In the context of international economic integration, export processing enterprises subcontracting domestically is becoming a strategic solution to optimize costs, utilize local resources and ensure flexible supply chain.
1, What is export processing enterprise subcontracting domestically?
An export processing enterprise is an enterprise that conducts export processing activities in export processing zones, industrial parks and economic zones.
(According to clause 21, Article 2 of Decree 35/2022/ND-CP)
Meanwhile, domestic subcontracting is a form where export processing enterprises hire domestic enterprises to perform part or all of the production and processing stages of products.
It can be seen that this model helps export processing enterprises maximize labor resources and lower costs from domestic enterprises, while ensuring products still meet export standards.
2, Benefits when export processing enterprises subcontract domestically
a, Optimizing production costs
Domestic labor costs are lower compared to many other countries, helping export processing enterprises save significantly on labor costs. Utilizing existing infrastructure and resources of domestic enterprises without additional investment.
b, Flexibility in production
Export processing enterprises can flexibly adjust processing output based on market demand. When demand increases, production scale can be easily expanded through domestic partners.
c, Tax optimization opportunities through domestic processing contracts
Domestic subcontracting helps export processing enterprises minimize risks related to transportation, goods control and customs procedures. Faster delivery time due to shorter geographical distance between domestic processing location and export processing enterprise.
3, Customs procedures for export processing enterprises subcontracting domestically
Export processing enterprises subcontracting domestically do not need to complete customs procedures.
(when bringing goods domestically for processing and receiving processed products from domestic sources)
(According to Article 1.52 of Circular 39/2018/TT-BTC)
However, export processing enterprises need to notify the processing facility to Customs authorities (where they plan to complete import procedures for goods to be processed)
(According to Article 1.36 of Circular 39/2018/TT-BTC)
4, Important notes when export processing enterprises subcontract domestically
a, Control of materials sent for processing:
Export processing enterprises need to strictly control materials sent for processing to ensure no material loss. This requires enterprises to maintain detailed records tracking the quantity and types of materials provided to processing units. Enterprises should conduct periodic inventory checks of materials at processing units and compare with recorded books.
b, Contract and invoice management:
All transactions between export processing enterprises and domestic subcontractors need clear and transparent contracts and invoices for explanation when Customs authorities inspect.
Processing contracts must be established in writing or in other legally equivalent forms as prescribed. Contracts must include at minimum the following clauses:
- Names and addresses of contracting parties and direct processing party
- Names and quantities of processed products
- Processing prices
- Payment terms and payment methods
- List, quantity, value of raw materials, auxiliary materials, supplies and usage standards
- List and value of leased or borrowed machinery and equipment (if any)
- Methods for handling waste materials, waste and defective products
- Delivery location and time
- Product trademarks and origin names
- Contract validity period
(Based on Article 39 of Decree 69/2018/ND-CP)
For invoices, export processing enterprises must also ensure invoices are issued according to regulations, fully reflecting processing service content and service value.
All contracts and invoices need to be systematically stored for easy retrieval when necessary.
c, Settlement reports:
Periodically, export processing enterprises must submit settlement reports to customs authorities as prescribed. Export processing enterprises should carefully prepare settlement reports, ensuring accurate figures and complete supporting documents for verification. Timely and complete submission of settlement reports will help enterprises avoid tax and customs risks during operations.
5, Frequently asked questions related to export processing enterprises subcontracting domestically
a, Do export processing enterprises need to notify processing facilities for export goods?
According to regulations in: Article 53.1.a of Circular 38/2015/TT-BTC amended by Article 1.36 of Circular 39/2018/TT-BTC:
Notification of processing facilities, reprocessing facilities, export goods production facilities; storage locations for raw materials, supplies, machinery, equipment, export products (hereinafter called CSSX notification)
a) Responsibilities of organizations and individuals: a.1) CSSX notification according to information criteria prescribed in […] and other accompanying documents […] to the Customs Sub-department that organizations and individuals plan to choose for customs procedures […] (hereinafter called managing Customs Sub-department) … through the System, including cases where organizations and individuals are export processing enterprises (hereinafter called DNCX).
It can be seen that export processing enterprises must notify export goods processing facilities to the Customs Sub-department where they plan to complete import procedures.
b, Can excess raw materials after processing be transferred for domestic consumption or disposal?
Based on Articles 42.1 and 42.2 of Decree 69/2018/ND-CP, Article 64.2 of Circular 38/2015/TT-BTC:
Export processing enterprises can authorize domestic enterprises to sell waste materials in the domestic market. The processing recipient (domestic enterprise) and waste material purchasing company must complete on-site import-export procedures and fulfill tax obligations as prescribed.
c, What are the tax policies for export processing enterprises subcontracting and domestic enterprises receiving processing?
Based on Article 2.4.c of the Export Tax, Import Tax Law 2016 and Article 1.52 of Circular 39/2018/TT-BTC:
For Export Processing Enterprises: Goods of export processing enterprises sent for domestic processing are not subject to import tax or value-added tax (VAT). For Domestic Enterprises: Import tax and VAT policies apply as for goods imported for processing for foreign countries.
6, UNI Consulting Customs Advisory: Solutions for export processing enterprises subcontracting domestically
UNI Consulting – a unit specializing in providing comprehensive customs consulting services for export processing enterprises – brings specific solutions to resolve difficulties in domestic subcontracting relationships:
a. Compliance consulting and tax risk management
Tax policy analysis: Comprehensive analysis and updates on the latest tax regulations applicable to export processing enterprises and domestic processing partners. Building effective tax management systems: Designing monitoring and tax obligation management systems suitable for each export processing enterprise’s characteristics. Tax exemption and reduction consulting: Guiding export processing enterprises to utilize current preferential policies and tax exemptions for processing activities.
b. Comprehensive customs procedure support services
Customs procedure representation: UNI Consulting represents export processing enterprises in completing necessary customs procedures with customs authorities. File monitoring and updating: Managing and continuously updating customs files for both export processing enterprises and domestic processing partners. Handling arising issues: Supporting resolution of issues arising during customs procedures, ensuring smooth clearance.
c. Processing contract management system consulting
Processing contract templates: Providing and supporting development of processing contract templates complying with current legal regulations. Contract implementation monitoring system: Designing processes to monitor contract implementation, helping export processing enterprises understand processing work progress and quality.
With a team of experienced experts with deep understanding of customs law, UNI Consulting commits to bringing optimal solutions to export processing enterprises, helping them operate domestic subcontracting activities effectively, comply with legal regulations and optimize production costs.
📞 Contact UNI Customs Consulting for free consultation
📧 Email: uni@eximuni.com
📱 Hotline: +(84) 908-535-898 (Vietnamese) | +(84) 902-927-767 (Korean)
References:
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Decree No. 35/2022/ND-CP
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Decree No. 69/2018/ND-CP
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Circular No. 38/2015/TT-BTC
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Circular No. 39/2018/TT-BTC
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Decision No. 1357/QD-TCHQ dated 2021
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Official Dispatch No. 5529/TCHQ-TXNK dated 2021