To: Provincial Customs Departments 

With respect to taxes imposed on goods leased or lent by domestic enterprises from export processing enterprises in the form of temporary import for re-export to serve their processing and export, the General Department of Customs gives its opinions hereunder:

1. Regarding customs procedures

Pursuant to Clause 4 Article 3 of the Law on Foreign Trade Management No. 05/2017/QH14: “separate customs area” means a geological area in the territory of Vietnam that is established under the law of Vietnam and international treaties to which the Socialist Republic of Vietnam is a signatory, and the trading relationship between this area and remaining areas of Vietnam or foreign countries is considered as importation and exportation”.

Pursuant to Article 41 of the Law on Foreign Trade Management No. 05/2017/QH14:

“1. Except for the temporary importations prescribed in Article 39 of this Law, traders may temporarily import goods that are not included in the list of prohibited exports and imports, or goods that are not subject to export and import suspension under contracts signed with foreign parties to serve the purposes of maintenance, lease or  lending or other purposes for a certain period of time, and then re-export them from Vietnam.

…

3. The time limit for temporary importation shall comply with the agreement between the trader and their partner and be registered with the customs authority where procedures for temporary importation are followed.

...

...

...

Pursuant to Clause 1 Article 57 of the Law on Foreign Trade Management No. 05/2017/QH14: “Measures for foreign trade management of goods that are transported from an separate customs area for domestic consumption shall be imposed in the same manner as goods that are imported from other countries to Vietnam”.

Pursuant to Clause 1 Article 4 of the Law on Import and Export Duties No. 107/2016/QH13:  “Free trade zone means an economic zone located within the territory of Vietnam, established in accordance with law, having a definite geographic boundary, and separated from the outer area by hard fences in order to facilitate customs inspection and customs control by the customs authority and relevant agencies with regard to exports and imports, inbound and outbound vehicles and passengers; the trading relationship between the free trade zone and the outside area is consider exportation and importation”.

Pursuant to Clause 1 Article 30 of the Government's Decree No. 82/2018/ND-CP dated May 22, 2018: “Export processing zones and export processing enterprises shall be subject to regulations applicable to separate customs areas and non-tariff zones, except for particular regulations applicable to non-tariff zones within border economic zones”.

Pursuant to Article 50 of the Government’s Decree No. 08/2015/ND-CP dated January 21, 2015 as amended by Clause 23 Article 1 of the Government’s Decree No. 59/2018/ND-CP dated April 20, 2018, prescribing customs procedures for temporary import, temporary export of equipment, machinery, heavy equipment, vehicles, moulds or models for production, construction, installation, project implementation or testing.

Pursuant to the abovementioned regulations, in case an export processing enterprise leases or lends its goods to a domestic enterprise for production of main products of the export processing enterprise, the export processing enterprise shall open the declaration of temporary export and the domestic enterprise shall open the declaration of temporary import; upon termination of the lease or lending contract, the domestic enterprise shall follow procedures for re-export of the leased or lent goods, and the export processing enterprise shall follow procedures for re-import of these goods.

2. Import duty on leased or lent goods

Pursuant to Clause 2 Article 2 of the Law on Import and Export Duties No. 107/2016/QH13:  “goods exported from the domestic market into free trade zones; goods imported from free trade zones into the domestic market” are subject to import and export duties.

Pursuant to Point a Clause 9 Article 16 of the Law on Import and Export Duties No. 107/2016/QH13:  “Machinery and equipment temporarily imported for re-export for testing, research and development; machinery and equipment, tools temporarily imported or temporarily exported to be used for certain period of time or serve processing of foreign traders, except for machinery, equipment, tools, and vehicles permitted to be temporarily imported to serve investment projects, construction, installation, or manufacturing" are exempted from import duty.

Pursuant to Point dd Clause 1 Article 19 of the Law on Import and Export Duties No. 107/2016/QH13 prescribing tax refund cases:  “Any taxpayer who has paid tax on machinery, equipment, tools, vehicles which are permitted to be temporarily imported for re-export, except for those lent to execute investment projects, construction and installation, manufacturing, when they are re-exported to abroad or exported to a free trade zone”.

...

...

...

With regard to imports which are lent goods, the customs value is the total amount of expenses that the borrower must pay to transport goods to the first importing checkpoint according to documents related to the lent goods”.

Pursuant to the abovementioned regulations, if a domestic enterprise leases or borrows goods from an export processing enterprise under the lease or lending contract to serve its manufacturing, it shall not be eligible for exemption from import duty as prescribed in Point a Clause 9 Article 16 of the Law on Export and Import Duties No. 107/2016/QH12, and it is required to declare and pay import duty when temporarily importing such goods, and shall also not be eligible for refund of the paid import duty when re-exporting such goods as prescribed in Point dd Clause 1 Article 19 of the Law on Export and Import Duties No. 107/2016/QH13 because these are leased or lent goods. The taxable value of leased or lent goods shall be determined according to Clause 9 Article 1 of the Circular No. 60/2019/TT-BTC of the Ministry of Finance.

3. VAT on goods leased or lent in the form of temporary import for re-export

Pursuant to Clause 20 Article 5 of the Law on Value-added tax No. 13/2008/QH12:  “….goods temporarily imported and re-exported; goods temporarily exported and re-imported….” are not subject to VAT.

Pursuant to these regulations, goods leased or borrowed by a domestic enterprise from an export processing enterprise and for which the declaration of temporary import has been registered shall not be subject to VAT. Upon the end of the lease or lending period, if the domestic enterprise fails to re-export such leased or lent goods, it shall, immediately after ending the lease or lending period, declare and pay VAT and import duty on a new customs declaration as prescribed in Clause 12 Article 1 of the Government’s Decree No. 59/2018/ND-CP dated April 20, 2018.

In case of the leased or lent goods which are damaged while being used and for which destruction procedures have been carried out in accordance with regulations of law, the domestic enterprise is not required to declare and pay VAT on these goods.

4. Additional declaration

Pursuant to Clause 4 Article 29 of the Customs Law No. 54/2014/QH13 dated June 23, 2014:

"4. A customs declarant that finds that the declaration contains errors may make additional declaration in the following cases:

...

...

...

b) For goods granted customs clearance: within 60 days from the date of customs clearance and before the customs authority issues a decision on post-clearance inspection, except additional declaration relevant to the export or import permit, specialized inspection in terms of goods quality, health, culture, animal quarantine, plant quarantine or food safety.

If a customs declaration is found to have errors after the time limit prescribed at Points a and b of this Clause, the customs declarant shall make additional declaration and such errors shall be handled in accordance with regulations of the law on taxation and the law on penalties for administrative violations.”

Pursuant to Point b Clause 1 Article 20 of the Circular No. 38/2015/TT-BTC dated March 25, 2015 as amended by Clause 9 Article 20 of the Circular No. 39/2018/TT-BTC dated April 20, 2018 of the Ministry of Finance:

“b) Additional declaration after customs clearance:

Except additional declaration relevant to the export or import permit, specialized inspection in terms of goods quality, health, culture, quarantine of animals, animal products or plants or food quality, the customs declarant shall make an additional declaration after customs clearance in the following cases:

b.1) The customs declarant or taxpayer that finds errors in the customs declaration before the customs authority issues a decision on post-clearance inspection may makes an additional declaration within 60 days from the date of customs clearance;

b.2) The customs declarant or taxpayer that finds errors in the customs declaration after 60 days from the date of customs clearance and before the customs authority issues a decision on post-clearance inspection shall make additional declaration and incur penalties as prescribed by law”.

Pursuant to the abovementioned regulations, if an error in the customs value of an enterprise's leased or lent goods which are declared on the declaration of temporary import registered on October 15, 2019 or afterwards (the effective date of the Circular No. 60/2019/TT-BTC) and have not yet been re-exported is found and the enterprise is entitled to make additional declaration of the taxable value of leased or lent goods as prescribed in Clause 9 Article 1 of the Circular No. 60/2019/TT-BTC dated August 30, 2019 of the Ministry of Finance, the enterprise shall make additional declaration as prescribed.

The customs authority shall inspect conditions for making additional declaration, the additionally declared customs value, tax policies and other regulations on additional declaration as prescribed.

...

...

...

Pursuant to Clause 1 Article 60 of the Law on tax administration No. 38/2019/QH14: “If the tax, late payment interest or fine paid by a taxpayer is greater than the amount payable, the overpaid amount may be offset against the outstanding tax, late payment interest or fine, or against the tax, late payment interest or fine payable next time, or may be refunded if the taxpayer no longer has outstanding tax, late payment interest or fine”.

Pursuant to Article 10 of the Circular No. 06/2021/TT-BTC dated January 22, 2021, Clauses 2, 3, and 4 Article 131 of the Circular No. 38/2015/TT-BTC dated March 25, 2015 as amended in Clause 64 Article 1 of the Circular No. 39/2018/TT-BTC dated April 20, 2018 of the Ministry of Finance prescribing procedures for handling of overpaid tax, late payment interest and fines.

If an enterprise is entitled to make additional declaration due to wrong statement of the taxable value resulting in the tax paid greater than the amount payable, the overpaid amount shall be refunded if the taxpayer no longer has outstanding tax, late payment interest or fine. The customs authority shall inspect the reasons for making additional declaration, the submitted declaration, relevant documents used for determining the customs value and tax policies as prescribed.

6. Handling of tax in case of failure to re-export temporarily imported goods

Pursuant to Clause 5 Article 25 of the Government’s Decree No. 08/2018/ND-CP dated April 20, 2018 as amended by Clause 12 Article 1 of the Government’s Decree No. 59/2018/ND-CP dated April 20, 2018: In case temporarily imported goods have been released or granted customs clearance but then repurposed or sold domestically, a new customs declaration is required.

Pursuant to Point d Clause 1 Article 21 of the Circular No. 38/2015/TT-BTC as amended by Clause 10 Article 1 of the Circular No. 39/2018/TT-BTC: In case of repurposing or domestic sale of goods, the taxpayer shall declare and pay taxes and fines (if any) as prescribed”.

Pursuant to Point d Clause 2 Article 21 of the Circular No. 38/2015/TT-BTC as amended by Clause 10 Article 1 of the Circular No. 39/2018/TT-BTC: If the customs authority or a competent authority finds that a taxpayer repurposes or domestically sells goods without declaring and paying taxes, such taxpayer shall pay an amount of tax imposed according to the initial import declaration, pay late payment interest and incur other penalties as prescribed by applicable law.

Pursuant to Clause 4 Article 17 of the Government’s Decree No. 126/2020/ND-CP dated October 19, 2020 prescribing cases of imposition of taxes by customs authorities.

Pursuant to the abovementioned regulations, if a domestic enterprise leases or borrows goods from an export processing enterprise under a lease or lending contract to serve its manufacturing, it shall re-export such leased or lent goods upon the expiry of the lease or lending period.

...

...

...

7. Implementation

Provincial Customs Departments are required to strictly comply with the guidelines herein and regulations of relevant legislative documents. Customs Departments of Bac Ninh Province, Ha Noi City, and Hai Phong City where import duties on goods leased or borrowed by domestic enterprises from export processing enterprises have been refunded (according to the Official Dispatch No. 1604/HQBN-NV dated February 14, 2021 of the Customs Department of Bac Ninh Province, the Official Dispatch No. 12287/HQHP-TXNK dated December 15, 2021 of the Customs Department of Hai Phong City, and the Official Dispatch No. 3580/HQHN-TXNK dated December 13, 2021 of the Customs Department of Ha Noi City) shall inspect and review relevant documents to recover the tax amounts refunded inconsistently with regulations.

Provincial Customs Departments are required to strictly implement the guidelines given herein./.

BY ORDER OF DIRECTOR GENERAL
PP. DIRECTOR OF THE IMPORT – EXPORT TAX DEPARTMENT
DEPUTY DIRECTOR




Tran Bang Toan