Vietnam Latest on Customs and Tax Compliance – What Has to be Improved to Match WTO Commitments

1. VIETNAM LATEST ON CUSTOMS AND TAX COMPLIANCE
– WHAT HAS TO BE IMPROVED TO MATCH WTO COMMITMENTS
By Oliver Massmann
Over the past year, we have seen significant efforts and progress made by the General
Department of Customs in terms of improved regulations, more effective e-customs operations,
and increased dialogue and consultation with the business community. From 01 January 2015,
the new Customs Law takes effect with its implementing Decrees coming into force on 15
March. The implementing Circulars are also already in force from 01 April with the most notable
one, Circular No. 38/2015/TT-BTC. This Circular, which replaces 13 previous customs
regulations, is considered the most comprehensive among the new regulations. We are looking
forward to more regulations being adopted soon following the new Customs Law, for example,
regulations on advance customs rulings, post-clearance inspection which stem from the ASEAN
agreements implementing the AFTA, the WTO Trade Facilitation Agreement, or regulations in
anticipation of the upcoming Free Trade Agreements. These agreements commonly have major
requirements on advance customs ruling, availability of information, separation of customs
clearance from final determination of duties and taxes, international cooperation in customs, etc.
The Prime Minister has adopted Resolution No. 19 for a period of three years, from 2015 to
2018, to prioritize these changes. During the implementation process, Vietnam has been
receiving much technical support from foreign experts of the WTO, WCO and other
organizations.
We have also seen progress in reforming Vietnam’s tax procedures over the recent years. Up to
01 January 2015, the total time for tax compliance is reduced to 370 hours per year, which is an
impressive decrease compared with 872 hours annually according to the 2013 statistics. Time
spent for tax declaration and payment is also reduced to 121.5 hours per year, with possibility of
online tax declaration and payment. Although German enterprises highly appreciate these tax
reforms, we would expect that the efforts are not only at Government or ministerial levels but
also at the local levels where we have to deal with the authorities there directly.
Notwithstanding the above positive developments, Vietnam still has much to do in the upcoming
time. We address below certain major issues and suggest solutions accordingly.
1. Application of blended tax
Blended tax is a combination of ad valorem tariff and specific/ fixed duty rate. Since Vietnam
has made WTO commitments in reducing import duty, especially for goods of commercial value
imported from WTO members, the application of blended tax could be considered as going
against WTO commitments on market opening and tax reduction. We suggest that if the Draft
Law on Import and Export Tariff has to include provisions on blended tax, it should specify in

2. which cases it is applicable or else it would create confusion for local companies in Vietnam who
are only familiar with either ad valorem or specific duty for each of their commercial goods.
2. Application of quota duty
Decree No. 187/2013/ND-CP and Circular No. 111/2012/TT-BTC subject salt, raw tobacco,
eggs, and sugar to tariff quota regime. This means if the imported quantity of these goods exceed
the quota as prescribed by the Ministry of Industry and Trade or there is no import license as
required under the tariff quota regime, import of these products will be imposed an import tariff
of 50%-90%. We would suggest these provisions be included in the Law on Export and Import
Tariffs rather than Decree No. 197 or Circular No. 11. Moreover, the Law on Export and Import
Tariffs should also address applicable import tariffs for minimum and maximum import quota
for specific types of goods and the authority to issue documents governing the application of
import quota from time to time. This would serve as the basis for the competent authorities to
perform their rights and obligations and enterprises to clearly understand government’s import
and export policies.
3. Tariff policies for goods imported for production of exports
It is recommended that goods which are imported for production of exports be not subject to
tariff upon importation. This tariff exemption works more efficiently compared with tax refund
upon goods exportation in terms of cash flows burden for export enterprises and will help
improve the competitiveness of domestic enterprises. However, there should be a mechanism to
monitor and request for tariff payment if the goods are then used for domestic consumption.
4. Goods imported for implementation of investment projects
According to the new Investment Law, projects being implemented in certain geographical areas
and industries will enjoy tax incentives. The implementing Decrees of the Investment Law or the
Law on Export and Import Tariffs should provide a detailed list of such areas and industries. The
law should also clarify whether imported goods are still exempted from duty if the investment
project is entitled with tax incentives under the initial investment license but is no longer
qualified for such preferential treatment due to a change in technology.
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Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you
have any questions on the above. Oliver Massmann is the General Director of Duane Morris
Vietnam LLC.

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