What are the conditions to exempt tax for importing goods from bonded warehouse to inland to export


Under Point 1, Article 4 of Law on export and import duties: “Free trade zone means an economic zone located within Vietnam’s territory, established following law, having a definite geographic boundary, and separated from the outer area by hard fences to facilitate customs inspection and customs control by the customs authority and relevant agencies about exports and imports, inbound and outbound vehicles and passengers; the trading relationship between the free trade zone and the outside area is considered exportation and importation.”

Under Point 4, Article 3 of Law on foreign trade management: “customs-controlled area means a geological area in the territory of Vietnam that is established following regulations of Vietnam law and international treaties to which the Socialist Republic of Vietnam is a signatory and the exchange of products between this area, and the remaining territory of Vietnam or foreign countries are considered as import and export activities.”

Under Point 2, Article 28 of Commercial Law: “Import of goods means the bringing of goods into the territory of the Socialist Republic of Vietnam from foreign countries or special zones in the Vietnamese territory, which are regarded as exclusive customs zones according to the provisions of law.”

Officers of Ha Nam Customs Branch (Ha Nam Ninh Customs Department) checked cargo at bonded warehouse. Photo: H.Nụ
Officers of Ha Nam Customs Branch (Ha Nam Ninh Customs Department) checked cargo at bonded warehouse. Photo: H.Nụ

Article 12 of Decree 134/2016/NĐ-CP amended and supplemented at Point 6, Articles 1 of Decree 18/2021/NĐ-CP stipulating “Goods imported for manufacture of domestic exports are exempt from import duties as prescribed in Clause 7 Article 16 of the Law on Export and import duties”.

The basis for determining goods subjected to tax exemption complies with Clause 2, Article 12 of Decree No. 134/2016/ND-CP, as amended and supplemented in Clause 6, Article 1 of Decree 18/2021/ND-CP.

Article 10 of Decree 68/2016/ND-CP, as amended in Clause 6, Article 1 of Decree 67/2020/ND-CP stipulates the conditions for recognition of bonded warehouses: “The area to be recognized as a bonded warehouse or yard must be located in the area prescribed in Clause 1 Article 62 of the Law on customs or the border-gate economic zone or the area included in the logistics centre development planning approved by competent authorities; investment incentive areas; areas serving the export of concentrated agricultural, forestry and fishery products.

The bonded warehouse or yard must be separated from surrounding areas by walls, and fences, and meet customs inspection and supervision requirements, except for those located in border checkpoints or ports with walls or fences to keep it completely separated from surrounding areas.

To ensure working conditions for Customs authorities such as workplaces, goods inspection places, customs inspection equipment installation, and warehouses for storing material evidence of violations following regulations of the Ministry of Finance.

A bonded warehouse must occupy a land plot covering a minimum area of 5,000 m2 (including warehouses, yards and other supporting structures), especially the storage facility that covers a minimum area of 1,000 m2; A dedicated bonded warehouse must have a storage facility that covers the minimum area of 1,000 m2 or has the minimum volume of 1,000 m3; A bonded warehouse located within the boundaries of a seaport, inland waterway port, inland port, international airport terminal or international railway station must have a storage facility covering the minimum area of 1,000 m2; A bonded yard must cover a minimum area of 10,000 m2 while none of the requirements will be imposed on its storage facility.

The bonded warehouse must have software that is capable of storing, managing and providing online data to customs authorities, including information relating to names, categories, quantity and status of goods, times of receiving, dispatching and storing goods at the bonded warehouse as provided in the customs declaration for management under the automatic customs management and control system.

It must be equipped with a camera system connected online with its supervisory customs authority. All locations in the bonded warehouse or bonded yard (including its gate, entrance and internal parts, except for internal parts of a bonded warehouse which is used for storing frozen goods) must be monitored 24/7 and camera images must be kept for at least 06 months.”.

The Director General of the General Department of Customs promulgates standards for data exchange between customs authorities and bonded warehouse businesses on software for managing goods in and out and the monitoring system.

Regarding VAT policy, according to the General Department of Customs, in Clause 20, Article 4 of Circular 219/2013/TT-BTC stipulating on subjects not subject to VAT: “The goods forwarded through Vietnam’s territory; goods temporarily imported or temporarily exported, raw materials imported for manufacturing or export processing under contracts with foreign partners. The goods and services traded between a foreign party and a free trade zone or among free trade zones.

Free trade zones include export-processing zones, export-processing companies, tax-suspension warehouses, bonded warehouses, special economic zones, commercial-industrial zones, and other economic zones established and provided with similar tax incentives as free trade zones, according to Decisions of the Prime Minister. The transactions between a free trade zone and an external party are considered export/import.

Based on current regulations, the General Department of Vietnam Customs said that a bonded warehouse must meet the definition of free trade zone as prescribed in Clause 1, Article 4 of the Law on export and import duties, and be a customs-controlled area as prescribed in Clause 4, Article 3 of the Law on Foreign Trade Management, the trading relationship between the free trade zone and the outside area is consider exportation and importation.

Therefore, in the case of Khanh Viet Corporation, the General Department of Vietnam Customs said that the company imported goods from bonded warehouses into the country to produce export goods and exported products to foreign countries has met the requirements specified in Article 12 of Decree 134/2016/ND-CP as amended and supplemented in Clause 6, Article 1 of Decree 18/2021/ND-CP. Therefore, they will be exempted from import duty and not subject to VAT following the regulations.

The General Department of Vietnam Customs suggested that Khanh Viet Corporation contact the customs office where the import declaration is registered for guidance and handling procedures as prescribed.


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