Tax policy for export processing enterprises in Vietnam

by NguyenThiThuTrang

Dear lawyer, I am one of the local export processing enterprises, witnessing the scene of people growing agricultural products that cannot be sold, so I opened a business to process dried fruit products for export. Because it’s just opened, it’s still quite difficult, I want to ask a lawyer to advise on tax policies of the state to partially support the costs of the business. Can a lawyer advise me what is the current tax policy for export processing enterprises in Vietnam? What are the conditions to enjoy those policies? Seek advice from a lawyer.

To answer your questions about “Tax policy for export processing enterprises”, please refer to our article below to clarify this issue.

Legal grounds

Circular No. 39/2018/TT-BTC

Circular No. 219/2013/TT-BTC

What is an export processing enterprise?

Export processing enterprises are enterprises specializing in the production of goods and production for export to other countries. These enterprises are located in industrial parks and export processing zones to ensure that they do not affect the daily life of people in residential areas.

If the enterprise is not located in the economic zone, it must be separated from the outside areas according to the provisions of law. The products after being manufactured will be 100% exported to foreign countries and must be fully declared to the customs office.

Regulations on export processing enterprises

Based on Decree No. 114/2015/ND-CP amending and supplementing Article 21 of Decree No. 29/2008/ND-CP and Decree No. 164/2013/ND-CP stipulating a number of articles on export processing enterprises. as follows:

There are separate regulations for each customs area and non-tariff zone for export processing enterprises, except for the non-tariff zone in the border gate economic zone.

Export processing enterprises located in export processing zones have fences, high walls, entrance and exit gates, meeting the inspection and supervision of customs authorities and a number of other relevant agencies.

Export processing enterprises licensed to carry out activities related to trading in Vietnam must have separate accounting books which record related costs and revenue from such trading. These trading products need to be kept separate from the export goods area or a branch can be established outside the export processing zone to carry out trading.

Export processing enterprises may liquidate their assets into the Vietnamese market according to the provisions of the Law on Investment and Trade. The liquidation of assets does not apply the policy on management of imported and exported goods, except for goods that are required to be managed according to standards and conditions, managed by permits or which have not been subject to specialized inspection.

Export processing enterprises may purchase food, foodstuffs, stationery, building materials or other necessary items to serve the construction and maintenance of operations in the enterprise and daily activities of officials and workers in the export processing zone.

Officials/employees working in export processing zones, when bringing foreign exchange from inland Vietnam to the industrial zone and vice versa, do not need to declare customs.

Tax policy for export processing enterprises

Tax policies of export processing enterprises are applied according to the provisions of export tax and import tax, specifically as follows:

In the case of export processing enterprises processing for domestic enterprises Import tax: When the export processing enterprises receive processing for domestic enterprises, the tax is not included in the customs value of products after processing but on the value of the products of supplies and raw materials that the enterprise has used for processing. In case a processing enterprise produces manufactured or processed goods without using raw materials and components imported from abroad, the domestic enterprise tax will not be collected. Conversely, if processed products are manufactured from raw materials and components imported from abroad, domestic enterprises must pay import tax according to the Law on Import Tax and Export Tax.

Regarding VAT: Domestic enterprises must declare and pay VAT specified in Clause 2, Article 7 of Circular No. 219/2013/TT-BTC. When processing export processing enterprises for domestic enterprises, if the processing activities of export processing enterprises are directly related to the purchase and sale of goods in Vietnam, the export processing enterprises are obliged to declare and pay tax. 10% VAT.

In case an export processing enterprise processes for another export processing enterprise

Regarding export and import taxes: goods sent for processing, production, or recycling at other export processing enterprises will be subject to any tariffs, including import and export taxes.
Regarding VAT: the purchase, sale and exchange of services between non-tariff zones will not be subject to VAT, so both export processing enterprises do not have to pay VAT.

Do export processing enterprises have to pay import tax?

If the importing enterprise is an export processing enterprise: according to regulations, goods imported into a non-tariff zone but must be exported abroad or goods exported into a non-tariff zone for use in a non-tariff zone may be import tax refund and no export tax. Therefore, in this case, the export processing enterprise will not be subject to import tax.
If the importing enterprise is a domestic enterprise, when imported goods and raw materials must pay import tax, when exporting goods to the export processing enterprise, they do not have to pay tax and receive a refund of the paid import tax amount before.

Preferential policies for export processing enterprises

The State always pays attention to, invests in and creates favorable conditions to promote processing enterprises to produce goods for export to foreign markets. Therefore, the state often offers many preferential policies for export processing enterprises:

Incentives on corporate income tax: When starting a new project, export processing enterprises will enjoy 17% corporate tax. Moreover, export processing enterprises are also entitled to tax exemption for the following 2 years and a 50% reduction in tax payable for the next 4 years.
Incentives on land rent: export processing enterprises are exempt from land rent for 7 years.
Import and export tax incentives: export processing enterprises are located in the non-tariff area, so they are not subject to import and export taxes.

Tax incentives for export processing enterprises

Value added tax: VAT = 0EPE is not subject to VAT for production activities for export -> no VAT declaration
Incentives for corporate income tax: PIT = 17% (10 years)Enjoy the preferential tax rate of 17% within 10 years (for new investment projects from January 1, 2016). Tax exemption for the first 2 years & 50% reduction of payable tax for the next 4 years (Except for the case of EPE in urban districts of special grade urban centers, grade I cities directly under the central government and grade I cities directly under the province)
Preferential land use feeInvestment projects of export processing enterprises are exempted from land rent for 07 years
Import and export tax incentivesTrade relations between export processing zones and foreign countries will not be subject to import and export taxes.
Tax incentive table

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Frequently asked questions

What are the customs procedures for export processing enterprises that hire domestic processing enterprises?

Pursuant to Clause 1, Article 76 of Circular 38/2015/TT-BTC, as amended and supplemented in Clause 52, Article 1 of Circular 39/2018/TT-BTC, stipulating goods processed by EPEs outsourced to domestic enterprises. determine:
– Domestic enterprises shall carry out customs procedures according to regulations on processing goods for foreign traders specified in Sections 1 and 2, Chapter III of this Circular. As for the location of customs procedures, domestic enterprises may choose to do so at the Customs Sub-department managing EPEs.
– EPEs do not have to go through customs procedures when bringing goods into the country for processing and receiving processed products from inland.

What are the regulations on tax rates for export processing enterprises according to current regulations?

According to the provisions of the law, many items are now subject to certain tax rates when imported into Vietnam. The importation of foreign goods into the non-tariff zone and used within the zone is an exception. Goods moved from one non-tariff zone to another are not subject to tax.
For goods imported into Vietnam but re-exported abroad or exported to a non-tariff zone, tax will be refunded. In short, what are the regulations on tax rates for export processing enterprises? You can understand that it is an export processing enterprise that is not subject to tax when importing goods from abroad into the enterprise to serve the production.

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