Do Domestic Enterprises Have to Pay Taxes on Processed Goods from EPEs?

Issued Document: Official Dispatch No. 2370/TCHQ-TXNK dated May 29, 2024, from the General Department of Customs on customs procedures and tax policies for goods processed by Export Processing Enterprises (EPEs).

Key Points:

Customs Procedures:

When an EPE processes goods for a domestic enterprise, the procedures outlined in Clause 2, Article 76 of Circular No. 38/2015/TT-BTC (amended and supplemented by Clause 52, Article 1 of Circular No. 39/2018/TT-BTC) must be followed.

Determination of Processing Activities:

To determine if processing activities for domestic enterprises by EPEs fall under processing activities, it is necessary to refer to Clause 20, Article 2 of Decree No. 35/2022/ND-CP and the actual operations of the enterprise.

Tax Obligations for Domestic Enterprises:

If a domestic enterprise (not located in a non-tariff zone) imports goods for processing and then assigns a part or all of the imported goods or semi-finished products to an EPE for further processing, the domestic enterprise must declare and pay import duty and VAT on the processed products when they are re-imported into the domestic market. This is in accordance with Clause 4, Article 1 of Decree No. 18/2021/ND-CP.

Practical Implications:

Import Duty and VAT: Domestic enterprises must be prepared to handle the tax obligations for processed goods re-imported from EPEs.

Compliance with Regulations: Both domestic enterprises and EPEs need to ensure compliance with relevant regulations to avoid penalties.

For more details, please contact W&A!