Circular 25 stated that the conditions to determine value of natural resources/minerals are direct and

indirect costs relating to exploiting natural resources/minerals and exclusive of expenses of transporting
natural resources/minerals to the place of processing. In the meantime, Circular 25 abolishes the case
where the total value of natural resources/ minerals plus energy cost accounts for at least 51% of the
cost of goods sold of the exported products are exempt from VAT

VAT refund on exported goods/services Circular 25 supplements the case where an enterprise imported
goods then exported then into non-tariff zones or exported overseas and states thst the enterprise is
entitled to VAT refund in accordance with the regulation. However, Circular 25 does not mention the tax
treatment in case the goods were imported before the effective date of Circular 25 (and Decree
146/2017/ND-CP) and then exported after the effective date of Circular 25.

Official letter No. 1386/TCT-DNL dated April 16, 2019 of the General Department of Taxation refers to the
refund of VAT for projects. As stipulated at Point 5, Clause 3, Article 1 of Circular No. 130/2016/TT-BTC,
for the case that the enterprise terminates the project under the investment stage, not yet in the
operation, not incurring output taxes, then the refunded input VAT must be re-remitted. However, if
assets liable to VAT of the project are sold, the enterprise is not required to return the VAT already
refunded corresponding to the assets sold. For the VAT which has not been refunded up to the time of
project termination, the enterprise is not allowed to apply for the tax refund and deduction.

Stop tax grace for the projects of importing machinery over VND 100 billion from May 20, 2019 Official
letter No. 5167/BTC-CST dated May 06, 2019 of the Ministry of Finance refers to the extension of the
time limit for payment of value added tax (VAT) for importation. According to the Ministry of Finance, at
the regular meeting on November 2018, the Government agreed to stop implementing measures for
extending the time limit for VAT payment and refund under the Resolution No. 63/NQ-CP dated August
25, 2014 (applying for projects having the value of imported machinery FROM VND 100 BILLION OR
MORE) and asked this Ministry to issue the guidance documents. Accordingly, the Ministry of Finance
has issued Circular No. 18/2019/TT-BTC to repeal Circular No. 134/2014/TT-BTC in order to stop the VAT
grace and refund policies for investment projects having the value of imported machinery and
equipment from VND 100 billion or more from May 20, 2019 onwards. Tax grace applications submitted
to the Customs authority before May 20, 2019 are still entitled for consideration for extension of the
time limit for tax payment under the Circular No. 134/2014/TT-BTC.

The General Department of Customs of Vietnam issued Official Dispatch

300/TCHQ-GSQL dated January 17, 2023 on export processing enterprises that
lease or borrow machinery, equipment, and molds from domestic enterprises.

Specifically, the tax policy for export processing enterprises that lease or
borrow machinery is guided as follows:
*In case the EPE leases or lends machinery, equipment, and molds to a domestic
enterprise to serve the export processing activities of the EPE in accordance
with the objectives stated in the Investment Registration Certificate or a written
certification of the competent investment registration agency (in case the
issuance of an Investment Registration Certificate is not required):

1. Guidance on customs procedures for export processing enterprises that lease

or borrow machinery
EPEs carry out procedures for temporary export, and domestic enterprises carry
out procedures for temporary import; After the lease or loan contract is
terminated, the domestic enterprise shall carry out re-export procedures, and
the export processing enterprise shall carry out procedures for re-importing the
leased or borrowed goods.

2. Guidance on the tax policies of export processing enterprises that lease or

borrow machinery

2.1. Import Tax

Domestic enterprises must declare and pay import tax when carrying out
temporary import procedures and are not entitled to a refund of paid import tax
when carrying out re-export procedures. Import tax calculation values for leased
or borrowed goods comply with Clause 9 of Article 1 of Circular 60/2019/TT-BTC.

In case a domestic enterprise imports machinery and equipment as agreed in the

processing contract to perform the processing contract, the domestic enterprise
is exempt from import tax as prescribed at Point c, Clause 1, Article 10 of
Decree No. 134/2016/ND-CP dated September 1, 2016 of the Government of
Vietnam.

2.2. VAT
Domestic enterprises that hire or borrow someone to register customs
declarations in the form of temporary imports for re-export are not required to
pay VAT because goods temporarily imported for re-export are not subject to
VAT.

In cases where the lease or loan term has expired but the domestic enterprise
continues to use it and does not re-export, domestic enterprises must carry out
procedures for changing the purpose of use and declare and pay VAT together
with import tax on the new customs declaration according to the provisions of
Clause 12, Article 1 of Decree 59/2018/ND-CP.

When using leased or borrowed goods that have been damaged and cannot be re-
exported but must be destroyed, and the destruction procedures have been
carried out in accordance with the law, then:

Domestic enterprises are not required to declare and pay VAT on these leased or
borrowed goods.
*In the event that an EPE leases or lends machinery and equipment to a
domestic enterprise to carry out other business activities, not to serve the
export processing activities of the EPE:
EPEs must carry out procedures for changing the purpose of use, declare a new
customs declaration, and pay tax in full for the number of non-taxable goods
before leasing or borrowing them.

More details can be found in Vietnam's Official Dispatch 300/TCHQ-GSQL dated

17/01/2023