Converting to the Export Processing Enterprise (EPE) model is becoming a popular trend as businesses seek to maximize preferential policies to optimize costs in the increasingly complex international trade environment. With significant tax and customs duty incentives and other support policies, the EPE model is attracting strong interest in industrial parks and export processing zones nationwide.
1. What is an Export Processing Enterprise (EPE)?
An Export Processing Enterprise (EPE) is a business unit specializing in producing goods and products for export to international markets. These enterprises operate primarily in export processing zones, economic zones, or planned industrial parks. According to current legal regulations, an export processing enterprise is defined as an enterprise specializing in producing export goods and providing services for export production activities, operating in export processing zones, industrial parks, or economic zones.
(According to Clause 20, Clause 21 Article 2 of Decree 35/2022/ND-CP)
| Criteria | Regular Enterprise | EPE |
|---|---|---|
| Production objective | Diverse | Primarily export |
| Operating location | Nationwide | Within IZ/EPZ/EZ |
| VAT | 8% or 10% | Tax-exempt or 0% |
| Machinery import | Subject to tax | Tax-exempt |
2. Outstanding Benefits of Converting to Export Processing Enterprise (EPE)
a. Export and Import Tax Exemption
According to point c, clause 4, Article 2 of the Export Tax and Import Tax Law 2016, the following types of goods are exempt from export and import taxes:
- Goods transferred from one non-tariff zone to another non-tariff zone
- Goods imported from abroad into non-tariff zones, used only for production or consumption within the zone
- Goods exported from non-tariff zones abroad
Since Export Processing Enterprises (EPE) are considered non-tariff zones, goods in the above cases enjoy export and import tax exemptions.
b. Value Added Tax (VAT) Exemption
According to clause 20, Article 4 of Circular 219/2013/TT-BTC, Export Processing Enterprises (EPE) are not subject to VAT as they are classified as non-tariff zones, including: export processing zones, export processing enterprises, bonded warehouses, bonded zones, customs warehouses, special trade economic zones, trade-industrial zones, and other economic zones enjoying similar tax incentives.
c. Application of 0% Tax Rate
Based on Article 9 of Circular 219/2013/TT-BTC, a 0% tax rate applies to exported goods and services and goods and services supplied to organizations and individuals in non-tariff zones. This brings practical benefits to enterprises supplying goods and services to Export Processing Enterprises (EPE):
- Enhanced price competitiveness
- More favorable VAT refund procedures
- Especially in the current context, when VAT refund procedures face many obstacles due to regulations on import-export in place, having partners selling to EPEs helps VAT refund applications be processed more quickly
3. Conditions for Converting to Export Processing Enterprise (EPE)
a. Field of Activity
Enterprises must specialize in producing export products, providing services for export production and export activities.
(According to Clause 20, Article 2 of Decree 35/2022/ND-CP)
b. Operating Area
Enterprises must operate within export processing zones, industrial parks, or economic zones. If an enterprise meets all other conditions but does not have an address within the specified zones, it cannot convert to an Export Processing Enterprise (EPE).
(According to Clause 21, Article 2 of Decree 35/2022/ND-CP)
c. Customs Inspection and Supervision Conditions
Investors converting to Export Processing Enterprises (EPE) must fully meet the inspection, supervision, and control conditions of customs authorities:
Physical Security System: Hard fencing separating from external areas, gates/doors for goods control
Electronic Surveillance System: 24/7 surveillance cameras, online connection with customs authorities, minimum 12-month data storage
Management Software: Software for managing duty-free imported goods to report settlement of import-export-inventory Export Processing Enterprises (EPE) wishing to enjoy investment incentives and tax policies must be confirmed by competent customs authorities as meeting inspection and supervision conditions before operation.
(According to Clause 2, Article 26 of Decree 35/2022/ND-CP and Article 28a of Decree 18/2021/ND-CP)
4. Detailed Process for Converting to Export Processing Enterprise (EPE)
a. Preparing Export Processing Enterprise Conditions
Regarding Field of Activity Enterprises need to consider adjusting their Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) to maintain only export production activities, in accordance with EPE regulations. This means enterprises must abandon other investment and business activities such as import rights and distribution rights in the Vietnamese market, to focus entirely on export production. If enterprises still want to maintain other business activities, they need to implement one of two options:
- Build complete isolation barriers between export production areas and other areas
- Establish branches to conduct activities outside the scope of export production
Regarding Operating Area Enterprises need to have operating locations within export processing zones, industrial parks, or economic zones. Regarding Fence Systems and Entry Gates Enterprises need to build hard fencing for separation and construct entry gates ensuring goods entering the EPE only pass through controlled gates/doors. Regarding Surveillance Camera Systems Enterprises need to install cameras at important locations: entry gates, raw material storage areas, waste material areas, and finished product areas. Camera systems must meet strict technical standards according to Decision No. 247/QD-TCHQ:
| No. | Item | Technical Requirements |
|---|---|---|
| 1 | Image sensor | 1/2.8″, CMOS or CCD technology |
| 2 | Day/night function | Yes |
| 3 | Pixel count | 1920×1080 |
| 4 | White balance | Yes |
| 5 | Image compression standard | Minimum: M-JPEG, H.264, H.265, H.264+, H.265+ |
| 6 | Focal length | 2.8mm – 12mm |
| 7 | Horizontal viewing angle | Minimum 33 degrees |
| 8 | Frame rate | 30 fps |
| 9 | Network protocol | IPv4, IPv6, TCP, DHCP, HTTP, SNMP |
| 10 | Backlight compensation | Minimum 146 dB (1920×1080) or 120 dB (2560×1440) |
| 11 | Dust/water resistance | IP67 |
| 12 | Operating temperature | Maximum 60°C |
| 13 | Light sensitivity | ≤ 0.0225 lx (color)/0 lx (with IR) |
| 14 | ONVIF standard | Yes |
| 15 | Safety standards | EN 60950-1, CUL 60950-1, CAN/CSA-C22.2 No.60950-1-07 |
Additional requirements:
- Storage time: minimum 12 months
- Online connection with Customs Authority surveillance system
- Anti-intrusion security features
- Dedicated manager to work with customs authorities
Regarding Duty-free Goods Management Software System Enterprises must have duty-free imported goods management software capable of tracking and extracting data to report settlement on import-export-inventory status of imported raw materials and materials and the quantity of manufactured products.
b. Prepare IRC Amendment Application
According to Article 26.1.b of Decree 35/2022/ND-CP, the application includes:
- Commitment letter on ability to meet customs inspection and supervision conditions
- Document requesting investment project adjustment
- Report on investment project implementation status up to the adjustment time
- Investor’s decision on investment project adjustment (for organizational investors)
- Customs authority’s confirmation document on completed tax obligations and raw material inventory report
- Explanatory documents and other materials as required by competent authorities (if any)
After complete preparation, enterprises submit applications to competent authorities (usually Economic Zone/Industrial Park Management Boards).
c. Raw Material Inventory Report
Enterprises report the quantity of remaining raw materials and supplies in inventory; customs authorities will inspect and process taxes according to regulations.
d. Complete Tax Obligations
Before conversion, enterprises are responsible for fully paying all outstanding tax debts and penalties to customs authorities and submitting applications for confirmation of completed tax obligations.
e. Investment Registration Authority Approves Application
The investment registration authority issues the Export Processing Enterprise (EPE) Registration Confirmation within 03 working days from receiving complete and valid applications.
f. Customs Authority Inspection and Confirmation
Based on investor requests, the investment registration authority will send documents to competent customs authorities for opinions on the ability to meet customs inspection and supervision conditions. Customs authorities are responsible for organizing actual inspections within a maximum of 10 working days from receiving the documents.
g. Supplement and Complete Conditions
Enterprises have 01 year to complete customs inspection and supervision conditions from the date the Customs Authority first confirms that the enterprise does not meet requirements.
Important Note: After the 01-year deadline, if enterprises do not meet conditions, they will not enjoy preferential tax policies and must declare and pay all taxes, late payment fees, and penalties for imported goods that previously received preferential policies.
5. Export Processing Enterprise (EPE) Conversion Service – UNI Customs Consulting
With over 10 years of deep experience in customs consulting, UNI is proud to be a trusted partner for many enterprises in their journey to optimize import-export operations and effectively utilize preferential policies. Consulting for conversion from regular enterprises to Export Processing Enterprises (EPE) is one of the leading strategic solutions that UNI is implementing, trusted and chosen by many enterprises.
Comprehensive Service Commitment:
- Assess enterprise’s ability to meet conditions
- Guide application completion and conversion condition preparation
- Support procedural processes and work with functional agencies
- Consult on specialized tax and inventory reporting issues
- Guide maximum utilization of export processing enterprise incentives
>>>> Related Service: EPE & AEO Setup and Conversion Consulting
Converting to the Export Processing Enterprise (EPE) model brings significant tax and trade benefits, but also comes with strict requirements for customs management, infrastructure, and management systems. Enterprises need to thoroughly prepare legal, technical, and operational conditions before implementing conversion procedures. If properly implemented with professional support, the Export Processing Enterprise model will be a powerful lever helping enterprises save costs, enhance competitiveness, and sustainably expand long-term export operations.
📞 Contact UNI Customs Consulting for free consultation:
📧 Email: uni@eximuni.com
📱 Hotline: +(84) 908-535-898 (Vietnamese) | +(84) 902-927-767 (Korean)