The recording, assessment and settlement of exchange rate differences in enterprises

On 27 May 2021, the Ministry of Finance issued Circular 37/2021/TT-BTC annulling Circular 179/2012/TT-BTC regulating the recording, assessment and settlement of exchange rate differences in enterprises issued by the Ministry of Finance.

The abolition of aforementioned Circular 179 is an effort to consolidate regulations related to the evaluation of foreign currency accounting ending balance at the date of Financial Statements preparation (i.e. using actual exchange rates) and regulations on splitting profit for non-monetary items in profit after tax (such as revaluation of monetary items, etc.). After Circular 179 was superseded, the above-mentioned regulations are consistently implemented in accordance with the guidelines in Circular 200/2014/TT-BTC guiding the corporate accounting policies.

Circular 37/2021/TT-BTC takes effect from 1 August 2021.

The Rules of Origin in the Free Trade Agreement between Vietnam and the United Kingdom of Great Britain and Northern Ireland

On 11 June 2021, the Ministry of Industry and Trade issued Circular 02/2021/TT-BCT stipulating the rules of origin in the UKVFTA. This Circular consists of 5 Chapters, 40 Articles and 8 Appendixes attached. Some main contents of Circular 02/2021/TT-BCT are as follows:

  • In order to enjoy the preferential tariffs under UKVFTA, proof of origin must be submitted to the Vietnamese customs authority within 2 years from the time of import. The Customs authority may require a translation if the certificate of origin is not in English;
  • The self-certification mechanism in the UKVFTA is implemented as follows:
  • For Vietnamese exports:
    • For shipments with a value of not exceeding 6,000 EUR, the exporter is allowed to self-certify the origin of shipments;
    • For shipments with a value of over 6,000 EUR, the C/O mechanism shall be applied by agencies and organizations authorized by the Ministry of Industry and Trade.
  • For imports into Vietnam:
    • For shipments with a value of not exceeding 6,000 EUR, the exporter is allowed to self-certify the origin of shipments;
    • For shipments with a value of over 6,000 EUR, only exporters which are eligible under UK regulations can self-certify the origin of shipments.

Certificates of origin are valid for 12 months from the date of issuance at the Exporting member country and must be submitted to the customs authorities of the Importing member country within the validity period.

Circular 02/2021/TT-BTC takes effect from 27 June 2021.

No VAT refund for the case of exporting goods under business export model

Official letter no. 3686/TCHQ-TXNK dated 22/07/2021 from the GDC.

This is the response from the GDC to the General Department of Taxation regarding VAT handling in case the company imported goods under business manufacturing model and then exported in the form of business export. Accordingly, the GDC has the opinion that in this case, there is no overpaid VAT amount at the import stage, hence the GDC would not handle the VAT refund. Companies will declare and request for VAT refund in accordance with current legal regulations with the tax authority.

Guidance on VAT refund dossier for investment project (“IP”) in a different province/city

On 26 May 2021, GDT issued Official letter 1713/TCTKK responding to Yen Bai Tax Department, guiding VAT refund dossier for IP established in a different province/city. Specifically, in case an enterprise has an IP in a province/city being different from where its headquarters is located and such IP is in the stage of investment but has not been put into operation, has not yet registered tax code, a separate tax declaration dossier for this IP shall be prepared as follows:

  • If enterprise applies for tax refund for the Quarter 04/2020 and the period before, , the refund request will still be processed at according to the provisions of old regulation as per the Circular 156/2013/TTBTC, i.e. the tax refund can be applied at headquarters.
  • From the tax period of January 2021 or Quarter 01/2021 onwards, the taxpayer is obligated to declare, pay tax and apply for tax refund according to provision of Decree 126/2020/ND-CP and its guiding documents, i.e. at the province where the IP located.

Entrusted import serving for export manufacturing business is exempt from customs duty

Official letter no. 3690/TCHQ-TXNK dated 22/07/2011 from the GDC.

Pursuant to Article 31 of Decree 134/2016/ND-CP (“Decree 134”), as amended by Decree 18/2021/ND-CP (“Decree 18”), in case organizations or individuals are eligible for import tax exemption on export manufacturing scheme, but import via entrusted party, the entrusted party is also exempted from import tax on the imported materials (the entrusting party conducts manufacturing products from imported materials), provided that the contract price is inclusive of import tax. In this regard, the entrusted party is responsible for notifying the production facility and conducting inventory report to customs authority according to regulations. The inspection of production facilities shall be carried out by the customs authority to the entrusting organizations and individuals.

Products re-imported after hiring an Export Processing Enterprise (“EPE”) for processing are subject to import duty

Official letter no. 3634/TCHQ-TXNK dated 19/07/2021 from the GDC.

This is the conclusion of the GDC responding the queries of Customs Department of Binh Duong province and the Customs Department of Ho Chi Minh City. Accordingly, pursuant to Decree 134 as amended and other relevant regulations, in case a domestic enterprise imports tax-free raw materials, and then transfers these materials or semi-finished products made from them to EPEs to continue processing, then when receiving back the products from the EPEs, the domestic enterprise must declare and pay import tax according to Clause 2, Article 22 of Decree 134.

In this case, the dutiable value is the processing fee, including the value of materials used in the processing activity provided by the EPE and the relevant adjustments (if any) as prescribed in Clause 3, Article 17 of Circular No. 39/2015/TT-BTC. The dutiable value would not include the materials that domestic enterprise provided to the EPEs for processing purpose under the contracts.

Disposed materials for export-manufacturing purpose imported before 25/04/2021 is exempted from import duty

Official letter no. 3542/TCHQ-TXNK dated 14/07/2021 from the GDC.

Pursuant to Decree 134 (Point dd, Clause 1, Article 12) as amended and supplemented by Decree 18 (Clause 6, Article 1) on tax exemption for goods imported for export-manufacturing purpose, and pursuant to regulations on the order of priority in the legislative documents application in Clause 1, Article 156 of the Law on Promulgation of Legislative Documents No. 80/2015/QH13 dated 22/06/2015, if an enterprise imported raw materials for export-manufacturing purpose before 25/04/2021, then has actually disposed of such materials after 25/04/2021, scraps resulted from the disposal will be exempted from import tax.

Guidance on customs procedures and tax policies for goods imported for construction to EPEs

Official letter no. 3758/TCHQ-TXNK dated 28/07/2021 from the GDC.

This is the official letter of the GDC answering the problems of enterprises and the Customs Department of Hai Phong City for the case that the contractor directly carries out the procedures for importing goods from abroad and bringing them directly into the non-tariff zones for the construction of factories, offices, and equipment installation according to the bidding results for the EPEs. Whereby:

  • Regarding customs dossiers and procedures: This will follow Article 75 of Circular No. 38/2015/TT-BTC, as amended and supplemented by Clause 51, Article 1, Circular 39/2018/TT-BTC. Accordingly, the contractors will register for customs procedures at the Customs Sub-department managing the EPE, and must immediately bring goods directly to the EPE after customs clearance. After 30 days from the contract-end, the EPE and the contractor shall report the figures of imported goods to the competent customs authority of the EPE.
  • Customs dossiers must comply with Article 16 of Circular No. 38/2015/TT-BTC, as amended and supplemented by Clause 5, Article 1 of Circular No. 39/2018/TT-BTC. Regarding tax policies: Goods imported by contractors from overseas to be brought directly into the non-tariff zone for the purpose of building office of the EPE are not subject to import tax, but subject to VAT declaration/settlement at the import stage. This is input VAT that the contractor can declare for creditability with the tax authority.

New guidance on tax policy for on-the-spot import of raw materials for export manufacturing purpose

Official letter no. 3487/TCHQ-TXNK dated 12/07/2021 from the GDC.

This is the official guidance of the GDC on tax policy applied to on-spot importation of raw materials for export manufacturing from the effective date of Decree 18/2021/ND-CP. Whereby:

  • In case domestic enterprise imports raw materials from EPEs under sale/purchase contracts for export manufacturing purpose: the domestic enterprise is exempt from import tax and not subject to VAT. Import customs declarations of domestic enterprises are registered under the mode E31.
  • In case an EPE sells goods to a foreign trader but is designated to deliver goods to a domestic enterprise for export-manufacturing purpose: the domestic enterprise is exempt from import tax and not subject to VAT. Import customs declarations of domestic enterprises are registered under the mode E31.
  • In case the domestic enterprise purchases raw materials from a foreign trader for exportmanufacturing purpose but is designated to receive goods from another domestic enterprise in Vietnam: the first domestic enterprise is not exempt from import tax. Import customs declarations are registered under import business mode (A11) or production business mode (A12). When the imported materials are put into production and actually exported to a foreign country or a non-tariff zone, the enterprise shall be entitled to a refund of import tax corresponding to the amount of on-the-spot imported raw materials constituting the finished exported product according to Article 36 of Decree No. 134/2016/ND-CP.

Tax Newsletter August 2021