Circular No. 75/2005/TT-BTC dated September 07, 2005 of the Ministry of Finance guiding the implementation of tax policies, tax and customs procedures for experimental expansion of operation functions of Tan Thuan export-processing zone

CIRRCULAR

GUIDING THE IMPLEMENTATION OF TAX POLICIES, TAX AND CUSTOMS PROCEDURES FOR EXPERIMENTAL EXPANSION OF OPERATION FUNCTIONS OF TAN THUAN EXPORT-PROCESSING ZONE

Pursuant to the Governments Decree No. 77/2003/ND-CP of July 1, 2003, defining the functions, tasks, powers and organizational structure of the Finance Ministry;

In furtherance of the Prime Ministers directions in the Governments Official Letters No. 1395/CP-CN of November 8, 2002, No. 891/CP-CN of July 4, 2003, and No. 250/CP-CN of February 24, 2004, on experimental expansion of operation functions of Tan Thuan Export-Processing Zone;

The Finance Ministry hereby guides the implementation of tax policies, tax and customs procedures for enterprises involved in experimental expansion of operation functions in Tan Thuan Export-Processing Zone as follows:

I. APPLICATION SUBJECTS

- Export-processing enterprises in Tan Thuan Export-Processing Zone (hereinafter called export-processing enterprises) involved in experimental expansion of business functions.

- Enterprises involved in the expansion of business functions of export-processing enterprises.

II. CONTENTS OF BUSINESS ACTIVITIES

1. Supplying goods to export-processing enterprises.

2. Providing international trade services, i.e. purchasing goods from a foreign country for sale in a third country.

3. Providing such services for enterprises in the export-processing zone and in foreign countries as marketing, advertising, market expansion, seeking of goods sources; warehouse construction, repair

4. Importing goods from overseas into warehouses of export-processing enterprises then bringing them inland (e.g. hiring bonded warehouses).

5. Export-processing enterprises may purchase, preserve, process, recycle or package goods for sale inland.

III. APPLICABLE TAX POLICIES

1. Import duties, export duties, value added tax (VAT) and special consumption tax (SCT):

1.1. Goods purchased by export-processing enterprises from inland for direct export to foreign countries without going through Tan Thuan Export-Processing Zone shall be neither subject to export duties nor liable to VAT.

Inland enterprises which sell goods to export-processing enterprises for direct export to foreign countries shall fill in procedures at customs offices of Tan Thuan Export-Processing Zone, pay export duties (if any), and be entitled to apply the VAT rate of 0%.

1.2. Goods purchased from inland and brought into Tan Thuan Export-Processing Zone for being warehoused and/or packaged or reprocessed then exported to foreign countries:

- When exporting goods from inland into Tan Thuan Export-Processing Zone, inland enterprises shall pay export duties (if any) according to regulations applicable to export goods and be entitled to apply the VAT rate of 0%.

- When exporting goods to foreign countries, export-processing enterprises shall neither pay export duties nor be liable to VAT under regulations applicable to export-processing enterprises.

1.3. Goods imported from overseas into Tan Thuan Export-Processing Zone for being warehoused and/or packaged and reprocessed then brought inland:

- When importing goods from overseas into Tan Thuan Export-Processing Zone, export-processing enterprises shall be exempt from import duties and not be subject to VAT under regulations applicable to export-processing enterprises.

- When importing goods into inland from the export-processing zone, inland enterprises shall make declaration for payment of import duties, VAT and SCT (if any) according to current regulations for import goods.

1.4. Goods purchased from foreign countries by export-processing enterprises for sale to third countries shall be subject to import, export duties and value added tax policies like goods transported from border gate to border gate or transit goods.

2. Business income tax (BIT)

2.1. The BIT rate of 15% shall apply to the following business service activities for experimental function expansion:

- Purchasing goods from inland for direct export to foreign countries without going through Tan Thuan Export-Processing Zone.

- Purchasing goods from inland and bringing them into Tan Thuan Export-Processing Zone for warehousing and/or packaging and reprocessing before exporting them to foreign countries.

- Purchasing goods from foreign countries for sale to third countries.

- Other services of export to foreign countries.

2.2. The BIT rate of 28% shall apply to the following business service activities for experimental function expansion:

- Importing goods from overseas into Tan Thuan Export-Processing Zone for warehousing and/or packing, reprocessing before bringing them inland.

- Other services on import into inland.

Export-processing enterprises in Tan Thuan Export-Processing Zone must account revenues, expenses and taxable incomes separately for each business activity subject to a specific tax rate. Direct expenses of each activity shall be accounted separately for such activity. Only common expenses shall be apportioned for each activity corresponding to the revenues of such activity against the total common revenues.

IV. GUIDANCE ON PROCEDURES

1. Customs procedures:

1.1 Activities of supplying goods and raw materials to export-processing enterprises in Tan Thuan Export-Processing Zone or inland and other services for function expansion include: preservation, keeping, reprocessing, packaging in separate areas of export-processing enterprises, shall be subject to customs supervision and go through customs procedures as for goods brought into or out of Tan Thuan Export-Processing Zone under current regulations.

1.2. Goods purchased by export-processing enterprises from inland for direct export to foreign countries without going through Tan Thuan Export-Processing Zone:

- Before signing contracts on the purchase of goods with inland enterprises, export-processing enterprises must enter into contracts on the sale of such goods lots to foreign parties.

- On the basis of goods sale and purchase contracts, inland enterprises shall register with the customs office of Tan Thuan Export-Processing Zone to make declarations for the export of the goods lots to enterprises in Tan Thuan Export-Processing Zone.

- Based on goods sale and purchase contracts signed with foreign parties and the registered export declarations of inland enterprises, export-processing enterprises shall make declarations on export of goods to foreign parties according to the provisions on export goods of export-processing enterprises.

- The customs office of Tan Thuan Export-Processing Zone shall register declarations on the export of goods into Tan Thuan Export-Processing Zone for domestic enterprises and concurrently register declarations on the export of goods lots overseas for export-processing enterprises. They then seal off customs dossiers and hand them to export-processing enterprises for the latter to carry out goods inspection procedures at export border-gates and complete the procedures provided for goods transported from border gate to border gate.

- Based on export declarations of export-processing enterprises with certification of actual export by the border-gate customs, the customs office of Tan Thuan Export-Processing Zone shall sign for certification export declarations of domestic enterprises and complete procedures for export of the goods lots.

1.3. Goods purchased from inland and brought into Tan Thuan Export-Processing Zone for being warehoused and/or packaged, reprocessed then exported to foreign countries:

- Customs procedures for goods brought from inland into Tan Thuan Export-Processing Zone shall be the same as for goods exported by inland enterprises to export-processing enterprises;

- Customs procedures for goods exported from Tan Thuan Export-Processing Zone to foreign countries shall comply with regulations applicable to goods exported to foreign countries by export-processing enterprises.

1.4. Where goods imported from overseas into Tan Thuan Export-Processing Zone for being warehoused and/or packaged, reprocessed then brought inland:

- Customs procedures for goods brought from overseas into Tan Thuan Export-Processing Zone shall comply with current regulations for goods brought from overseas into export-processing zones;

- Customs procedures for goods brought inland from the export-processing zone shall comply with regulations on goods imported by inland enterprises from export-processing zones.

1.5. Goods purchased from foreign countries for sale to third countries:

1.5.1. For goods purchased from foreign countries and going through customs procedures for direct export to third countries without being brought into Tan Thuan Export-Processing Zone, the customs procedures shall comply with those applicable to the business form of temporary import for re-export.

1.5.2. For goods purchased from foreign countries, imported into Tan Thuan Export-Processing Zone for being warehoused and/or packaged, reprocessed then exported to third countries, customs procedures shall comply with current regulations on goods imported from foreign countries into export-processing zones and goods exported overseas from export-processing zones.

Where upon their re-exportation, a product is associated with another product other than the temporarily- imported one, the concerned enterprise shall register a separate declaration for such product according to its type.

2. Procedures for registration of additional business activities and BIT declaration shall comply with current regulations.

3. Procedures for refunding VAT to inland enterprises which sell goods to export-processing enterprises for direct export to foreign countries;

Goods sold by inland enterprises to export-processing enterprises for direct export to foreign countries shall be entitled to input VAT credit/refund but must satisfy the following conditions and procedures:

- They are compatible with contracts on the sale of goods to export-processing enterprises.

- The actual export of goods is certified by the customs office of Tan Thuan Export-Processing Zone in the customs declarations on export goods.

- They are accompanied with VAT invoices on the sale of goods to export-processing enterprises.

- They are accompanied with vouchers of via-bank payment between export-processing enterprises and inland enterprises.

V. ORGANIZATION OF IMPLEMENTATION

1. Provincial/Municipal Customs Departments and Tax Departments, concerned enterprises and units shall have to organize the implementation of the guidance in this Circular.

2. Quarterly, enterprises involved in the function expansion shall send reports to the Customs Sub-Department of Tan Thuan Export-Processing Zone and the Tax Department of Ho Chi Minh City on matters related to the function expansion under this guidance regarding the import and export goods volumes, their values, the volume of goods consumed inland and the goods in stock for each type of business.

Where enterprises show signs of dishonesty in reporting or evading tax, the customs office of Tan Thuan Export-Processing Zone and the Tax Department of Ho Chi Minh City shall coordinate in inspecting and handling violations under regulations.

3. Any problem arising in the course of implementation of this Circular should be promptly reported to the Finance Ministry for direction.

4. This Circular takes effect 15 days after its publication in CONG BAO and replaces the Finance Ministers Decision No. 194/2003/QD-BTC of November 28, 2003.