Overview of Export Processing Enterprise (EPE) in Vietnam 2019

Minh, Nguyen Viet – Lawyer – Samsung Vietnam Manufacturing Complex

13. Feb.2019

1. What is EPE?

According to Article 2.10 of Decree No. 82/2018/NĐ-CP, export processing enterprise[1] means:

An enterprise that is established and operates in an export processing zone; or specializes on manufacturing products for import and operates in an industrial zone or economic zone

2. Requirement on separate area

According to Article 30.2 of Decree No. 82/2018/NĐ-CP, it states that:

2. In industrial parks, there may be industrial sub-zones for export processing enterprises. Export processing zones, export-processing enterprises or industrial parks reserved for export-processing enterprises shall be separated from the outside by fence systems, have ports, entrance and exit doors, and fulfill requirements concerning supervision and control by customs authorities and related functional agencies according to regulations applicable to non-tariff areas and regulations laid down in the legislation on import and export duty.

3. Customs procedures

According to Article 30.3, 30.4, 30.5 of Decree No. 82/2018/NĐ-CP, it states that

3. Export processing enterprises may purchase building materials, stationery, food, foodstuffs and consumer goods from inland areas of Vietnam for carrying out construction works or meeting the needs of operation of the office system and basic needs of officers and staff members working in these enterprises.

Export processing enterprises and persons selling goods to export processing enterprises shall have the option of carrying out procedures for export or import of building materials, stationery, food, foodstuffs and consumer goods from inland areas of Vietnam.

4. Customs procedures, inspection and supervision of exported and imported goods of export processing zones and export processing enterprises shall be subject to the customs legislation.

5. Exchange of goods between export processing zones or export processing enterprises and other areas within the territory of Vietnam, except for non-tariff zones, shall be defined as an export or import relationship, unless otherwise stipulated in clause 3 of this Article and except in the cases where customs procedures are not required under regulations adopted by the Ministry of Finance.

Export processing enterprises may sell into the domestic market their liquidated assets and goods under the provisions of law on investment and trade. At the time of selling or disposing of goods in the domestic market, export or import management policies shall not apply, except to the extent that the goods are subject to management in conformity with conditions or standards ,and specialized inspection have not yet been implemented when import; The goods must be approved in writing by the import permit-issuing agency

Samsung Electronics Vietnam Co., Ltd., an EPE located in Bac Ninh province

4. Tax policies

According to Article 30.1 of Decree No. 82/2018/NĐ-CP, it states that

1. Export processing zones and export processing enterprises shall be subject to regulations applicable to separate customs areas and non-tariff zones, except for particular regulations applicable to non-tariff zones within bordergate economic zones. If export processing enterprises may be exempted from applying for the Certificate of investment registration, such exemption shall be specified in their investment registration certificates or written document issued by the competent investment registry. The investment registry shall be held responsible for gathering opinions from the competent customs authorities on the capability to satisfy conditions of the customs inspection and supervision before issuing the investment registration certificate or confirmation in writing to investors.

5. Foreign exchange

According to Article 30.6 of Decree No. 82/2018/NĐ-CP, it states that

6. Officers, workers and staff members working in export processing zones and export processing enterprises, when carrying foreign currencies from inland areas of Vietnam to export processing zones or export processing enterprises, and vice versa, shall not have to make customs declaration

According to Article 4.12 of Circular No.32/2013/TT-NHNN, it states that:

Article 4. Cases allowed to use foreign exchange in the territory of Vietnam

12. Residents being exporting and processing enterprises shall comply with the following provision:

a) They are allowed for prices in contracts in foreign currency and payment in foreign currency by transfer when they buy goods from domestic market for production, processing, reprocessing, and assembling of export goods or for export, except for goods banned export. Domestic enterprises are allowed to make quotations, fix prices in foreign currency or receive payments in foreign currency by transfer when they sell goods for exporting and processing enterprises;

b) They are allowed for quotations, pricing and prices in contracts in foreign currency and payment, receipt of payments in foreign currency by transfer with other exporting and processing enterprises

6. Trading

According to Article 30.7 of Decree No. 82/2018/NĐ-CP, it states that

7. Export processing enterprises, when being permitted to purchase, sell goods and carry out other activities directly related to the purchase and sale of goods in Vietnam, must open separate accounting books for revenue and expenses related to these activities in Vietnam, arranging zones for storage of goods for such purchase or sale separated from those for production activities of export-processing enterprises, or setting up separate branches outside export processing enterprises or export processing zones to carry out these activities.

7. Accounting records in case of trading in domestic area

According Article 3.6 of Circular No 219/2013/TT-BTC, it states that

6. Branches of the export processing companies that are established to trade goods and do the tasks related to goods trading in Vietnam in accordance with the laws on industrial parks, export-processing zones, and economic zones.

Example 1: Sanko LLC. is an export processing company. Apart from manufacturing for exportation, Sanko LLC. is also licensed to import goods for sale or for exportation, and Sanko LLC. must establish a branch to do this task. This branch shall independently keep accounting records, declare and pay separate VAT on such task instead of including it in the VAT on manufacturing for exportation.

When importing goods for distribution (sale), the branch of Sanko LLC shall declare and pay VAT on the importation and on each sale (including exportation). Sanko LLC. shall use invoices, declare and pay VAT as prescribed.

8. Branch of EPE

According to Article 30.8 of Decree No. 82/2018/NĐ-CP, it states that

8. Branches of an export processing enterprise may have the operational system so applied to export processing enterprises as specified in this Article if they meet the conditions that are separated from the outside by fence systems, have ports, entrance and exit doors, and fulfill requirements concerning supervision and control by customs authorities and related functional agencies, may be set up within export processing zones, industrial parks or economic zones, and shall have to keep a record of accounting entries at the discretion of export processing enterprise.

[1] In comparison with the old regulation, EPEs which operates in an industrial zone or economic zone will no longer to export all its products. According to Article 2.6 of Decree No. 29/2008/ND-CP, export processing enterprise means “An enterprise that is established and operates in an export processing zone; or exports all its products and operates in an industrial zone or economic zone”