Circular No. 127/1998/TT-BTC guides the implementation of import tax regimes for spare parts and components imported together with SKD, CKD, and IKD kits for production purposes.

CIRCULAR

GUIDELINES FOR IMPLEMENTING THE IMPORT TAX REGIME FOR REPLACEMENT PARTS AND SPARE PARTS IMPORTED WITH ASSEMBLED KITS FOR PRODUCTION PURPOSES

Pursuant to Decree No. 54/CP dated August 28, 1993 of the Government detailing the implementation of the Law on Export Tax, Import Tax, and the Law Amending and Supplementing Certain Provisions of the Law on Export Tax, Import Tax;

Pursuant to Article 3 of Decision No. 280/TTg dated September 28, 1994 of the Prime Minister on the issuance of the Export Tax Rate Table and Import Tax Rate Table;

After reaching consensus with relevant Ministries and Agencies, the Ministry of Finance hereby provides guidelines for the application of import tax rates for replacement parts and spare parts imported together with assembled kits (SKD, CKD, IKD) for production purposes as follows:

1. For spare parts and replacement parts imported for the purpose of replacing damaged components during the production and assembly of complete products from imported assembled kits (SKD, CKD, IKD) (if the tax rate of such spare parts and replacement parts is higher than the tax rate of the imported assembled kits), the tax shall be calculated based on the tax rate of the assembled kits at the time of importation.

2. In order to apply the tax policy stipulated in Point 1 of this Circular, enterprises must present the following documents when handling customs procedures:

- A letter requesting the calculation of import tax for spare parts and replacement parts according to the assembled kits (SKD, CKD, IKD) issued by the enterprise.

- A consumption quota for each spare part and replacement part imported for spare parts purposes (additional imports) outside the assembled kits (SKD, CKD, IKD) confirmed by the Ministry of Industry.

- A letter from the Ministry of Trade permitting the import of spare parts and replacement parts for production and assembly purposes from the assembled kits (SKD, CKD, IKD) of the enterprises.

- An explanation of the annual production and assembly plan.

Based on these documents, the Customs Departments of provinces and cities will verify the quantity of spare parts and replacement parts imported according to the assembled kits (SKD, CKD, IKD) to implement the import tax calculation as prescribed in Point 1 of this Circular.

Planning process:

Annually, based on the annual production and assembly registration plan of the enterprise, the confirmed consumption quota for each spare part and replacement part imported for spare parts purposes (additional imports) by the Ministry of Industry, and the quantity of spare parts imported in the previous year carried over, the Customs Authority will approve the import plan for spare parts and replacement parts for the enterprise.

If spare parts and replacement parts imported in a year are not used, they must be deducted from the spare parts import quota of the following year. The enterprise may not sell them off. In case of sale, the enterprise will be subject to back payment of import tax at the individual tax rate of each spare part and replacement part and will be penalized according to current regulations.

Settlement regime:

Enterprises must compile and report annually to the Customs Authority on the usage of imported spare parts and replacement parts, specifically: the quantity imported, the quantity used in production and assembly, the quantity sold or not used in production and assembly of products.

The Customs Authority will settle accounts based on the reports submitted by the enterprises. Where necessary, the Customs Authority will coordinate with the local Tax Bureau to conduct inspections and settle accounts for the enterprises. Any non-compliance discovered during inspection will result in back payment of import tax at the individual tax rate of each spare part and replacement part specified in the Import Tax Rate Table and penalties for tax evasion according to current regulations.

By the latest date of April 1 of the following year, if an enterprise has not reported settlement (without a valid explanation), the Customs Authority will not allow the enterprise to apply the tax rate according to the assembled kits (SKD, CKD, IKD) as stipulated in this Circular.

This Circular takes effect from the date of signature. All previous provisions contrary to this Circular are abolished. During implementation, any issues encountered should be promptly reported to the Ministry of Finance for consideration, resolution, and supplementary guidance as appropriate.