Export tariff is a type of duty imposed on goods that are limited to export. Meanwhile, import tariff is the tax that a nation or a territory imposes on goods that are originally exported from other countries.
Read this blog to explore other types of taxes that enterprises must pay when importing goods to Vietnam.
1. What is Tax-Exempt? Importance of Tax Exempt Status?
Tax-exempt status means a taxable object not being required to pay taxes by meeting the requirements issued by the law.
Tax-exemption is imposed to encourage businesses to purchase imported goods for the increase in goods and services consumption, as well as the economic development in various areas.
Furthermore, the tax-exemption also contributes to the decrease in product price, increasing the competitiveness of domestic goods, then attracting the foreign and domestic investors in Vietnam and creating more job opportunities, enhancing the resident’s income.
2. Legal Basis
The article below sets out 22 conditions to get tax-exempt status for goods imported or exported to Vietnam, along with a list of taxable objects.
The article below is based on the regulation of Import and Export Taxes Law No.107/2016/QH13.
3. Taxable Objects
The Article 2 of the 2016 Import and Export Taxes Law states taxable objects as follows:
3.1. Goods that are imported or exported through the Vietnamese border.
3.2. Products exported from domestic markets to non- zones, and goods imported from non-tariff zones to domestic markets.
3.3. Goods that are exported or imported on-site, and goods that are exported or imported by enterprises exercising the right to export, import, or distribute.
3.4. The following cases are not subject to export and import taxes:
a) Goods in transit, re-exported goods, and transshipment goods.
b) Humanitarian aid goods, non-refundable aid goods.
c) Goods exported from a non-tariff zone to foreign countries; goods imported from foreign countries into a non-tariff area and used only within the non-tariff zone; goods transferred from one non-tariff area to another.
d) The portion of petroleum used to pay resource taxes to the State upon export.
4. 22 Conditions to Get Tax-Exempt Status for businesses in Vietnam
According to The Article 2 of the 2016 Import and Export Taxes Law, there are 22 cases of tax exemption for businesses that import or export goods to Vietnamese territory.
4.1. The cases where goods of foreign enterprises and individuals are exempt from tax include:
- Goods exported or imported by foreign organizations or individuals that are entitled to preferential treatment or exemption in Vietnam within the limits stipulated in international treaties to which the Socialist Republic of Vietnam is a member;
- Goods imported for sale at duty-free shops.
4.2. Movable property, gifts, and presents can be tax-exempt in the following situations:
- Movable property, gifts, and presents within the limits specified for foreign organizations or individuals given to Vietnamese organizations or individuals, or vice versa.
- Movable property, gifts, and presents with a quantity or value exceeding the tax-exempt limit are subject to tax on the excess portion.
This does not apply in cases where:
- The recipient is an agency or organization whose operating expenses are guaranteed by the state budget and is authorized to receive such by a competent authority;
- The purpose is humanitarian or charitable.
4.3. Goods can be exempt from export and import taxes based on international agreements that Vietnam is a member of.
4.4. Goods with a value or tax amount below the minimum threshold are exempt from import and export taxes.
4.5. Tax exemptions for raw materials and processed products include:
- Raw materials, components, and parts imported for processing export products; completed products imported to be attached to processed products; and export processing products.
- Processed export products produced from domestic raw materials and materials subject to export taxes are not exempt from taxes on the corresponding value of domestic raw materials and materials constituting the export product.
- Goods exported for processing and then imported are exempt from export and import taxes on the value of the exported raw materials constituting the processed product. However, goods exported for processing and then imported that are resources, minerals, or products with a combined value of resources, minerals, and energy costs of 51% or more of the product’s cost are not exempt from taxes.
4.6. Raw materials, supplies, imported components for the production of export goods.
4.7. Goods manufactured, processed, recycled, or assembled in non-tariff zones without the use of imported raw materials and components shall be exempt from import and export taxes when imported into the domestic market.
4.8. The cases of exemption of temporarily imported and re-imported export or temporary export or re-import within a certain time limit includes:
- Goods temporarily imported or exported for the purpose of organizing or participating in fairs, exhibitions, product launches, sports, cultural, artistic, or other event.
- Machinery and equipment temporarily imported or exported for testing or product research and development.
- Machinery, equipment, and tools temporarily imported or exported for use within a specified period or for processing for foreign traders (except for machinery, equipment, tools, and means of transport of organizations or individuals permitted to temporarily import or export for investment projects, construction, installation of works, and production).
- Machinery, equipment, parts, and spare parts temporarily imported to replace or repair foreign seagoing vessels or aircraft, or temporarily exported to replace or repair Vietnamese seagoing vessels or aircraft abroad.
- Goods temporarily imported or exported to supply foreign seagoing vessels or aircraft anchored at Vietnamese ports.
- Goods temporarily imported or exported for warranty, repair, or replacement.
- Containment vessels temporarily imported or exported for transporting export or import good.
- Goods temporarily imported or exported for commercial purposes within the specified temporary import or export period (including any extension), with a guarantee from a credit institution or a deposit equivalent to the amount of import tax on the temporarily imported or exported goods.
4.9. Non-commercial goods, including samples, promotional materials, and media, are exempt from taxes.
If you need further consultation about tax exemption, tax reduction, and tax refund, please contact UNI. With over 8 years of experience in customs advisory, UNI is a trusted partner for businesses in handling customs and tariff issues.
4.10. Cases of tax exemption for imported goods to create fixed assets for investment beneficiaries entitled to investment incentives as prescribed by investment law include:
a) Machinery, equipment; components, parts, subassemblies, spare parts for assembly or synchronous use with machinery and equipment; raw materials, and materials used to manufacture machinery, equipment, or to manufacture components, parts, subassemblies, spare parts of machinery and equipment.
b) Specialized means of transport in the technological line used directly for the production activities of the project;
c) Domestic construction materials that have not yet been produced.
The import tax exemption for imported goods as prescribed in this clause applies to both new investment projects and investment expansion projects.
4.11. Plant varieties; same livestock; fertilizers and pesticides that cannot be produced domestically, need import equipment according to regulations of competent state management agencies, are exempt from taxes.
4.12. Cases of tax exemption for domestically produced raw materials, supplies, and components that are not yet produced include:
- Raw materials, supplies, and components that are not yet produced domestically and are imported for production of investment projects belonging to the list of preferential investment sectors.
- Or of investment projects located in areas with particularly difficult socio-economic conditions as prescribed by investment law, high-tech enterprises, science and technology enterprises, and scientific and technological organizations.
- The products mentioned above are exempt from import taxes for the first five years of production.
However, this exemption does not apply to:
- Mineral extraction projects.
- Projects producing goods where the combined cost of raw materials, minerals, and energy exceeds 51% of the total product cost.
- Projects producing or selling goods or services subject to special consumption tax.
4.13. Imported raw materials, supplies, and components needed to make medical equipment in Vietnam can be brought in tax-free for the first five years of production, if the equipment is for research and development.
4.14. Cases of tax exemption for imported goods serving oil and gas activities include:
- Machinery, equipment, spare parts, and specialized means of transport necessary for oil and gas activities, including temporary import and re-export.
- Components, parts, subassemblies, and spare parts for assembly or synchronous use with machinery and equipment; raw materials, and materials used to manufacture machinery, equipment, or to manufacture components, parts, subassemblies, and spare parts of machinery and equipment necessary for oil and gas activities.
- Materials necessary for oil and gas activities that are not yet produced domestically.
4.15. Cases of tax exemption for shipbuilding projects and facilities in the preferential industry and trade category as prescribed by investment law include:
- Imported goods to create fixed assets of a shipyard, including: machinery, equipment; components, parts, subassemblies, spare parts for assembly or synchronous use with machinery and equipment.
- Raw materials, and materials used to manufacture machinery, equipment, or to manufacture components, parts, subassemblies, and spare parts of machinery and equipment.
- Means of transport in the technological line directly serving shipbuilding activities; domestic construction materials that have not yet been produced.
- Imported goods such as machinery, equipment, raw materials, supplies, components, and semi-finished products that are not yet produced domestically and serve shipbuilding.
- Exported sea vessels.
4.16. Imported machinery, equipment, raw materials, supplies, components, parts, and spare parts for the purpose of printing and minting coins are exempt from import and export duties.
4.17. Goods imported as raw materials, supplies, or components that are not yet domestically produced and are directly used for the production of information technology products, digital content, or software are exempt from import and export duties.
4.18. Tax exemptions for goods exported or imported for environmental protection include:
- Machinery, equipment, vehicles, tools, and specialized materials imported that are not yet domestically produced and are used for collecting, transporting, treating, processing wastewater, waste, and exhaust gases, monitoring and analyzing the environment, producing renewable energy, treating environmental pollution, responding to and handling environmental incidents.
- Exported products produced from recycling and waste treatment activities.
4.19. Specialized imported goods that are not yet domestically produced and are directly used for education are exempt from import and export duties.
4.20. Import and export duties are exempted for:
- Imported machinery, equipment, spare parts, and specialized materials that are not yet domestically produced.
- Specialized scientific documents, books, and periodicals used directly for scientific research, technology development, technology incubation activities, incubation of science and technology enterprises, and technological innovation.
4.21. Import and export duties are exempted for specialized imported goods used directly for national security and defense, in which specialized means of transport must be of a type not yet produced domestically.
4.22. Goods exported or imported to serve social security, to remedy natural disasters, epidemics, and other special cases are exempt from import and export duties.
Here are 22 cases of import and export duty exemptions that businesses operating in Vietnam need to note.
Contact UNI now to receive consulting and support for tax exemption, and tax reduction for businesses importing or exporting products to Vietnam.