Circular No. 50A-TC/TCT provides temporary regulations on export and import taxes for parts and components imported for the production and assembly of products not yet standardized in SKD, CKD, or IKD formats.

CIRCULAR

Provisions for temporarily implementing import and export duties on parts and components imported for manufacturing and assembling products not yet regulated under the SKD, CKD, IKD assembly standards.

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

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

Pursuant to the Prime Minister's opinion expressed in Government Circular No. 3144/KTTH dated June 24, 1997 regarding tax policies for certain materials for foreign investment projects and tax incentives for domestic production localization;

Pending the issuance of import tax policies based on the rate of domestic content for production and assembly of products in the mechanical-electrical-electronic industry, after reaching consensus with relevant ministries and sectors, the Ministry of Finance hereby promulgates temporary regulations on import tax rates for the importation of component parts for the production and assembly of products not yet regulated under the SKD, CKD, or IKD standards as follows:

I. SCOPE AND CONDITIONS FOR APPLICATION

1- Scope of application:

This Circular applies to mechanical-electrical-electronic products that are imported components and parts of all Vietnamese enterprises and foreign-invested enterprises operating in the production and assembly of products and spare parts in the mechanical-electrical-electronic industry, but which have not been regulated under the SKD, CKD, or IKD standards.

2- CONDITIONS FOR APPLICATION:

To be eligible for temporary tax policies on imports of parts and components, enterprises must meet the following conditions:

- Having a production and assembly technology chain (meeting technical requirements and being consistent with investment and business licenses) verified and confirmed by the General Department of Standardization, Measurement, and Quality Control.

- Products produced and assembled must have a product quality registration certificate issued by the Standardization, Measurement, and Quality Control agency.

- Having a production and assembly plan for mechanical-electrical-electronic products registered with the Customs authority.

II. METHODS FOR CALCULATING IMPORT TAXES:

1- For enterprises meeting the conditions stipulated in Point 2, Part I of this Circular, if they import component parts to produce and assemble products and spare parts not regulated under the SKD, CKD, or IKD standards, they shall be subject to import taxes at the individual import tax rates specified in the Import Tariff for each component part imported.

Example: Company A imports a complete set of components to produce and assemble washing machines including parts such as motors, electrical components, steel shells, timing belts, electronic control panels, wires, springs, screws, plastic parts...

The import tax on the washing machine components will be calculated separately for each part: motor, electrical components, timing belt, spring... according to the individual import tax rates specified for each part (excluding the import tax rate for the washing machine as a whole).

- In cases where a component or part can be classified under two or more tariff codes with different tax rates, the determination of the tariff code and the applicable import tax rate shall be carried out according to the current provisions of the Tariff and the classification principles of the Harmonized System Code issued by the General Statistics Office.

2- In cases where applying the calculation method of import taxes based on individual components and parts as prescribed in this Circular results in a total import tax for each component and part of a set being higher than the import tax for the set if calculated based on the product as a whole, then for components and parts with import tax rates higher than the product's overall tax rate, the import tax shall be calculated based on the product's overall tax rate.

3- For items currently subject to import taxes based on the SKD, CKD, or IKD standards (such as automobiles; motorcycles; refrigerators; internal combustion engines; electronic components), the import taxes shall continue to be applied according to the SKD, CKD, or IKD tax rates as per current regulations.

III. IMPLEMENTATION

1- Registration and Approval of Applications

Enterprises producing and assembling products and spare parts must submit to the Customs authority (where import procedures are handled) an application package for importing parts and components for production and assembly, including:

- Investment and production-business license (consistent with the products being manufactured and assembled using imported mechanical-electrical-electronic products to apply the import duty calculation based on parts and components).

- Confirmation letter from the General Department of Standardization, Measurement, and Quality Control regarding the production and assembly technology chain meeting technical requirements.

- Product quality registration certificate.

- An explanation of the production and assembly plan for the year; the import plan and the quota for each component and part imported for production and assembly of products and spare parts for the year, along with the name of the product being produced and assembled.

Based on the submitted documentation, the Customs authority will review and approve the enterprise's implementation of import taxes based on individual components and parts. At the same time, a record will be kept to track the import of components and parts and settle accounts later.

2- Monitoring and Settlement of Imported Goods:

a) Monitoring imported goods: When importing, enterprises must declare in full each component and part, the import price of each component and part, and maintain a record of imported goods according to the guidance of the Customs authority. The General Customs Department will guide local Customs authorities to monitor imported goods to ensure convenience for enterprises while preventing abuse of imports for production and assembly to evade import taxes.

b) Settling accounts for imported goods: By March 1st of the following year, enterprises must submit a report on the previous year's importation, production, and assembly situation to the Customs authority: quantity imported; quantity used for production and assembly; quantity of products produced and assembled; quantity carried over to the next year; quantity transferred or sold or not used for the purpose of producing and assembling products and spare parts.

Based on the enterprise's settlement report, 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 taxes being levied at the rate applicable to the product as a whole (or the rate applicable to individual components and parts as stipulated in Point 2, Part II of this Circular) as specified in the Import Tariff and current regulations.

Thirty days after March 1st of the following year, if an enterprise has not submitted a settlement report (without a valid explanation), the Customs authority will not allow the enterprise to apply the tax rate for individual components and parts as prescribed in this Circular to subsequent shipments.

IV. EFFECTIVE DATE OF IMPLEMENTATION

This Circular takes effect from August 15, 1997.

For cases arising before this Circular takes effect, the Ministry of Finance will consider and resolve each case individually. During implementation, any issues encountered should be promptly reported to the Ministry of Finance for resolution and supplementary guidance to ensure compliance.

Vu Mong Giao

(Signed)