Taxation and Transport and Logistics updates

1. New customs payment term


In terms of time limits for tax payments for imported and exported goods, the Law amending and supplementing a number of articles of the Law on Tax Administration, which is applicable from 1st July 2013, regulates that taxes must be paid before customs clearance or good release. The Law further specifies “…[…] in case the payable tax amount is guaranteed by a credit institution, the taxpayer may enjoy customs clearance or goods release but shall pay late payment interests from the date of customs clearance or goods release to the date of tax payment in accordance with Article 106 of this Law. The maximum guarantee period is thirty days from the date of registration of the customs declaration. Past the guarantee period, if taxpayers fail to pay tax and late-payment interests (if any), guaranteeing credit institutions shall fully pay tax and late-payment interests on behalf of taxpayers…” 
Under the old regulation, duty with respect to imports of general goods was imposed at the point of Customs and required to be remitted prior to Customs clearance. In circumstances where there is a bank guarantee, the duty is payable within 30 days of the Customs declaration. The old law was silent on whether this was deemed a late payment, however the practical interpretation and implementation by the authority was that payment within 30 days was not deemed a late payment. 
The new Law has added the wording that imposes a late payment interest where the duty is paid after Custom clearance. It would seem, from a regulatory perspective, the authority is seeking to elaborate and strictly apply the wording of the provision that duty must be paid prior to Customs clearance. However, from a practical implementation perspective, this would create potential additional interest costs for those companies currently taking advantage of the 30 days payment window. We also note that further guidance on the Amended Law on Tax Administration has been issued recently (i.e Decree 83/2013), the Decree does not provide much further comment on the issue above. 
This new customs payment term has created some obstacles. For example, even though payment has been made before customs clearance, there is an issue of late recognition of tax payment due to weak coordination between Vietnamese Government agencies (i.e. State Treasury, Customs). In addition, cargos do not always arrive during work days, making it difficult to make tax payment. This means companies have to pay significant demurrage. If companies pay within 30 days, it will be charged a fiscal penalty interest rate which means 18%/year (0.05%/day). 


EuroCham makes the following recommendations to the General Customs Department (GDC):
1. GDC to work out an agreement for collection link with other big international banks like they have with 12 local commercial banks.
2. Acceptance of a copy of tax payment from emitting bank.
          a. Yet, Article 46 of the new Law on Tax Administration already specifies that the date of tax payment is the date that State Treasury or commercial bank certifies on payment voucher of the tax payer (i.e. after money is already in their accounts). Thus we understand that it is difficult for the GDC and the MOF to approve for any proposal not in accordance with the Law on Tax Administration. 

3. Set up system where automatically deduct money deposit in bank account, once tax payment made, controlled by the State Bank of Vietnam;

Interim recommendation for operating companies:

Companies should open a temporary bank account for tax/duties settlement at any of the permitted local commercial bank, then setup an automatic authorized-payment (Ủy nhiệm chi tự động) for the purpose of duties settlement. The business may transfer sufficient amount of money from its bank account in overseas bank to such tempo account. Anytime when the duties are determined, the company just needs to inform local bank to process the authorized duties payment and issue certification for the company to prove with customs for goods clearance and release. 
The above recommendation appears to be the most feasible way to mitigate time-gap between the goods arrival date and its customs release date, which would increase efficiency in goods movement and avoid any potential financial charge/port-charge on the goods storage days at port.

2. Bonded warehouse


Upfront tax payment is applied for those who use bonded warehouse for re-export.
The Ministry of Finance has issued Official letter No. 10645/BTC-TCHQ dated 13 August 2013 sending to all provincial customs authorities overruling guidance in Official letter No. 8356/BTC-TCHQ in relation to duty paid upfront applicable to goods imported into bonded warehouse. Accordingly, OL 10645 referred to regulations on Tax Management Law, Import Export Duty Law and relevant laws for tax policy implementation for the specific case instead.
Accordingly, with reference to the updated Tax Management Law, there is only restriction applicable to goods trading by means of temporary import re-export, of which duty must be paid before completing the customs procedures for temporarily importing goods. Please note that this trading mode has so far been strictly not allowed to be implemented by FDIs.
Therefore, goods imported into bonded warehouse for later export, unless statutorily defined as a mode of trading by means of temporary import re-export, should not be subject to duty payment upfront now.
However, if you import into bonded warehouse, and state that this is for later import into VN domestic market, but later on decide to re-export, this is no longer possible as you are already in the “channel” for import into the domestic market…

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