Regarding VAT on-spot import and export activities in cases where foreign traders specify delivery in Vietnam.
Case: The company opens an on-spot export declaration when selling goods to a parent company abroad and specifies delivery in Vietnam. Previously, the company was still able to open an on-spot export declaration with the customs authority and therefore applied 0% output VAT. Currently, the customs authority is stopping the opening of on-spot export declarations because according to regulations, only foreign traders without a commercial presence are allowed to conduct on-spot exports in Vietnam. According to Decree 90/2007/ND-CP dated 31st May 2007, foreign traders without a commercial presence are foreign traders without direct investment in Vietnam.... Therefore, the parent company is not eligible to open an on-spot export declaration in Vietnam.
Can the tax authority recalculate the 10% VAT for the entire on-spot export declaration in the above case?
Regarding on-spot export
- From the third quarter of 2022, several local Customs Departments have issued a Notice stating that to declare customs under the on-spot import-export type as prescribed in Point c, Clause 1, Article 35 of Decree No. 08/2015/ND-CP, foreign traders must satisfy the condition of "No presence in Vietnam".
- In case a foreign trader who has designated to deliver goods has a presence in Vietnam (such as having a representative office, branch, investing in establishing an economic organization; investing in contributing capital, buying shares, buying capital contributions; implementing an investment project; investing in the form of a BCC contract; new forms of investment and types of economic organizations as prescribed by the Government), it is not allowed to declare the on-spot import-export type.
- According to Official Dispatch No. 4146/TCHQ-GSQL dated 8th August 2023, the response regarding on-spot import and export activities is as follows:
- According to the General Department of Customs' viewpoint, for on-spot import and export activities as designated by foreign traders as prescribed in Point c, Clause 1, Article 35 of Decree No. 08/2015/ND-CP, the nature of the transaction is that goods are only bought and sold domestically, there is no movement of goods out of Vietnam's borders, so it is necessary to consider removing customs declaration procedures for this activity and transferring it to the tax authority for management like other domestic sales transactions.
Regarding VAT rates
According to Article 9, Circular 219/2013/TT-BTC dated 31st December 2013
Article 9: 0% tax rate
1. 0% tax rate: applies to exported goods and services
a) Exported goods include:
- Goods exported abroad, including export consignments
…
- Cases considered as exports according to the provisions of law:
…
+ Goods exported on the spot according to the provisions of law.
Conditions for applying 0% tax rate:
a) For exported goods:
There is a contract for selling or processing exported goods; an export consignment contract;
There is a document proving payment for exported goods via bank and other documents according to the provisions of law;
There is a customs declaration as prescribed in Clause 2, Article 16 of Circular 219/2013/TT-BTC.
Thus:
For previously exported goods on the spot, which have been successfully declared to customs as on-the-spot import-export, with an On-the-spot Import-Export Declaration, the output VAT rate of 0% is applied because of the Customs Declaration.
However, currently, as in the above case, Enterprises cannot open an On-the-spot Import-Export Declaration anymore, meaning that without an On-the-spot Import-Export Declaration, they do not meet the conditions to apply an output VAT rate of 0%, but the VAT rate is applied to domestically sold goods.
Evaluate the possibility of refunding and collecting VAT on past On-the-spot import-export declarations, which have been declared to Customs.
Regulations on customs procedures for on-the-spot import and export have existed for a long time, not only since Decree No. 08/2015/ND-CP but also since Decision 928/2006/QD-TCHQ. In addition, the regulation that Enterprises are allowed to apply 0% VAT for On-the-spot Export and Import (if there is an On-the-spot Import and Export Customs Declaration) has existed since Circular 219/2013/TT-BTC. Therefore, in the past, Enterprises have applied a 0% output VAT rate and have also received VAT refunds.
Customs procedures for on-the-spot import and export have mainly arisen from the third quarter of 2022 to present. Therefore, the possibility of the Tax Authority collecting and refunding (when changing the VAT rate from 0% to 10%) for past on-spot import-export declarations is seemingly impossible, the possibility is very low because in the past, Enterprises were allowed by the Customs to open On-spot Import-Export Customs Declarations, and met the conditions to apply 0% output VAT. Moreover, if the collection and refund occur, it will not only affect one or a few enterprises but also affect the business activities of thousands of Enterprises with on-spot import-export business activities that have arisen for many years in the past.
Up to now, there has not been any document from the Tax Authority or Customs or in fact, the Tax Authority has recalculated the 10% VAT for past on-spot import-export declarations.