Circular No. 06/TC-TCT stipulates and guides the application of export tax rates and import tax rates for complete equipment and individual components.

CIRCULAR

Guidelines for the Implementation of Tax Policies
for Duty-Free Shops at Seaports and International Airports in Vietnam

On November 13, 1990, the Ministry of Commerce and Customs issued Circular No. 12/TTLB-TN-TCHQ on the organization and operation of duty-free shops at seaports and international airports, and the Ministry of Finance also issued Circular No. 165 TC/TCT dated March 31, 1992 to guide the implementation of tax policies for this activity. However, through inspections, it was found that the implementation was inconsistent across units.

To ensure uniform tax management for this activity nationwide, based on current tax laws and ordinances, the Ministry of Finance guides the implementation of tax policies for this form of business as follows:

 I. APPLICABLE OBJECTS

This Circular applies to duty-free shops permitted to sell goods to outbound passengers and transit passengers at seaports and international airports in Vietnam and organized under the following forms:

1. Domestic enterprises conducting business independently.

2. Domestic enterprises operating under the form of selling goods on behalf of foreign entities or both independently and as agents for foreign entities.

3. Domestic enterprises entering into contracts with foreign parties to sell duty-free goods under revenue-sharing or profit-sharing arrangements.

4. Foreign-invested enterprises and foreign parties participating in joint venture contracts are granted investment licenses by the State Committee for Cooperation and Investment to engage in duty-free shop operations.

 1. Export duties, import duties, and value-added tax:

1. Import and Export Duties:

Goods imported from abroad into Vietnam for sale at duty-free shops are exempt from import duties.

Goods purchased from the domestic market by duty-free shops for sale at their premises are considered export goods and must be subject to export duties according to the specific export tariff rates set forth in the export tariff schedule.

For imported goods intended for sale at duty-free shops, if sold to the wrong target or consumed in the domestic market, in all cases, they shall be considered as tax evasion and the duty-free shop must pay back the exempted import tax and be fined twice the amount of the evaded tax.

2. Business Income Tax and Profit Tax:

Business income tax is calculated on the total sales revenue (without distinction between imported goods sales revenue and domestically produced goods sales revenue) at a rate of 1% business income tax applicable to export activities. In cases where the duty-free shop maintains books and records in accordance with regulations and meets conditions approved by the tax authority, it pays business income tax at a rate of 14% on the difference between selling price and purchase price.

Profit tax payable is 45% of taxable profits.

For duty-free shops involving foreign participation, business income tax and profit tax shall be implemented as follows depending on the form of business organization:

a) In the case of domestic enterprises operating duty-free shops as agents for foreign entities:

The domestic enterprise shall pay business income tax at a rate of 12% on the commission received and pay profit tax according to the prescribed regime.

The foreign party shall pay business income tax and profit tax at a combined rate of 8% on the total amount paid by the domestic enterprise for sales made as an agent.

b) In the case of domestic enterprises cooperating with foreign entities to operate duty-free shops under revenue-sharing arrangements:

The domestic enterprise shall pay business income tax on its share of the revenue and profit tax according to the regulations.

The foreign entity shall pay business income tax and profit tax at a combined rate of 8% on the total revenue shared.

c) In cases where Vietnamese enterprises cooperate with foreign parties to operate duty-free shops under a profit-sharing arrangement, the duty-free shop pays business income tax and corporate income tax according to regulations applicable to Vietnamese enterprises, and when the foreign party transfers its share of profits abroad, no withholding tax on repatriation of profits is required.

d) Foreign-invested enterprises and foreign parties participating in joint venture contracts granted investment licenses by the State Committee for Cooperation and Investment to engage in duty-free shop operations must pay business income tax and corporate income tax according to the provisions of the investment license.

d) Foreign-invested enterprises and foreign parties participating in joint ventures and obtaining investment licenses from the State Committee for Cooperation and Investment to engage in duty-free shop operations shall pay business income tax and profit tax according to the provisions in the investment license.

The foreign party participating in a foreign-invested enterprise or a joint venture contract granted an investment license by the State Committee for Cooperation and Investment must pay withholding tax on repatriation of profits at the rate specified in the investment license.

Foreign parties participating in foreign-invested enterprises or joint ventures and obtaining investment licenses from the State Committee for Cooperation and Investment shall pay withholding tax on the transfer of profits out of the country at the rate specified in the investment license.

Foreign parties participating in duty-free shop operations under other forms shall not be subject to withholding tax on the transfer of profits out of the country.

4. Other Taxes:

 III. PROCEDURES FOR EXEMPTION FROM IMPORT TAX AND COLLECTION
AMENDS THE RATE OF IMPORT DUTY FOR THE FOLLOWING ITEMS: AVIATION FUELS WITH CODE 27100040 AND COMMON FUEL WITH CODE 27100050 UNDER GROUP 2710 LISTED IN THE REVISED AND SUPPLEMENTED IMPORT DUTY SCHEDULE ACCOMPANYING DECISION NO. 1233 TC/TCT/QĐ OF THE MINISTER OF FINANCE DATED DECEMBER 9, 1995 TO THE NEW RATE OF IMPORT DUTY AS FOLLOWS:

III. PROCEDURES FOR DUTY EXEMPTION AND COLLECTION OF IMPORT DUTIES

Each time a duty-free shop imports goods for sale at its premises, it must present the following documents to the customs office at the port of entry:

The quota granted by the Ministry of Trade allowing the shop to import goods for sale to outbound passengers.

The import declaration.

Purchase contract or agency agreement for selling goods on behalf of foreign entities.

Based on the relevant documentation, the customs office directly managing the duty-free shop handles the import procedures, stamps "tax-free goods" on the declaration form, escorts the consignment to the warehouse, and implements customs supervision and sealing according to regulations.

The customs office directly managing the duty-free shop is responsible for maintaining records to monitor and supervise the stock-out and sales activities of the duty-free shop. The General Department of Customs studies and guides the inspection and supervision procedures for stock-in, stock-out, and sales of duty-free shops to ensure uniform implementation nationwide.

The customs office directly managing the duty-free shop is responsible for maintaining records to monitor and supervise the stock removal and sales activities of the duty-free shop. The General Department of Customs will study and guide the procedures for monitoring and supervising the importation, stock removal, and sales activities of duty-free shops to ensure uniform implementation nationwide.

In cases where the duty-free shop has inventory and is permitted by the Ministry of Trade to sell the remaining stock in the domestic market, before selling the goods in the domestic market, the duty-free shop must declare to the customs office directly managing the shop to calculate and collect the import tax according to regulations.

 IV. PROCEDURE FOR PAYING BUSINESS INCOME TAX AND PROFIT TAX

The duty-free store shall declare and pay business income tax and profit tax in accordance with Circulars No. 73A TC/TCT and Circular No. 75A TC/TCT dated August 31, 1993, issued by the Ministry of Finance.

For cases where foreign parties pay business income tax and profit tax at the consolidated rate, they shall declare and pay taxes in accordance with Circular No. 30 TC/TCT dated July 18, 1992, issued by the Ministry of Finance.

 V. IMPLEMENTATION PROVISIONS

This Circular takes effect from the date of signature. Any difficulties encountered during implementation should be reported to the General Department of Taxation under the Ministry of Finance for timely research and resolution./.