Issuing invoices to Export Processing Zones (EPZ) is an important accounting-tax operation that contains many potential risks, such as: losing VAT refund rights or being subject to tax追collection. This article will help you understand the regulations, required documents, and proper handling when transacting with businesses in Export Processing Zones.
1. Why Be Careful When Issuing Invoices to Export Processing Zones?
Issuing invoices to Export Processing Zones (EPZ) is a specialized operation with the nature of “domestic export” and is subject to strict supervision from both tax and customs authorities. Since businesses in EPZ are considered export entities, even though they remain within Vietnamese territory, regulations regarding invoices, Value Added Tax (VAT), and accompanying documents are much stricter than regular domestic transactions.
Even a small error can lead to major consequences:
- VAT collection due to incorrect tax rate application
- Loss of input VAT refund rights, directly affecting cash flow
- Invoices excluded from reasonable expenses during tax settlement, increasing tax liability
2. What’s Special About Transactions with EPZ Businesses?
- Treated as “Domestic Export Transactions”
When domestic businesses sell goods to EPZ businesses, it’s essentially considered an export activity, even though goods don’t actually leave Vietnamese territory. EPZ businesses are considered special export entities, so all transactions with them must follow specific regulations regarding VAT rates, invoices, and customs procedures.
- Must File Customs Declarations
When selling goods to EPZ, suppliers must file export declarations (since EPZ is managed like an export zone). Without filing, conditions for applying 0% tax rate won’t be met.
- Special VAT Rate Application
Depending on the case, EPZ transactions may:
-
- Apply 0% tax rate (if export conditions are met)
- Apply 10% tax rate
- Be exempt from tax
- Complete and Valid Documentation Required
Transactions must include: contracts, customs declarations, payment documents, delivery receipts, warehouse release slips, etc.
- Supervised by Customs and Tax Authorities
EPZ businesses are strictly supervised by customs authorities (for goods) and tax authorities (for invoices, VAT, declarations, etc.).
3. Regulations on Issuing Invoices to Export Processing Zones
According to Article 8.1.c and Article 8.2.a of Decree 123/2020/ND-CP:
“Article 8. Types of Invoices
Invoices specified in this Decree include:
Value Added Tax invoices are invoices for organizations declaring VAT under the credit method used for activities:
c) Export to duty-free zones and cases considered as exports”
Therefore, when providing goods and services to duty-free zones, businesses must issue VAT invoices for this income.
4. VAT Rate Regulations
a. Cases Applying 0% Tax Rate:
- Export goods and services
- Construction and installation activities abroad and in duty-free zones
- International transportation; goods and services not subject to VAT when exported, except cases where 0% rate doesn’t apply
- Export goods and services sold to foreign organizations/individuals and consumed outside Vietnam
- Sales to organizations/individuals in duty-free zones
- Goods and services provided to foreign customers as prescribed by law
(According to Article 9.1 of Circular 219/2013/TT-BTC)
b. Cases NOT Applying 0% Tax Rate:
- Reinsurance abroad
- Technology transfer, intellectual property rights transfer abroad
- Capital transfer, credit provision, securities investment abroad
- Financial derivative services
- Postal and telecommunications services going abroad
- Export products that are unprocessed natural resources and minerals
- Imported tobacco, alcohol, and beer subsequently exported
- Goods and services provided to unregistered individuals in duty-free zones, except other specified cases
- Gasoline and oil sold to vehicles of EPZ businesses purchased domestically
- Automobiles sold to organizations/individuals in duty-free zones
- Services provided by businesses to organizations/individuals in duty-free zones: house rental, conference halls, offices, hotels, warehouses; employee transportation services; food services, etc.
- Certain services provided in Vietnam to foreign organizations/individuals: sports competitions, artistic and cultural performances, online payment services, etc.
(According to Article 9.3 of Circular 219/2013/TT-BTC amended by Article 1.5 of Circular 26/2015/TT-BTC)
5. Required Documents for 0% Tax Rate Benefits
Required documents when issuing invoices to EPZ to enjoy 0% tax rate include:
- Contracts for selling, processing goods, providing export services; export agency contracts
- Payment documents for export goods and services through banks and other documents as prescribed by law
- Customs declarations
(According to Article 9.2 of Circular 219/2013/TT-BTC)
However, customs declarations are NOT required for:
- Businesses exporting services and software through electronic means
- Construction and installation activities abroad or in duty-free zones
- Businesses providing electricity, water, office supplies, and daily necessities to EPZ businesses including: food, consumer goods (including labor protection items: clothing, hats, shoes, boots, gloves)
(According to Article 16.2 of Circular 219/2013/TT-BTC)
6. Common Mistakes to Avoid
In practice, many businesses still make numerous errors when issuing invoices to EPZ businesses, leading to serious consequences such as: loss of VAT refund rights, invoices excluded from reasonable expenses, or even tax collection and administrative penalties. Below are common errors requiring special attention:
- Not filing customs declarations when delivering goods to EPZ: This is mandatory for applying 0% tax rate. Missing declarations will cause transactions to be considered domestic and subject to 10% tax rate
- Payment not through banks: Loses conditions for applying 0% tax rate and VAT refund rights
- Combining multiple shipments and declarations on one invoice: Leads to document mismatches, difficult to prove during tax audits
- Incorrect or missing EPZ business information (name, tax code, address, etc.): Makes invoices invalid
- Not keeping sufficient supporting documents like contracts, delivery receipts, warehouse release slips, payment documents, etc., leading to risks of being unable to prove legitimate transactions
7. Conclusion
Although viewed as routine procedure by many businesses, issuing invoices to Export Processing Zones can easily cause serious errors if businesses don’t clearly understand regulations regarding tax rates, documents, and customs procedures. To avoid consequences like tax collection, loss of refund rights, or increased tax liability, businesses need to standardize documentation, comply with proper procedures, and regularly update the latest regulations from competent authorities.
References:
- Decree 123/2020/ND-CP Link.
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