This Official letter is to note some issues relating to procedures and tax policies for goods of domestic enterprises leased or borrowed from exporting processing enterprises (EPEs) to serve manufacturing.
Accordingly, in case a domestic enterprise leases or borrows goods from an EPE to serve its manufacturing, it is still required to make customs declaration in which the domestic enterprise shall follows procedures for re-export of the leased or borrowed goods and the EPE shall follow procedures for re-import of these goods.
Point a Clause 9 Article 16 and Point dd Clause 1 Article 19 of the Law on Import and Export Duties No. 107/2016/QH13 regulate that goods temporarily imported for re-export under the lease or lending contract to serve the manufacturing shall not be eligible for exemption from import duty and shall also not be eligible for refund of the paid import duty. As the result, when the domestic enterprise temporarily imports goods leased or borrowed from the EPE, it has to declare and pay import duty and shall not be entitled to receive the duty refund. Taxable value of the leased or borrowed goods shall be determined according to Clause 9 Article 1 of the Circular No. 60/2019/TT-BTC.
With regard to value added tax (VAT), the domestic enterprise shall be exempt from VAT when it temporarily imports goods leased or borrowed from the EPE (clause 20 Article 5 of the Law on VAT No. 13/2008/QH12). However, upon the end of the lease or lending period, if the domestic enterprise fails to re-export such leased or borrowed goods, it has to declare and pay VAT and import duty on a new customs declaration.