Decision No. 194/2003/QD-BTC of the Minister of FINANCE promulgating regulations on customs management and tax application for piloting the expansion of functions of enterprises in the Tan Thuan Export Processing Zone.

DECISION OF THE MINISTER OF FINANCE

Issuing the Regulations on Customs Management and Taxation System for Pilot Application to Expand the Functions of Enterprises in the Tan Thuan Export Processing Zone

Expanding the functions of enterprises in the Tan Thuan Export Processing Zone

THE MINISTER OF FINANCE

Pursuant to Decree No. 86/2002/NĐ-CP dated November 5, 2002 of the Government stipulating the functions, tasks, powers, and organizational structure of Ministries and ministerial-level agencies;

Based on Circular No. 1395/CP-CN dated November 8, 2002; Circular No. 891/CP-CN dated July 4, 2003 of the Prime Minister regarding the pilot expansion of the operational functions of the Tan Thuan Export Processing Zone;

Based on Circular No. 7322/BKH-KCN dated November 18, 2002; Circular No. 4206/BKH-KCN&KCX dated July 11, 2003 of the Ministry of Planning and Investment.

Considering the proposal of the General Director of the General Department of Customs,

DECISION:

Article 1. The Regulations on Customs Management and Taxation System for Pilot Application to Expand the Functions of Enterprises in the Tan Thuan Export Processing Zone are hereby issued together with this Decision.

Article 2. The Standard Measurement Quality Control Department shall be responsible for organizing and guiding the implementation of the Regulations adopted herein.

Article 3. The Director of the General Department of Customs, Heads of Units under the Ministry of Finance and relevant organizations and individuals are responsible for implementing this Decision./.

REGULATIONS

Customs management and taxation system for pilot application to expand the functions of enterprises in

the Tan Thuan Export Processing Zone

(Issued together with Decision No. 194/2003/QĐ-BTC dated November 28, 2003)

of the Minister of Finance)

I. GENERAL PROVISIONS:

1. These regulations provide guidance on customs procedures, inspection and supervision systems, and tax administration for export, import, and goods exchange activities of enterprises in the Tan Thuan Export Processing Zone permitted to expand their operational functions according to Circular No. 7322/BKH-KCN dated November 18, 2002; Circular No. 4206/BKH-KCN&KCX dated July 11, 2003 of the Ministry of Planning and Investment.

For other activities of enterprises in the Tan Thuan Export Processing Zone that are not part of the pilot expansion of functions, customs procedures and tax policies shall be implemented in accordance with the current provisions of Government Decree No. 36/CP dated April 24, 1997 and related guiding documents.

2. Enterprises in the Tan Thuan Export Processing Zone must separately account for trial business and service activities; they must have separate warehouses to store these types of goods.

II. SPECIFIC GUIDANCE:

1. For services providing goods and raw materials to enterprises in the Tan Thuan Export Processing Zone and domestic areas from both domestic and foreign sources:

For this activity, enterprises must establish a bonded warehouse or enter into a bonded warehouse rental agreement at the Tan Thuan Export Processing Zone. The establishment of bonded warehouses, rental agreements, the entry, exit, storage, and preservation of goods in bonded warehouses, and related issues shall be carried out in accordance with the provisions of Government Decree No. 101/2001/NĐ-CP dated December 31, 2001.

2. For services of purchasing, storing, processing, recycling, packaging domestic products sold abroad and purchasing, storing, processing, recycling, and packaging foreign products sold domestically.

2.1. Regarding services of purchasing, storing, and packaging domestic products sold abroad and purchasing, storing, and packaging foreign products sold domestically:

- Enterprises may carry out these services under the bonded warehouse storage model or;

- Directly handle export and import procedures at the Tan Thuan Export Processing Zone Customs if the goods are exported immediately abroad or imported for immediate domestic consumption. Export processing zone enterprises must comply with current export and import policies.

For services of purchasing, storing, and packaging domestic products sold abroad, export processing zone enterprises are responsible for declaring and fulfilling export duties and are eligible for VAT refunds on exported goods.

For services of purchasing, storing, and packaging foreign products sold domestically, export processing zone enterprises are responsible for declaring and fulfilling import duties, VAT, and special consumption taxes (if applicable) as for imported goods.

2.2. Regarding recycling activities of domestic products sold abroad and foreign products sold domestically:

a) For recycling activities of domestic products sold abroad:

- When export processing zone enterprises purchase products from the domestic market into the Tan Thuan Export Processing Zone for recycling, the Tan Thuan Export Processing Zone Customs handles export procedures for domestic enterprises (hereinafter referred to as domestic enterprises) in accordance with the regulations for exported goods. Domestic enterprises are eligible for VAT refunds on exported goods.

- When exporting products abroad, export processing zone enterprises handle export procedures at the Tan Thuan Export Processing Zone Customs, clearly stating in the export declaration that the exported goods were recycled according to the declaration number and date. The Tan Thuan Export Processing Zone Customs handles export procedures in accordance with current regulations for exported goods of export processing zone enterprises.

b) For recycling activities of foreign products sold domestically

- When importing products from abroad into the Tan Thuan Export Processing Zone for recycling, export processing zone enterprises register to handle import procedures at the Tan Thuan Export Processing Zone Customs, clearly stating in the customs declaration that the goods are imported for recycling and domestic consumption.

- When selling domestically, domestic enterprises purchasing the goods must handle import procedures at the Tan Thuan Export Processing Zone Customs, paying import duties, VAT, and special consumption taxes (if applicable) in accordance with current regulations for imported goods.

2.3. Regarding processing activities of domestic products sold abroad and foreign products sold domestically:

- Since processed products belong to the ownership of the enterprises placing the orders for processing and not to the processing enterprises (export processing zone enterprises), the acceptance and placement of processing orders shall be carried out in accordance with current regulations for processed goods; The sale of foreign traders' processed products placed in the Tan Thuan Export Processing Zone into the domestic market shall be carried out in accordance with the current regulations for processed goods sold at the place of production as stipulated in Government Decree No. 44/2001/NĐ-CP dated August 2, 2001 amending and supplementing certain articles of Government Decree No. 57/1998/NĐ-CP dated July 31, 1998, Circular No. 07/2000/TT-TCHQ dated November 2, 2000 of the General Department of Customs; The sale of domestic enterprises' processed products placed in the Tan Thuan Export Processing Zone abroad shall be carried out in accordance with current regulations for exported goods.

3. Services of purchasing goods from abroad to sell in a third country:

For this service, the enterprise shall file a declaration for temporary importation-re-exportation. The procedures for temporary importation and re-exportation shall be carried out at the Haiphong Customs Branch of Tan Thuan Export Processing Zone. The transportation of temporarily imported goods from the port of entry to Tan Thuan Export Processing Zone and the transportation of re-exported goods from Tan Thuan Export Processing Zone to the port of exit shall be conducted in accordance with the regulations applicable to goods transshipped through ports.

In cases where re-exported products are combined with other products that are not temporarily imported products, the enterprise must file a separate declaration for such products in accordance with their respective types.

4. Regarding the calculation of import duties on the value of imported raw materials and components for processing activities intended for domestic consumption:

- The registration of processing contracts and customs procedures shall be carried out in accordance with current regulations for enterprises engaged in domestic processing within export processing zones.

- When importing processed products back into the domestic market, the domestic enterprise placing the order for processing must pay import duties, value-added tax, and special consumption taxes (if applicable). Import duties shall only be levied on the portion of imported raw materials and components from abroad that constitute part of the processed product, while value-added tax shall be calculated on the total processing fee plus import duties and special consumption taxes (if applicable). The basis for determining the import duty payable on the portion of imported raw materials and components from abroad constituting part of the processed product includes:

+ The value of each type of imported raw material and component constituting each unit of the product (calculated based on the import price from abroad (CIF) or the domestic market price of similar raw materials and components (in VND) multiplied by the consumption rate of each type of imported raw material and component per unit of goods established by the export processing zone enterprise. The director of the export processing zone enterprise shall be responsible under the law for the accuracy of these consumption rates.

+ The quantity of products re-imported into the domestic market of Vietnam.

+ The import duty rate applicable to each type of raw material and component.

5. Pilot activities expanding functions within Tan Thuan Export Processing Zone shall be exempt from corporate income tax for one year from the date of generating taxable income; after the tax exemption period, these activities shall be subject to a corporate income tax rate of 28%.

III. IMPLEMENTATION:

1. The General Department of Customs, provincial and municipal Tax Departments, enterprises, and related units shall be responsible for implementing this regulation.

2. Quarterly, enterprises conducting pilot activities to expand functions shall submit reports to the Haiphong Customs Branch of Tan Thuan Export Processing Zone and the Ho Chi Minh City Tax Department regarding issues related to the expanded functions specified in this guidance, including the quantities of imported and exported goods, domestic sales, and inventory levels.

In cases where there are indications of non-compliance or fraud in reporting to evade customs duties at Tan Thuan Export Processing Zone, the Ho Chi Minh City Tax Department may conduct inspections of the expanded functions of enterprises within Tan Thuan Export Processing Zone.

3. During the implementation of this regulation, relevant units and organizations shall promptly identify any difficulties or loopholes and report them to the Ministry of Finance for timely guidance./.