11 CONSULTATION ON TAX ISSUES FOR THE DRAFT DECREE IN PLACE OF DECREE 08/2015/ND- CP

2 TAX-RELATED CONTENTS IN THE DRAFT DECREE REPLACING DECREE 08/2015/ND-CP Tax-related contents shall be covered in 02 chapters of the new decree and include 7 sections as follows: 1. Chapter on customs procedures, customs inspection and control over imported/exported goods will include 2 sections: - 01 Section on taxation timing and exchange rate; tax base, methods of determining import- export tax; safeguard duties, anti-dumping, anti- subsidy tax Section on taxes & fees.

3 TAX-RELATED CONTENTS IN THE NEW DECREE REPLACING DECREE 08/2015/ND-CP 2. Chapter on tax exemption and discount and other regulations on import/export tax management, including: - Section 1: Tax exemption procedures; - Section 2: Tax discount procedures; - Section 3: Tax refund procedures; - Section 4: Tax deferred or gradual payment, extension for tax payment; removal of tax in arrears and fines; - Section 5: Fulfillment of tax obligation.

4 TAX ISSUES FOR CONSULTATION 1. Regarding application dossiers for tax refund: The current draft revised regulations on tax refund dossiers to remove requirements for enterprises to submit documents which the customs authorities already had or not relevant to refund application, ensure transparency and facilitate customs office’s verification of the enterprises’ eligibility, specifically:

5 TAX ISSUES FOR CONSULTATION 1.1. General dossier: The draft Decree requires that tax refund dossier is comprised of 02 types: a) Application form for tax refund on imported/exported goods, specifying: reasons for tax refund; reference number of declaration form, reference number of import/export contract; methods of payment, etc. b) Payment documents (if already made).

6 TAX ISSUES FOR CONSULTATION In case of paper-based customs declaration and manual tax refund: submit 01 original copy of customs declaration and 01 original letter of application for tax refund In addition to general dossier, in specific situation, tax payers are requested to submit the following information/documents:

7 TAX ISSUES FOR CONSULTATION a) If tax payer has paid import/export tax but no import/export actually occurred: In the tax refund application, clearly state the declaration which has been cancelled due to the fact no import/export occurred. b) If goods actually imported/exported are less than tax paid: The tax payer shall submit additional declaration after clearance or the exact amount of tax imposed.

8 TAX ISSUES FOR CONSULTATION c) If a taxpayer has paid tax on goods exported temporarily for re-import or exported goods, but then had to be re-imported into Vietnam. c.1) Sales contract of the goods (except when no contract is made): submit 01 copy; c.2) Phiếu xuất kho, phiếu nhập kho: nộp 01 bản chụp; c.3) Trong công văn yêu cầu hoàn thuế, người nộp thuế cam kết về việc hàng hóa chưa qua quá trình sản xuất, gia công, sửa chữa hoặc sử dụng ở nước ngoài.

9 TAX ISSUES FOR CONSULTATION c.4) If the goods have to be re-imported due to being unclaimed or rejected by overseas partner as notified by the carrier, the following documents must be supplemented: Notice of or agreement with the overseas partner on reimporting the goods or notification of the carrier on goods being unclaimed, specifying reasons, quantity and type In case of force majeure or the importer identify faulty goods himself and reimports the goods, there is no such document but he must submit a written statement specifying reasons for reimporting the goods.

10 TAX ISSUES FOR CONSULTATION d) If import tax has been paid but the goods which are still stored under the customs office’s supervision are re- exported, or the goods are temporarily imported for re-export, or the goods are imported under entrustment agreement with the overseas partner for later export (except when the temporary-import-for-export goods are entitled to tax exemption); If imported goods are returned to foreign exporters or re-exported to a third country or non-tariff areas: d.1) Sales contract of the goods (except when no contract is made): submit 01 copy; d.2) Inventory delivery or receipt documents: submit 01 copy; d.3) In the tax refund application, tax payer must commit about the goods not being produced, processed, repaired or used in the country of overseas partner;

TAX ISSUES FOR CONSULTATION d.4) VAT invoice or sales invoice for the case of exports to non-tariff areas : submit 01 copy; d.5) Agreement of returning the goods to the overseas partner (in case of returning goods to the overseas partner): submit 01 copy 11

12 TAX ISSUES FOR CONSULTATION e) If import tax has been paid and the imported goods are supposed to be produced for trading purpose but then exported: e1) If import tax has been paid and the imported materials are supposed to be produced for domestic distribution but then exported: e.1.1) Import/export contract: submit 01 copy;

13 TAX ISSUES FOR CONSULTATION e.1.2) Inventory delivery and receipt document: submit 01 copy; e.1.3) Contract of entrusted import/export (if applicable): submit 01 copy; e.1.4) Tax report on imported materials and supplies (in accordance with Form no. […] issued in attachment to this Decree).

14 TAX ISSUES FOR CONSULTATION e2) Taxpayers already pay taxes to import raw materials and supplies for the production of products, then use this product for the processing of goods exported under contracts with foreign companies : In addition to the documents mentioned in paragraph e.1 taxpayers have to supplement processing contracts signed with overseas partner: submit 01 copy.

15 TAX ISSUES FOR CONSULTATION e3) If a taxpayer has paid taxes to import raw materials, production supplies and then sell the product (finished or unfinished products) to organizations and individuals who directly produce and process goods for export In addition to the documents mentioned in paragraph e.1 taxpayers have to supplement the following documents: e.3.1) VAT invoice or sales invoice: submit 01 copy; e.3.2) Sales contract between the importing enterprise and manufacturing or export processing enterprise: submit 01 copy; e.3.3) Processing contracts or export contracts between manufacturing or export processing enterprise and foreign partner: submit 01 copy.

16 TAX ISSUES FOR CONSULTATION e.4) If the taxpayer has paid import duty for raw materials and supplies for production and then sell the product (finished or unfinished product) to organizations and individuals who directly export in sets of components. In addition to the documents mentioned in paragraph e.1 taxpayers have to supplement the following documents : e.4.1) VAT invoice or sales invoice: submit 01 copy ; e.4.2) Sales contract between the importing enterprise and exporting enterprise: submit 01 copy ;

17 TAX ISSUES FOR CONSULTATION e.5) Where a taxpayer has paid taxes to import raw materials, production supplies and then sell the product (finished or unfinished product) to organizations and individuals who directly export the products: In addition to the documents mentioned in paragraph e.1 taxpayers have to supplement the following documents: e.5.1) VAT invoice or sales invoice: submit 01 copy; e.5.2) Sales contract between the importing enterprise and exporting enterprise: submit 01 copy;

18 TAX ISSUES FOR CONSULTATION e.6) If taxpayers import raw materials, supplies and components to produce goods for export, then registered customs declarations to switch to the domestic distribution, but finally find export markets and thus export products: In addition to the documents mentioned in paragraph e.1, in tax refund application, tax payers need to state the reference number of the declaration of switching usage and commit to have used imported materials, supplies and components for producing exported products.

19 TAX ISSUES FOR CONSULTATION e.7) If taxpayer has paid taxes to import raw materials and supplies for the manufacture of goods sold to foreign traders but deliver the goods to organizations and individuals in Vietnam as designated by foreign traders In addition to the documents mentioned in paragraph e.1 taxpayers have to supplement the following documents : e.7.1) Commercial invoice issued by exporting organizations and individuals: submit 01 copy; e.7.2) The sales contract must contain the agreement to deliver the goods to Vietnamese consignee as designated by the importer: submit 01 copy

20 TAX ISSUES FOR CONSULTATION f) If taxpayer has paid tax on machinery, equipment, tools and vehicles of organizations and individuals allowed to import temporarily for re-export to non-tariff areas (except for leasing agreement) to implement investment projects, construction and installation works, or production f1) in tax refund application, tax payers need to state the time the machinery, equipment, tools and vehicles are used and kept in Vietnam; rate of depreciation and value distribution; plus a commitment on not leasing them; f.2) Import/export contract: submit 01 copy;

21 TAX ISSUES FOR CONSULTATION g) If import tax has been paid and the imported goods are then sold to foreign traders via sales agents in Vietnam; or sold to the carriers of foreign firms on international routes through Vietnam's ports or Vietnamese carriers on international routes in accordance with law g1) Agent contracts in the sale and purchase of goods and contracts/agreements to provide goods: submit 01 copy; g2) VAT or sales invoice: submit 01 copy;

22 TAX ISSUES FOR CONSULTATION g3) Receipt of drinks on international flights, certified by airport Customs: submit 01 copy. g4) Confirmation the seaway carrier about quantity and value of goods purchased from the wholesale importer and actually supplied to the carrier together with payment documents of foreign shipping carrier: submit 01 original. The supplier is responsible before the law for their confirmation.

23 TAX ISSUES FOR CONSULTATION h) If imported goods are sent to organizations and individuals in Vietnam through international postal and courier services and vice versa, in which import/export tax have been paid, but not delivered to the recipients and thus have to be re-exported or re-imported: Documents proving the goods are not delivered to the recipient: submit 01 copy i) If import/export tax has been paid, but then granted tax exemption or refund by competent authorities: Taxpayers have to submit the decision of the competent state agencies on tax exemption: submit 01 copy

24 TAX ISSUES FOR CONSULTATION 2. Regarding classification of tax refund dossiers: The draft decree has removed some cases subject to inspection before tax refund which are not very reasonable, e.g.: + If tax payer’s bank payment vouchers is still pending at the time of submitting tax refund application to customs authorities: Article 60 of the Law on Tax Management stipulates that goods whose payments are made through banks and by compliant businesses will be eligible for tax refund before inspection. Accordingly, cases of pending payment vouchers are still considered as making payments through banks, just that payment documents are not available because the payment is not due yet.

25 TAX ISSUES FOR CONSULTATION + Regarding the regulation that imported goods must meet the state management requirements on quarantine, food safety, product quality inspection, etc. Vietnam Association of Seafood Exporters and Producers and some companies proposed to remove this provision because quarantine, food safety, and quality checks have already been performed during import/export procedures.

26 TAX ISSUES FOR CONSULTATION 3. Regarding application dossiers for tax exemption on imported/exported goods: The draft Decree has revised regulations on application documents for import/export tax exemption in implementing the Law on Import/Export Tax no. 107/2016/QH13 and the decree detailing the implementation of this law as well as to overcome shortcomings arising from the fact that customs authorities do not have adequate documents to check upon tax-exempted goods (because according to Circular 38, the tax exemption application dossiers only include a list of eligible goods and reconciliation tracking slip), specifically as follows:

27 TAX ISSUES FOR CONSULTATION 3.1. Notification of the goods eligible for tax exemption: a) Via the system: The list of imported/exported goods eligible for tax exemption declared via customs office’s on-line database and sent to the customs office. b) Not via the system: b.1 The written request for notification of the list of eligible goods, specifying quantity of goods and reasons for tax exemption in the Form attached to this Decree (Form No. 14 / CVDKDMMT / TXNK Annex VI issued together with this Decree): submit 01 original copy;

28 TAX ISSUES FOR CONSULTATION b.2) If the imported/exported goods eligible for tax exemption are not notified via the system: submit 02 original copies of the list and 01 reconciliation tracking slip (Form No. 15 / PTDTL / Annex VI TXNK attached to this Decree) c) If verification on tax exemption status is required for imported/exported goods, the person who notified the list must submit or present additional documents as the basis for determining export goods are in compliance with the reporting of organizations and individuals

29 TAX ISSUES FOR CONSULTATION 3.2. Regarding tax exemption dossiers: In addition to documents specified in Article 41 (Customs dossiers) of this Decree, in specific situations, tax payers may be required to submit or present the following additional documents: Regarding gifts & donations a) Notice or agreement of giving gifts & donations; b) If temporarily imported merchandise are not re- exported but instead, kept as gifts to organizations and individuals in Vietnam, they must be licensed by the competent authorities and within the norms prescribed by the Government

30 TAX ISSUES FOR CONSULTATION c) Certification of the competent agency on allowing reception to use tax-free goods which are gifts to public agencies with exempted value exceeding the regulated norm Regarding goods temporarily imported for re-export within certain timeframe Regarding commercial goods temporarily imported for re-export a.1) Import/export contract; a.2) Letter of guarantee from a credit institution or deposit certificate in the customs office’s deposit account at the State Treasury

31 TAX ISSUES FOR CONSULTATION Regarding imported goods of businesses eligible for investment incentives a) The list of duty-free goods and reconciliation tracking slip received by customs authorities in paper- based notification cases b) Documents on the transfer of tax-free goods to other tax-exempted entities c) Documents certifying the production start date as the basis for import duty exemption on raw materials, supplies and components which are not likely to be produced domestically within the next 05 years

32 TAX ISSUES FOR CONSULTATION Regarding imported/exported goods for the purpose of environmental protection a) Certification of the Ministry of Natural Resources and Environment (MONRE) on environment-friendly exported products and sealed with Vietnamese green label. b) Certification of a competent state agency on the product being made from recycling and waste management activities under the guidance of MONRE c) Practice license for hazardous waste management of Vietnam Environment Administration - MONRE

33 TAX ISSUES FOR CONSULTATION Regarding imported goods for the purpose of technological research and development Approval of the scientific research projects and the list of goods to be imported to implement the project by the line Ministry (multiple import cases must be accompanied by reconciliation tracking slip)

34 TAX ISSUES FOR CONSULTATION Regarding imported goods for the purpose of national security and defense a) The written request for tax exemption of the Ministry of Defense, Ministry of Public Security or their authorized/delegated units, (which clearly states: Goods are imported for the purpose of security and defense and financed by the central/local budget; quantity, type and value of each item on the list approved by the Ministry of Defense and Ministry of Public security in consultation with the Ministry of Finance, tax amount, customs declarations. If there are different customs declarations, they must list the customs declaration for tax exemption ( multiple import cases must be accompanied by reconciliation tracking slip )

35 TAX ISSUES FOR CONSULTATION b) Import consignment contract (for the import consignment cases) or a notice of winning a contract to supply goods (for imported cases through bidding), clearly stating the price is exclusive of import duties; c) Certification of Ministry of Defense and Ministry of Public Security about importing goods for national security purpose such as weapons and ammunition used exclusively for national defense and not subject to value added tax

36 TAX ISSUES FOR CONSULTATION Regarding imported goods for the purpose of education and training Decision approving investment projects and list of equipment to be imported for the purpose of education and training by the line Ministry ( multiple import cases must be accompanied by reconciliation tracking slip ); Regarding raw materials, supplies and components imported for the manufacture and assembly of medical equipment Certificate of qualified manufacturer of medical equipment for exemptions of imported materials, supplies and components which cannot be produced domestically for the manufacture and assembly of medical equipment.

37 TAX ISSUES FOR CONSULTATION Regarding plant varieties and animal breeds, fertilizers, plant protection products Certificate of business registration, which has defined the function of importing plant varieties and animal breeds, fertilizers, plant protection products eligible for tax exemption; Regarding imported goods for the purpose of of printing and minting money Approval of the State Bank allowing organizations to import machinery, equipment, raw materials, supplies, components, parts, spare parts for printing and minting money.

38 Thank you! 38