Circular No. 40/2000/TT-BTC dated May 15, 2000 guiding the implementation of the Prime Minister’s Decision No. 176/1999/QD-TTg dated August 26, 1999 on import tax exemption for materials and raw materials

CIRCULAR

GUIDING THE IMPLEMEN-TATION OF THE PRIME MINISTER’S DECISION No. 176/1999/QD-TTg OF AUGUST 26, 1999 ON IMPORT TAX EXEMPTION FOR MATERIALS AND RAW MATERIALS

Pursuant to the Government’s Decree No. 10/1998/ND-CP of January 23, 1998 on a number of measures to encourage and guarantee foreign direct investment activities in Vietnam;
Pursuant to the Prime Minister’s Decision No. 29/1998/QD-TTg on solutions to support the development of a number of sectors of the mechanical engineering industry;
Pursuant to the Prime Minister’s Decision No. 53/1999/QD-TTg of March 26, 1999 on a number of measures to encourage foreign direct investment;
Pursuant to the Prime Minister’s Decision No. 176/1999/QD-TTg of August 26, 1999 on import tax exemption for materials and raw materials;
After consulting the Ministry of Trade, the Ministry of Industry, the Ministry of Planning and Investment and the General Department of Customs, the Ministry of Finance hereby guides the implementation of the regime on import tax exemption for materials, raw materials and semi-finished products imported in service of production, as follows:

I. SUBJECTS AND SCOPE OF TAX EXEMPTION:

Projects on the list of projects where investment is specially encouraged and investment projects in mountainous, deep-lying and remote areas shall enjoy import tax exemption for materials, raw materials and semi-finished products, which have not yet been domestically manufactured or have been domestically manufactured but fail to meet the required quality standards, in service of their production for a period of 5 (five) years (calculated according to the calendar year) starting from the time of commencement of production, which shall be applicable to both foreign-invested enterprises and Vietnamese enterprises. Specifically, these project include:

1. Investment projects on the list of projects where investment is specially encouraged and investment projects in mountainous, deep-lying and remote areas specified in Appendix I attached to the Government’s Decree No. 10/1998/ND-CP of January 23, 1998 on a number of measures to encourage and guarantee foreign direct investment activities in Vietnam and Article 11 of the Prime Minister’s Decision No. 53/1999/QD-TTg of March 26, 1999 on a number of measures to encourage foreign direct investment in Vietnam;

Projects where investment is encouraged on List A and in geographical areas with extremely difficult socio-economic conditions specified on List C issued together with the Government’s Decree No. 51/1999/ND-CP of July 3, 1999 detailing the implementation of Domestic Investment Promotion Law (amended) No. 03/1998/QH10;

2. Projects on manufacturing mechanical, electric and electronic components and parts of high added value, using large amounts of local raw materials and supplies;

3. Investment projects on renovating equipment and technologies for manufacturing bicycles, electric fans, engines with a small capacity of from 6 to 15 CV and building sea-going ships, as specified in Article 3 of the Prime Minister’s Decision No. 29/1998/QD-TTg on solutions to support the development of a number of sectors of the mechanical engineering industry;

Where a project concurrently falls into two or three tax exemption objects mentioned above, the enterprises shall be entitled to choose only one type of tax exemption offered to one of these three tax exemption objects.

Regarding the tax exemption duration:

+ Projects which had been put into production for more than five years from the time of commencement of production up to September 9, 1999 (prior to the effective date of above-said Decision No. 176/1999/QD-TTg) shall not be eligible for the tax exemption mentioned above.

+ Projects which had been put into production for less than five years from the time of commencement of production up to September 9, 1999 or on-going projects which have been considered for and just enjoyed import tax exemption for less than five years from the time of commencement of production, shall be considered by the competent authorities for import tax exemption for the remaining time (for full five years) calculated according to the calendar year.

+ Projects which have commenced production as from September 10, 1999 shall be entitled to tax exemption for a period of 5 (five) years, calculated according to the calendar year, starting from the time of commencement of production.

II. DOSSIER FORMALITIES FOR TAX EXEMPTION

1. For projects eligible for tax exemption specified at Point 1, Section I and Point 2, Section I of this Circular, the following documents are required:

- An official dispatch addressed to the Ministry of Trade requesting the import tax exemption for materials, raw materials and/or semi-finished products in service of production, which clearly indicates the tax exemption subjects, the list of duty-free goods items and the commitment to use such goods for the right purposes of tax exemption;

- The import plan and the waste norms for supplies, raw materials, semi-finished products in direct service of production in the year, which are elaborated by the enterprises and certified by the superior managing agencies, with regard to State enterprises, or by the provincial/municipal specialized economic-technical management services, with regard to non-State enterprises (the plan on import of supplies, raw materials and/or semi-finished products; the production capacity and designed capacity);

- The investment license or business registration certificate issued by the competent authorities;

- The investment preference certificate issued by the competent authorities, which clearly indicates that the subjects are entitled to import tax exemption for materials, raw materials and/or semi-finished products, which have not yet been domestically manufactured or have been domestically manufactured but fail to meet the required quality standards; the tax exemption duration.

2. For subjects eligible for tax exemption specified at Point 3, Section I of this Circular, the following documents are required:

- The enterprise’s official dispatch addressed to the Ministry of Trade applying for import tax exemption for supplies and/or equipment of projects on renewal of equipment and technologies for manufacturing bicycles, electric fans, engines with a small capacity of 6 - 15 CV or building sea-going ships, which clearly indicates the quantity and value of the supplies and equipment to be imported and the commitment to use these supplies and equipment for the right purposes of tax exemption;

- The investment project or plan, or business plan (hereunder called investment project for short) on manufacturing bicycles, electric fans, engines with a small capacity of 6 - 15 CV or building sea-going ships, which is funded with the source of national investment support capital. For projects which are required by the Regulation on Investment and Construction Management (issued together with the Government’s Decree No. 52/1999/ND-CP of July 8, 1999) to be approved by the agencies competent to decide investment, a valid copy of the investment decision must be also enclosed therewith;

- The investment license or business registration certificate issued by the competent authorities;

- The investment preference certificate issued by the competent authorities, which clearly indicates that the subject is entitled to import tax exemption for materials, raw materials and/or semi-finished products, which have not yet been domestically manufactured or have been domestically manufactured but fail to meet the required quality standards; the tax exemption duration;

- The certification of the use of capital borrowed from the National Investment Support Fund;

- The import plan and the waste norms for supplies, raw materials, semi-finished products in direct service of production in the year, which are elaborated by the enterprises and certified by the superior managing agencies, with regard to State enterprises, or by the provincial/municipal specialized economic-technical management services, with regard to non-State enterprises (the plan on import of supplies, raw materials and/or semi-finished products must be compatible with the production capacity and designed capacity).

3. Basing itself on the provisions at Points 1 and 2 of Section II above and making reference to the Ministry of Planning and Investment’s current list of domestically-manufactured materials and raw materials, the Ministry of Trade shall consider and approve each project’s list of duty-free import goods (which clearly indicates the goods items, quantity and value) in service of production.

Basing themselves on the lists of duty-free import goods issued for each particular project, the Departments of Customs of the provinces or cities where the units register for completion of import procedures shall supervise and process the tax-exemption procedures for each particular shipment of goods. Quarterly, they shall have to sum up and make reports on the total value of imported goods and the quantities of major goods items imported duty-free by enterprises and send them to the General Department of Customs, the Ministry of Finance and the Ministry of Trade.

III. DECLARATION, MAKING BALANCE OF ACCOUNTS OF IMPORT TAX AND HANDLING OF VIOLATIONS

Materials, raw materials and/or semi-finished products imported duty-free by enterprises must be used for the right purposes of tax exemption; if they are used for other purposes, the exempted import tax amount shall be retrospectively collected. The time limit for tax payment declaration is 02 (two) days after the use purpose inscribed in the relevant papers, vouchers and/or invoices is changed. Where there are no vouchers for determining the date when the use purpose is changed, the date determined for retrospective tax collection is that of registration of the import/export declaration forms.

For the goods used for purposes other than those for which they are exempt from import tax, the enterprises must declare thereon to the customs offices of the localities where the goods are sold or where the enterprises register the import declaration forms. Past the above-mentioned time limit if the enterprises fail to declare, they shall be sanctioned for acts of tax evasion under the Law on Export Tax and Import Tax and other current regulations.

Not later than March 31 every year, the enterprises must report to the customs offices and the tax agencies that directly manage them on the quantities of duty-free imported materials, raw materials and/or semi-finished products; the actual waste norms for materials and raw materials; the quantities of materials, raw materials and semi-finished products already used in production; the quantities of products already manufactured; quantities of materials, raw materials and semi-finished products already used for other purposes in the previous year; quantities of unused materials, raw materials and semi-finished products carried to the subsequent year. The provincial/municipal Tax Departments shall have to make balances of accounts of the quantities of duty-free imported materials, raw materials and supplies already used in the enterprises’ production.

The import tax to be retrospectively collected shall be determined according to the tax calculation bases, including tax rate, exchange rate and tax calculation price at the time the use purpose of the duty-free goods is changed, in accordance with the provisions of the Law on Export Tax and Import Tax. Where such goods are also subject to special consumption tax at the time of payment of import tax, the special consumption tax must be also paid according to the Law on Special Consumption Tax.

In the fifth year (the last year of tax exemption), on the basis of the waste norms for materials and raw materials, the quantities of unused materials, raw materials and semi-finished products carried from the previous year must be reported within 2 (two) days after the balance of accounts is made; the entire volume of materials, raw materials and semi-finished products, imported in excess of the production demands and still left unused, must be declared for full payment of import tax arrears.

In the process of management of the enterprises’ tax payment, the agencies managing the enterprises’ tax payment shall have to oversee the use of duty-free imported goods; upon detecting any cases of selling such goods or using them for some purpose other than the purposes for which they are exempt from import tax, apart from collecting the value-added tax arrears as prescribed in the Value Added Tax Law, the directors of the provincial/municipal Customs Departments shall also be entitled to issue decisions to retrospectively collect import tax thereon and impose fines according to current provisions of the Law on Export Tax and Import Tax.

IV. ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its signing and replaces the provisions at Point 1.3, Section III, Part B of Circular No. 63/1998/TT-BTC of May 13, 1998; Point 1.b, Section II, Part Two of Circular No. 89/1999/TT-BTC of July 16, 1999 of the Ministry of Finance. All previous provisions which are contrary to this Circular are hereby annulled.

Any problems arising in the course of implementation should be reported by units to the Ministry of Finance for timely settlement.