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

CIRCULAR

Guidelines for Implementing Import Tax Regime for Certain Spare Parts and Replacement Components Imported Along with Assembled Kits (SKD, CKD, IKD) for Production Purposes

details of import reserve for complete sets of spare parts

 SKD, CKD, IKD 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 and Import Tax Tariff;

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

1. For spare parts and components imported for the purpose of replacing damaged items during the production and assembly of complete products from imported assembled kits (SKD, CKD, IKD), if the import tariff rate for such spare parts and components is higher than that of the assembled kit, they shall be taxed at the tariff rate applicable to the assembled kit at the time of importation.

2. To qualify for the tax policy stipulated in Point 1 of this Circular, enterprises must present the following documents when processing customs procedures:

- A letter requesting the application of import tax rates for spare parts and components based on the assembled kits (SKD, CKD, IKD) issued by the enterprise.

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

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

- An explanation of the annual production and assembly plan.

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

* Planning Process:

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

Any spare parts and components not used within the year must be deducted from the next year's import quota for replacement purposes. 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 tariff rate for each spare part and component and will be penalized according to current regulations.

* Settlement Procedures:

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

The Customs Authority will review the settlement based on the enterprise's report. If necessary, the Customs Authority will coordinate with the local Tax Bureau to conduct inspections and settle accounts for the enterprise. Any non-compliance discovered during inspection will result in back payment of import tax at the individual tariff rate for each spare part and component specified in the Import Tariff and penalties for tax evasion according to current regulations.

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

This Circular takes effect from the date of issuance. All previous regulations inconsistent with this Circular are hereby repealed. During implementation, any issues encountered should be promptly reported to the Ministry of Finance for consideration, resolution, and supplementary guidance as appropriate.