What is an export processing enterprise? What is an export processing zone? Issuing invoices to export processing zones? Customs procedures for selling goods and providing services to export processing enterprises?
I. What is a manufacturing enterprise?
Export processing enterprise (EPE), also known as export processing enterprise (EPE), is an enterprise established and operating in an export processing zone or an enterprise specializing in the production of export goods.
II. What is an export processing zone? Distinguishing between an export processing zone and a duty-free zone
2.1. What is an export processing zone?
An export processing zone is an industrial zone that specializes in the production of goods for export, providing services for the production of goods for export and activities for the export of goods, with fully defined boundaries, established or permitted to be established by a State agency.
2.2. Distinguishing between export processing zones and non-tariff zones
Non-tariff zones are special economic zones of Vietnam, established in accordance with the provisions of law, with defined boundaries, separated from outside areas by fences, ensuring conditions for customs inspection, supervision and control activities of customs authorities and other relevant agencies for import and export goods and means of transport, passengers entering and leaving the country; the relationship of buying and selling and exchanging goods between the non-tariff zone and the outside is an export and import relationship.
According to document No. 16/VBHN-BTC and decision No. 100/2009/QD-TTg of the Prime Minister on duty-free zones including:
- Export processing zone;
- Manufacturing enterprise;
- Bonded warehouse;
- Bonded area;
- Bonded warehouse;
- Special economic and trade zones;
- Commercial and industrial zones;
- Other economic zones are established and enjoy tax incentives similar to duty-free zones according to the Prime Minister’s decision.
➥ Thus, the export processing zone is only an area specializing in the production of goods and providing services for export, while the duty-free zone is an economic area established to include many other economic areas with different functions and including the export processing zone.
III. Procedures for selling and providing services to manufacturing enterprises
1. Customs procedures for selling goods into export processing zones and export processing enterprises Enterprises
wishing to sell goods into export processing zones must complete customs declaration procedures.
To open a business declaration, you need to prepare the following documents:
- Sales contract;
- Value added tax invoice;
- Packing list;
- Other documents if the manufactured goods are subject to specialized inspection or quality inspection.
Note :
There are some special cases when enterprises sell goods to DNCX but do not have to carry out customs procedures, specifically:
– Selling software products;
– Goods are construction materials for construction works in export processing zones;
– Food, food, stationery, consumer goods (including labor protection items: pants, shirts, hats, shoes, boots and gloves) serving office activities and daily life of staff working in export processing enterprises.
2. Procedures for providing services to export processing zones and export processing enterprises
When an enterprise provides services to an export processing enterprise, it is not necessary to carry out customs declaration procedures. The enterprise only needs to sign a service provision contract with the export processing enterprise.
III. VAT rate when selling goods and providing services to enterprises
According to Clause 1, Article 9, Circular 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance, the tax rate of 0% applies to exported goods and services; construction and installation of works abroad and in duty-free zones; cross-border transportation; sale of goods and provision of services not subject to VAT when exported. Goods and services for export are goods and services sold or provided to organizations or individuals abroad and consumed outside Vietnam; sold or provided to organizations or individuals in duty-free zones; sale of goods and services provided to foreign customers in accordance with the provisions of law.
➥ Thus, selling goods and providing services to export processing zones is an export activity that will be subject to a tax rate of 0%.
However, to enjoy a 0% tax rate, there will also be some conditions as follows:
➤ Conditions for enjoying a 0% tax rate when selling goods in export processing zones
- There is a sales contract;
- Have proof of sales receipts via bank;
- Have a set of customs declarations (except for cases of selling goods to export processing enterprises that do not have to open the fdiinvietnam.com declaration mentioned above).
Then:
– If the enterprise sells goods into the export processing zone without a customs declaration, the goods sold to the export processing enterprise will not enjoy a 0% tax rate but will have to be calculated according to the current tax rate of those goods as if selling goods to domestic enterprises;
– If the enterprise does not have payment documents through banks but still has a customs declaration, the enterprise selling goods into the export processing zone can issue an invoice with a 0% tax rate but the input VAT cannot be deducted.
Note :
Some items when sold to export processing enterprises are not considered export activities, so the 0% tax rate is not applied but is applied as for sales to domestic enterprises, such as cars, and gasoline for cars of export processing enterprises.
➤ Conditions for enjoying 0% tax rate when providing services to export processing zones
- Have a service contract;
- Have bank receipt;
- Have investment license (photocopy) to prove that the business partner is a DNCX.
Enterprises with all the above documents will be subject to a 0% tax rate. However, except for some special services, the 0% tax rate will not be applied. Including:
- Labor transportation services;
- Catering services (except providing industrial meals and catering services in export processing zones);
- House rental services for residence or business, large hall, office, hotel, warehouse.
>> See more: Some cases applying 0% VAT rate.
IV. Regulations on invoice issuance for manufacturing enterprises
1. Enterprises selling goods and providing services to export processing zones are required to issue invoices.
In Clause 1 and Clause 2, Article 8 of Decree No. 123, invoices include the following types:
- VAT invoices for businesses declaring VAT using the deduction method are used for activities: Exporting goods and providing services to duty-free zones and cases considered as exports;
- Sales invoices for businesses declaring VAT using the direct method are used for the following activities: exporting goods and providing services to duty-free zones and cases considered as exports.
➥ Thus, when selling goods and providing services in the export processing zone, an invoice must be issued. If the enterprise declares VAT using the deduction method, it will issue a VAT invoice. If the enterprise declares VAT using the direct method, it will issue a sales invoice.
>> See more: Distinguishing between direct and deduction tax calculation methods.
2. How to write invoices for goods and services in export processing zones
➤ Regarding the currency on the invoice:
- If the two parties agree to pay in VND, the currency unit stated on the invoice is the amount calculated in Vietnamese Dong;
- If the two selling parties agree to pay in foreign currency, the currency stated on the invoice is foreign currency, but the bottom line clearly states the exchange rate for the enterprise to use as a basis for accounting (The exchange rate is taken according to the buying rate of the commercial bank where the enterprise intends to collect payment for the goods on the date of invoice issuance).
➤ For businesses using VAT invoices:
- The VAT rate line clearly states: 0%;
- VAT cash flow clearly states: 0.
For example:
IV. Questions when selling and providing services to manufacturing enterprises
1. In which cases is it not necessary to carry out customs declaration procedures when selling goods to a foreign-invested enterprise but still subject to a 0% VAT rate?
Cases of selling goods to DNCX that do not require customs declaration procedures but are still subject to 0% VAT rate include:
- Sell software products;
- Goods are construction materials for construction works in export processing zones;
- Food, foodstuff, stationery, consumer goods (including labor protection items: pants, shirts, hats, shoes, boots and gloves) serving office activities and daily life of staff working in export processing enterprises.
2. When selling goods to a foreign-invested enterprise to apply a 0% VAT rate, what documents does the enterprise need to have?
Businesses need to have the following documents:
- Sales contract;
- Sales receipts via bank;
- Customs declaration documents (except for cases of selling goods to enterprises that do not need to open a declaration).
3. When providing services to DNCX to apply 0% VAT rate, what documents does the enterprise need to have?
Businesses need to have the following documents:
- Service provision contract;
- Bank receipt;
- Investment license (photocopy) to prove that the enterprise’s partner is a foreign invested enterprise.