The laws of Vietnam are complex and new legislation is constantly being introduced. What follows is no more than an introductory overview that we hope will assist investors to decide which areas of law they will need to research further.
This summary is, necessarily, selective and is no substitute for detailed legal advice.
1. In general, import and export activities are regulated by the State, as set out in Decree No. 33 CP of 19 April 1994, which gives the Ministry of Trade the main responsibility for State management of all import/export matters.
2. Decree 33 requires individual Ministries to submit proposals for the type and level of goods, either for import or export, which are to be regulated by quota. From these submissions, an annual quota plan is formulated, which requires the approval of the Prime Minister.
3. On the basis of this plan, certain designated State enterprises will be permitted to import/export essential items.
4. Decree 33 also makes it clear that only those enterprises which obtain an import/export licence from the Ministry of Trade, will be permitted to take part in such activities.
5. Separate legislation has been enacted to give details of precisely which goods are to fall under the quota system, and to state which items may not be imported, for example foreign cigarettes, or second hand textiles.
6. Within this overall regulatory framework, specific provisions apply in relation to imports and exports made by Enterprises with Foreign Invested Capital, including the foreign party to a Business Co-operation Contract. Import and export licences must always be obtained, but certain exemptions from payment of import duties are permitted.
7. A foreign invested enterprise must prepare an import plan listing the goods that it wishes to import, and stating whether they form part of its capital contribution, and lodge this with the Ministry of Trade. The basis of this plan will be as set out in the enterprise's Feasibility Study which will have been submitted to the authorities with the application for an investment licence. It will also have to prepare annually a list of items it will need to import for its production processes, together with its sales plan.
8. Before goods can be imported or exported a licence must be obtained from the Ministry of Trade. Ordinarily, duty is payable on most imported goods, though certain exemptions are permitted.
9. Article 76 of Decree 18 CP of 16 April 1993 sets out in general terms the situations in which exemption from import duty will be allowed.
10. The provisions of Decree 18 are clarified and expanded upon by a number of Circulars, notably:-
Circular No. 47 TC/TCT of I June 1994, as amended by Circular No. 90 TC/TCT of 4 November 1994; and Circular No. 20 TC/TCT of 16 March 1995.
Together this body of legislation makes it clear that foreign invested enterprises are exempt from import/export duties in the following situations:-
- where the imported machinery, equipment, parts or materials are used for capital construction to
- establish the enterprise, or form part of the fixed assets under a Business Co-operation Contract; the first time import of tools, assembly equipment and materials required for initial production and business activities as described in the Feasibility Study of the enterprise, as approved by the SCCI;
- the first time import of vehicles. This does not apply to businesses in the field of transportation. Also the type and quantity of duty free vehicles permitted are restricted depending on the level of investment being made;
- the imported items are used in connection with the exploration and exploitation of petroleum;
- where imported components, parts and materials are used in the production of goods for export. In this situation, import duty will be payable temporarily, but will be refunded when the finished goods are exported.
11. If duty free imported items are sold or otherwise disposed of in Vietnam, then import duty as well as other taxes, will be payable.
12. Strict reporting requirements are imposed on foreign invested enterprises in relation to their import/ export activities. Broadly, they must lodge reports no later than 3(.) days after completion of the relevant project, or completion of the investment period, and the last day of the calendar year. Failure to comply with these requirements will stop any future processing of import exemption formalities taking place.
13. Special rules apply in relation to BOT contracts, where materials and equipment used in the construction and operation of the project are exempt from import duty.
14. Special provision is also made for Export Processing Zones. All goods and materials imported to or exported from an Export Processing Zones, either to a foreign country or to another Export Processing Zones will be exempt from payment of duty.
NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes & Master" and "Business Monitor".