By way of providing guidelines for implementing the Tax Law No.106/2016/QH13 (Law 106) effective from 1 July 2016, the government has issued Decree 100/2016/ND-CP (Decree 100) on 1 July 2016 and the Ministry of Finance has issued Official Letter 10315/BTC-TCT dated 25 July 2016 (OL 10315) and Circular 130/2016/TT-BTC dated 12 August 2016 (Circular 130). Following our tax alert  on the important changes under Law 106, the key points in Decree 100, Circular 130 and OL 10315 are outlined below:
■ Goods imported for subsequent export; and
■ Goods exported outside a customs controlled area according to the Law on Customs.
In the first case, Law 106 and Decree 100 do not clearly specify whether the restriction on input VAT refund applies to:
■ Materials or goods imported to produce goods for export; or
■ Goods imported by traders and subsequently exported to a third country; or
An example provided in Circular 130 seems to indicate that the VAT refund restriction applies only to traders. However, to be certain, export manufacturers should seek further clarification with the tax authorities. This VAT refund restriction applied in any of the above cases would seem to defeat the very purpose of input VAT refund restriction in the first place, which is for the stimulating of local circulation or transacting of goods (i.e. to restrain significant inventory). This restriction on input VAT refund for export may negatively impact the cash-flow (or even increase the cost) for traders or manufacturers dealing in the exportation of goods.
In the latter case, a “custom controlled/operating area” under the Law on Customs covers “areas of land border checkpoints, international railway stations, international civil airports; seaports and inland waterway ports where import, export, exit, entry and transit operations are conducted; areas where goods subject to customs supervision are stored, export processing zones and customs preference zones; customs clearance places, bonded warehouses, tax-suspension warehouses, international posts, head offices of customs declarants where post-customs clearance inspection is carried out; and places for inspection of imported and exported goods in the customs territory”.
From the description above, it is very unclear in which customs controlled area would the input VAT of the goods exported through it be disallowed; or how the goods could be officially exported outside those areas. Although, an example in Circular 130 appears to indicate that the VAT refund restriction would only apply to “unofficial” exported cases.
Furthermore, under the new Law on Import Duty and Export Duty, materials imported to produce goods for export are exempt from import duty. Therefore, Decree 100 has abolished Article 38 of Decree 83/2013/ND-CP on Tax Administration regarding the 275-day dereferral of import duty payment for material imported to produce exporting goods.
OL 10315 states that the reduced interest rate only applies from 1 July 2016 onward. This will apply to overdue tax before or on 1 July 2016 that has not yet been settled.
Please feel free to contact us if you need further details on this tax alert.
Partner, Regional Tax Practice Group
Phan Thi Lieu
Senior Tax Manager
*The information provided is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.