or right to enjoyment of the facility for manufacture or processing in the following cases:

a1) The taxpayer that assigns all or part of the imports to a third party within Vietnam’s territory for manufacture or processing through one or some stages, then receives the semi-finished products for further processing into finished exports will be exempt from import duties on the assigned imports.

a2) The taxpayer that assigns all or part of the semi-finished products that are manufactured by the taxpayer from imports to a third party within Vietnam’s territory for manufacturing or processing through one or some stages, then receives the semi-finished products for further processing into exports or receives the finished products for export will be exempt from import duties on the imports assigned to the third party for manufacturing of the semi-finished products.

a3) The taxpayer that assigns part of the imports to a third party in Vietnam for processing into finished products, then receives the finished products for export will be exempt from import duties on the imports assigned to the third party.

a4) The taxpayer that assigns the imports or semi-finished products that are entirely manufactured from the imports to a third party for manufacture or processing in a free trade zone or a foreign country in one of the cases specified in a.1, a.2, a.3 of this Clause will be exempt from import duties on the imports or semi-finished products that are entirely manufactured from the imports assigned to the third party. The products manufactured or processed overseas by the third party are subject to import duties when they are imported back into Vietnam as prescribed in Point d Clause 1 Article 11 of this Decree. Products that are manufactured or processed by the third party are subject to import duties when they are imported into Vietnam’s domestic market as prescribed in Clause 2 Article 22 of this Decree.

b) The taxpayer that imports goods as prescribed in Clause 1 of this Article and assigns all of the imports to an organization (third party) in which the taxpayer holds over 50% charter capital or total ordinary shares for manufacturing or processing, then receives the products for export will be exempt from import duties on the assigned imports, even if the third party hires another unit to process one or some stages. The third party shall have the right to ownership or enjoyment of a manufacturing or processing facility in Vietnam and equipment therein. The taxpayer shall submit the notification of the third party’s manufacturing or processing facility to the customs authority in accordance with customs Law. In case the taxpayer fails to submit such notification on schedule, the taxpayer shall only incur administrative penalties for customs offences.

The taxpayer shall also submit the following documents together with the aforementioned notification:

The Certificate of Enterprise Registration or latest audited financial statement of the taxpayer and the third party: 01 certified true copy;

The taxpayer’s and third party’s operation charters: 01 certified true copy;

The shareholder register (for joint stock companies) or member register (for multiple-member limited liability companies) of the taxpayer and the third party: 01 certified true copy.

The taxpayer that assigns all of the imports to a third party in a free trade zone or a foreign country for manufacturing or processing will be exempt from import duties on the assigned imports. The products manufactured or processed overseas by the third party are subject to import duties when they are imported back into Vietnam as prescribed in Point d Clause 1 Article 11 of this Decree. Products that are manufactured or processed by the third party in a free trade zone are subject to import duties when they are imported into Vietnam’s domestic market as prescribed in Clause 2 Article 22 of this Decree.

c) The taxpayer shall report the use of duty-free imports in accordance with customs laws.

d) 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 Points e, g, h of this Clause shall apply to the imports used for manufacture of products that are exported to another domestically located organization and individual (outside of free trade zones), in-country exports and in-country imports.

dd) Goods imported for manufacturing, manufactured products, scrap and refuses produced during manufacturing 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 domestic exports are not used or the products are not exported, import duties shall not be exempt. In this case 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.

e) The quantity of imported goods that are used for manufacturing 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 manufacturing 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.

g) In-country exports are not exempt from export duties. The in-country exporter shall register the in-country export declaration, declare and pay export duties at the rates and values of the in-country exports that are applicable when the declaration is registered.

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 Clause 2 Article 10 of this Decree. 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. 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

4. Scraps and refuses produced during the manufacture 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.

Best Regards!