In early September, the General Department of Customs (GDC) issued Official Letter No. 4218/TCHQ-CCHĐH to respond to KOCHAM regarding issues related to non-taxable goods of Export Processing Enterprises (EPE).
1.EPE leasing machinery, equipment, and molds to domestic enterprises and wanting to bring components, accessories, and materials into the domestic market for replacement, repair, and upgrade
In order for EPEs to lease and lend machinery, equipment and molds to domestic enterprises to serve export processing activities: the EPE must carry out temporary export – re-import procedures, and the domestic enterprise must carry out temporary import – re-export procedures. The machinery, equipment, and molds upon re-import must be the same goods that were temporarily exported.
(Clause 1, Article 50 of Decree 08/2015/ND-CP)
The GDC states that if the machinery, equipment, and molds after repair, replacement, or upgrade are no longer the same goods that were temporarily exported, they do not meet the conditions to carry out the above procedures.
Therefore, if the EPE needs to repair, replace, or upgrade machinery, KOCHAM should guide enterprises to carry out re-import procedures. After completing the repair, replacement, or upgrade, the machinery, equipment, and molds can continue to be leased or lent to domestic enterprises.
2. EPEs destroy and dismantle non-taxable machinery and equipment and recover some parts for reuse
Regarding this issue, the GDC suggests that KOCHAM guide its EPE members to note the actual process of handling machinery and equipment and the method of accounting and bookkeeping at the enterprise in accordance with the law, emphasizing:
- Regulations on EPEs importing goods for export production activities must carry out customs procedures and use them for the right production purposes.
(Article 74 of Circular No. 38/2015/TT-BTC)
- Regulations on customs procedures when EPEs liquidate hooks and equipment.
(Article 79 of Circular No. 38/2015/TT-BTC)
If the EPE wants to retain some parts for replacement or upgrade of other machinery, it must clearly state the purpose of use of these parts for the GDC to provide detailed guidance.
3. EPEs transfer indirect materials and consumer goods to domestic enterprises performing processing contracts
Regarding this issue, the General Department of Customs cannot provide specific guidance as KOCHAM’s question includes many types of goods with different customs procedures and tax policies. The General Department of Customs suggests that KOCHAM specify the question with examples to receive guidance for each specific case.
However, the GDC notes that: if the domestic processing enterprise imports indirect materials and consumables from the EPE for management and operation activities, and these goods do not directly constitute the exported processed product or do not directly participate in the processing process, they are not eligible for tax exemption.
(Clause 6, Article 16 of the Law on Import and Export Tax)