China is no longer a go-to destination for a lot of businesses because of its rising manufacturing costs, the relevant policies for foreign enterprises as well as the trade war between the US and China. In this current context, Vietnam has arisen as a serious competitor. The import and export in Vietnam have also had positive signs as foreign businesses shift their operation to the country. Additionally, in June 2020, Vietnam has ratified the EVFTAs, which will bring huge opportunities for Vietnamese trade with the EU. This article provides you with essential information about export in Vietnam.
Regulation of export in Vietnam
General regulations
With a view to conducting export businesses, a foreign investor must register with the Department of Planning and Investment (DPI). Additionally, foreign investors who wish to engage in export activities in Vietnam are required to obtain an Investment Certificate. Companies that wish to expand their current business operations to engage in import activities must follow the procedures for adjusting their Investment Certificates.
Certain goods require the trading company to obtain import and export permits from the government, as per Appendix II of Decree 187/2013/ND-CP. These include:
– Goods subject to export control in accordance with international treaties to which Vietnam is a contracting party;
– Goods exported within quotas set by foreign countries;
– Goods subject to import control in accordance with international treaties to which Vietnam is a contracting party; and
– Chemicals, explosive pre-substances, and industrial explosives.
Only certain commodities are liable for the export tax. Export taxes range from zero to 45 percent. Many goods are also subject to VAT. In addition, the Law on special consumption tax (SCT) stipulates that exporters who purchase SCT tax-liable goods for export but instead sell the products domestically are liable for SCT. Notably, petroleum oil is banned from export.
Applicable duties and taxes
Most goods exported across the borders of Vietnam, or which pass between the domestic market and a non-tariff zone, are subject to import/export duties. Exceptions to this include goods in transit, goods exported abroad from a non-tariff zone, goods imported from foreign countries into non-tariff areas for use in non-tariff areas only, and goods passing from one non-tariff zone to another.
Most goods and services being exported are exempt from tax. Export duties (ranging from zero percent to 45% and computed on free-on-board (FOB) price) are only charged on a few items, mainly natural resources such as minerals, forest products, and scrap metal.
Export duties declarations are required upon registration of customs declarations with the customs offices. Export duties must be paid within 30 days of registration of customs declarations.
Merchandises in these specific cases are not an object of taxation:
– Goods temporarily exported for re-import;
– Goods imported for processing for foreign partners then exported or goods exported to foreign; countries for processing for Vietnam then re-imported under processing contracts;
– Goods imported to create fixed assets for projects entitled to investment incentives or investment projects funded with official development assistance (ODA) capital sources;
– Goods imported in service of petroleum activities; and
– Goods imported for direct use in activities of scientific research and technological development.
Regarding tax calculation, the export payable tax amount must be equal to the unit quantity of each actual export goods inscribed in the customs declarations with taxable price and tax rate of each goods inscribed in the Tariff at the time of tax calculation. For goods subject to absolute tax, the export payable tax amount must be equal to the unit quantity of each actually exported goods item inscribed in the customs declarations multiplied by the absolute tax rate provided for a goods unit at the time of tax calculation.
Key export goods in Vietnam
Here is a list of top 10 export product goods representing the highest dollar value in Vietnamese global shipments during 2019. Besides, the list below also presents the percentage share of each group with regard to the overall exports in Vietnam.
1. Electrical machinery, equipment: US$126.9 billion (41.7% of total exports)
2. Footwear: $24.7 billion (8.1%)
3. Clothing, accessories (not knit or crochet): $16.9 billion (5.5%)
4. Machinery including computers: $16.7 billion (5.5%)
5. Knit or crochet clothing, accessories: $16.1 billion (5.3%)
6. Furniture, bedding, lighting, signs, prefabricated buildings: $12.3 billion (4.1%)
7. Optical, technical, medical apparatus: $5.8 billion (1.9%)
8. Fish: $5.6 billion (1.8%)
9. Leather/animal gut articles: $4.6 billion (1.5%)
10. Plastics, plastic articles: $4.5 billion (1.5%)
Furniture, bedding, lighting, signs, and prefabricated buildings was a group representing the fastest growth among ten export categories, increasing by 63% between 2018 and 2019. The second fastest growth belonged to footwear with a gain of 47%. Vietnam’s shipments of electrical machinery and equipment ranked the third-fastest growth of 46.5%. Nevertheless, optical, technical, and medical apparatus was a leading decliner with a 25.2% drop year over year.
What does the Vietnamese government do to promote export in Vietnam?
Vietnam’s National Assembly ratified EVFTAs
Country that establishes bilateral or multilateral trade agreements with Vietnam may enjoy low tax rate or even zero tax rate. For example, Vietnam is a member of the ASEAN Free Trade Area and intraregional import taxes for certain products range from 0-5%, including products such as livestock, meat and fish, fruit and vegetables, medicaments and pharmaceutical goods, agricultural machinery.
The EVFTA brings to a lot of opportunities for Vietnamese trade with European countries, especially export and import. “From now to the year’s end, we will have more opportunities to boost exports thanks to positive impacts from free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA),” Minister of Planning and Investment Nguyen Chi Dung told the government at a recent conference between the government and localities on Vietnam’s socio-economic development organized in Hanoi.
“These pacts have helped further strengthen the confidence of investors and enterprises in conducting business and production in Vietnam, especially in the manufacturing and processing sector, creating a firm impetus for enterprises to boost exports and for the whole economy to reap bigger trade growth, including a big trade surplus in 2019,” he stated.
Attractive trade policies and government incentives
First, the government promotes export subsidies. Vietnam still maintains several forms of export subsidy under Government programs such as reducing or exempting taxes; providing direct financial support (especially for new exporters) to the export of goods to new markets or to goods affected by price fluctuations; and granting export rewards (under Trade Ministry Decision No. 02/2002/QD-BTM). The Export Support Fund is maintained to support, encourage and promote export. Export support is also in the form of offsetting losses of enterprises that export rice, meat, coffee, canned vegetables and fruits, and porcelain products under Finance Ministry regulations.
Second, the authority boosts the advertising and marketing for Vietnamese products. A lot of products are introduced free on the Ministry of Industry and Trade website and provincial-level Departments of Industry and Trade website. Funds are prioritized for trade and investment promotion programs. Plus, the government creates opportunities to form product and services supply networks for high-tech industry projects.
Third, science is invested and human resources are trained. Support from the National Scientific and Technological Development Fund may be used to cover expenses arising from technology transfers, design copyrights purchases, software purchases, and the hiring of foreign experts. Besides, funds from the state budget to partially cover expenses for human resource training.
Fourth, export projects are supported in terms of finance. Import and export duty incentives under the current laws on import and export duties are granted. Tax and land rent incentives for small and medium enterprises (SMEs) engaged in the ancillary industry zones and specialized industrial zones are introduced to increase opportunities to obtain loans for SMEs engaged in ancillary industries.
READ FURTHER: How to Set up a Franchising Business in Vietnam.
In conclusion, although the COVID-19 pandemic has posed some obstacles to export in a lot of countries in general and in Vietnam in specific, EVFTA in the early of June 2020 can be seen as a success for Vietnam in the pave of integration and trade expansion. The government always tries to issue favorable conditions for both Vietnamese and foreign enterprises to promote trade exchange. The article helps to provide essential information about Vietnamese export and presents some incentives that the government proposes for businesses. If you would like to enter the Vietnamese market, Viettonkin is always ready to assist you.