Circular No. 20/TC-TCT on guiding the exemption from import and export taxes for forms of investment under the Law on Foreign Investment in Vietnam pursuant to Government Decree No. 191/CP dated December 28, 1994.

CIRCULAR

REGARDING GUIDELINES FOR CONSIDERING EXEMPTION FROM EXPORT AND IMPORT TAXES FOR VARIOUS FORMS OF FOREIGN INVESTMENT IN VIETNAM ACCORDING TO DECREE NO. 191-CP OF DECEMBER 28, 1994 ISSUED BY THE GOVERNMENT

Pursuant to Article 14 of Decree No. 191-CP dated December 28, 1994 of the Government on the issuance of regulations for the formation, appraisal, and implementation of foreign direct investment projects, which stipulates that "the Ministry of Trade shall issue import permits specifying clearly the quantity of goods exempted from tax according to the law."

After receiving comments from the Ministry of Trade, General Department of Customs, State Committee for Cooperation and Investment (SCCI), and the Ministry of Finance, guidelines for implementing the consideration of exemption from export and import taxes for various forms of foreign investment in Vietnam under the Law on Foreign Investment are hereby provided as follows:

I. OBJECTS AND CONDITIONS FOR EXEMPTION FROM EXPORT AND IMPORT TAXES

- Joint ventures with foreign capital established based on business cooperation contracts, oil and gas product sharing contracts, pursuant to the Law on Foreign Investment in Vietnam (hereinafter referred to as foreign-invested enterprises)

- Equipment, machinery, spare parts, production and business means (including transportation means) and imported materials and those produced in Vietnam for basic construction to form enterprises, or to create fixed assets to implement business cooperation contracts (hereinafter referred to as goods)

Production and business means include small labor tools, special-purpose fixtures for production, packaging containers, plastic drums for recycling packaging, and other necessary means for the initial operation of new enterprises formed by initial investment capital and recorded in the initial economic and technical justification of the approved project. These items are eligible for the first-time import tax exemption according to Point 1, Article 76 of Decree No. 18-CP dated April 16, 1993, and Article 13 of Decree No. 54-CP dated August 28, 1993 of the Government. The quantity and value of goods eligible for the first-time import tax exemption for this category are determined in the initial economic and technical justification of the project and must be approved by the Ministry of Trade for import.

- For goods and equipment imported to serve oil and gas activities under oil exploration contracts implemented in accordance with Circular No. 5842/Điền kinh dated October 21, 1994 of the Government regarding the exemption of export and import taxes for goods serving oil and gas activities.

- Transportation means shall comply with the quota specified in Circular No. 1412-UB/QL dated July 27, 1994 of the State Committee for Cooperation and Investment concerning the import of passenger cars for foreign-invested enterprises.

- Machinery, equipment, materials, and transportation means imported into Vietnam for basic construction to form enterprises or to create fixed assets to implement business cooperation contracts exceeding the specified limits in the economic and technical justification and technical design explanations shall not be eligible for import tax exemption.

- In cases where projects are granted supplementary licenses to adjust the economic and technical justification, the State Committee for Cooperation and Investment shall submit additional economic and technical explanations to the Ministry of Trade to provide a basis for processing applications for import plans of goods eligible for import tax exemption.

- In cases where foreign-invested enterprises need to replace and reinvest to modernize equipment and transportation means that have already been exempted from import tax (including cases using depreciation funds for fixed assets), they shall not be eligible for import tax exemption.

II. AUTHORITY AND PROCEDURES FOR CONSIDERING EXEMPTION FROM EXPORT TAXES, IMPORT TAXES

The Ministry of Trade shall review import plans, determine the quantity and types of goods eligible for import tax exemption for the objects specified in Section I above. The procedures and documents shall follow Circular No. 03-MT/DT dated July 2, 1993 of the Ministry of Trade guiding the implementation of Chapter VII of Decree No. 18-CP dated April 16, 1993 of the Government on the organization of operations of foreign-invested enterprises.

The General Department of Customs shall be responsible for directing and guiding customs offices at provincial and municipal levels to implement the clearance of specific quantities of goods and amounts of import tax exemptions based on the import plans of goods eligible for import tax exemption issued by the Ministry of Trade against actual imports. It shall also monitor and manage goods eligible for import tax exemption accurately and consistently to prevent revenue loss for the state budget.

The Ministry of Finance, together with relevant sectors, shall direct the organization to inspect the situation of import tax exemptions for various forms of foreign investment in Vietnam in accordance with the provisions of the law.

Annually and upon completion of initial investment projects or each phase of investment projects, foreign-invested enterprises must prepare reports on the importation of goods and the use of goods eligible for import tax exemption and submit them to the directly managing tax authority, the Ministry of Trade, and the General Department of Customs. The reporting deadline is no later than 30 days after the completion of the project or investment phase or the end of the year. If there is no report, the customs authority will refuse to process tax exemption procedures for subsequent import and export consignments of the enterprise.

III. EFFECTIVE DATE

This circular takes effect from April 1, 1995, and replaces Point 1 of Circular No. 47-TC/TCT dated June 1, 1994, and Points 1 and 2 of Circular No. 90-TC/TCT dated November 4, 1994, of the Ministry of Finance regarding guidelines for considering and refunding export and import taxes for foreign-invested enterprises.