Customs Newsletters – Legal Updates May 2024

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1. Possibility of repealing the 0% VAT rate on services consumed in non-tariff zone 

The proposed amendments to the Law on Value-Added Tax are at the final approval stage and are expected to be adopted in Q4/2024. Notably, the content of these amendments could have a significant impact on enterprises operating in non-tariff zones, especially export processing enterprises (EPEs). 

Currently, the  Law on Value-Added Tax stipulated the application of 0% tax rate for export services which are services provided to foreign organizations and individuals and services consumed in the non-tariff zones (According to Clause 2, Article 1 of the Law on Value Added Tax 2016) 

However, the new proposed Law on Value-Added Tax is expected to narrow down the group of export services to which 0% VAT is applied. Accordingly, export services will only apply to services provided to foreign organizations and individuals, including: vehicle rental services used outside Vietnam’s territory; services provided by the aviation and maritime sectors directly to international transport or through agents.  

Thus, it is likely that the new VAT Law will repeal the application of 0% VAT rate on services consumed in non-tariff zones. At the same time, the proposed amendments to the VAT Law do not provide for VAT refunds for services consumed in non-tariff zones. The above regulations may put financial pressure on the operations of export processing enterprises (EPEs) and domestic enterprises that provide services to the non-tariff zones. 

The Vietnamese Government discussed and collected comments on the proposed amendments to the VAT Law during the Session on Legal Development in April 2024 (Resolution 49/NQ-CP). Notably, the Ministry of Finance is continuing its practical research, refer to foreign experiences to clearly define criteria, classification rules and contents of export services as a basis for stipulating cases where export services are subject to a tax rate of 0%. The Vietnamese Government also emphasized that the development of new regulations must ensure fairness and true nature of export services, ensuring a balance between the interests of import-export enterprises and state management requirements. 

Proposed amendments to the Law on Value Added Tax

Source: Resolution 49/NQ-CP  

2. VAT on “basic chemicals” and “chemical products” 

  • Decree 94/2023/ND-CP allows reducing VAT from 10% to 8%. However, this policy does not apply to some groups of goods and services, including “chemical products”. Therefore, “chemical products” are not entitled to VAT reduction, and a tax rate of 10% is applied. 

Note: “Chemical products” are products detailed in Appendix I of Decree 94/2023/ND-CP. 

  • Meanwhile, “basic chemicals” do not fall under the “List of goods not entitled to VAT reduction” specified in the Appendices of Decree No. 94/2023/ND-CP.  Therefore, “base chemicals” are entitled to a VAT reduction, and a tax rate of 8% is applied. 

Note: “Basic chemicals” are substances under the industry code 2011 in the “Vietnam Product Industry System” – Decision No. 43/2018/QD-TTg 

Official Letter No. 1382/TCHQ-TXNK 

Source: Official Letter 1382 

3. Revocation of Circular No. 83/2014/TT-BTC guidelines on VAT by Viet Nam’s List of Export-Import Commodities   

From June 8, 2024, Circular 83/2014/TT-BTC will be officially repealed.  

Accordingly, the notable content of this Circular will also be repealed: “VAT according to Viet Nam’s List of Export-Import Commodities” 

Circular No. 25/2024/TT-BTC 

Source: Circular 83/2014/TT-BTC 

4. Customs procedures for partial picking up of goods 

Goods declared on 01 customs declaration form can only be cleared when all goods on the declaration form meet the conditions of customs clearance. There are no regulations allowing partial customs clearance of goods declared on 01 customs declaration 

(Based on Article 37 of the 2014 Customs Law and VNACCS/VCIS system design) 

Therefore, in case goods belonging to 01 bill of lading are transported by 02 flights at 02 different times that businesses want to pick up the goods by each shipment, they must separate the bill of lading into 02 branch bills of lading before registering the declaration.  

After separating the bill of lading, the enterprise uses the branch bill of lading number to declare on the customs declaration form corresponding to each shipment to carry out customs clearance procedures in accordance with the regulations. 

Official Letter No. 1581/TCHQ-TXNK

Source: Official Official Letter No. 1581/TCHQ-TXNK 

 

5. Is the bonus for loading and unloading export goods included in the customs value?   

The customs value for exported goods is the selling price to the port of export, including: the selling price stated in the sales contract or commercial invoice and the costs associated with export commodities, excluding international shipping charges and international insurance costs (if any) 

(Based on Clause 3, Article 1 of Circular 60/2019/TT-BTC) 

In the process of loading goods onto ships, enterprises can use services including: cargo transportation services, loading and unloading goods, arranging goods in the ship hold, etc. These costs have been included in the shipment value. 

Upon completion of the export of goods, enterprises can add a bonus for services, such as loading and unloading cargo on board. This bonus may or may not arise depending on the effectiveness of each law on the export of goods. Therefore, this bonus is not related to the determination of customs value. Therefore, no addition or deduction is considered in the customs value of exported goods. 

Official Letter No. 1484/TCHQ-TXNK

Source: Official Letter No. 1484