On October 12th, 2016, the General Department of Customs (“GDC”) issued Official Letter No. 9744/TCHQ-TXNK on guiding the declaration of commodity codes and tax rates for the implementation of export tariffs as prescribed in Decree No. 122/2016./ND-CP dated September 01st, 2016. According to the provision of Section 211 of Appendix I, Decree No. 122/2016/ND-CP, "Materials, raw materials, semi-products ... of which the value of mineral and sources thereof and energy accounts for 50 % product price or more" will be subject to export tax of 5%. Until now, cement products are always considered as finished products, so they are not subject to export tax as above-mentioned. However, Official Letter No. 9744/TCHQ-TXNK uses the definition
"export goods" in general, so that cement is subjected to the export tax rate of 5%.
Vietnam Cement Association has responded fiercely to the Letter No. 9744/TCHQ-TXNK. In view of the representative of the Cement Association, Cement is the "finished good" rather than "semi-finished good", and this item is not listed in the Export Tariff in Appendix I of Decree No. 122/2016/ND-CP. Therefore, Cement should not be subject to export tax. Representatives of a number of cement exported-company also expressed that the guidance of GDC on the imposition of 5% tax rate on export cement was lack of basis, unsuitable with legal processes. Moreover, a number of Customs Department already required exporters to submit:
(1) Written commitment on the sum of mineral value and the energy cost of the cement account for less than 51% of the cost of cement; (2) The accounting commitment on the proportion of mineral resources plus energy costs of cement accounts for less than 51% of the cost of the cement in the previous year. This action made cement companies dissatisfied.
In that situation, as a media agency, the Life & Legal Newspaper (L&L Newspaper) has gathered the comments of the business community nationwide and the Government, experts and lawyers through interviews, roundtables and online exchanges... to make recommendations to competent state agencies. Vietthink Law Firm has been cooperating with the L&L Newspaper, the Vietnam Cement Association and other relevant organizations in the process of gathering feedbacks and recommendations to the competent state agencies. From the legal point of view, Vietthink's lawyers have stated that the imposition of the export tax rate of 5% was ungrounded. Vietthink lawyers also showed the unreasonable points as stated un the Official Letter No. 9744/TCHQ-TXNK.
Lawyer, PhD., Le Dinh Vinh - Director of Vietthink Law Firm, who directly participated in criticizing the application of 5% export tax.
With the feedbacks and petitions of cement businesses through L&L Newspaper, on May 16th, 2017, the Finance Committee of the National Assembly has issued Official Letter No. 504/UBTCNS14 on the application of export tax with cement and sent to the Ministry of Finance, L&L Newspaper, Vietnam Cement Association and other related organizations.
According to the Official Letter No. 504/UBTCNS14, the Finance and Budget Committee determines that the local Customs Departments require the companies to submit additional documents such as
(1) Written commitment on the sum of mineral value and the energy cost of the cement account for less than 51% of the cost of cement; (2) The accounting commitment on the proportion of mineral resources plus energy costs of cement accounts for less than 51% of the cost of the cement in the previous year is inconsistent with the Law on Export Taxation, Import Taxation No. 107/2016/QH13 and Decree No. 122/2016/ND-CP. As stipulated in the list of Export Tariffs for each group of taxable goods, the 211st commodity is defined as " Materials, raw materials and semi-products other than those mentioned above, of which the value of mineral and sources thereof and energy accounts for 50% product price or more" are subject to tax rate of 5-20%. Thus, this tax rate only applies to materials, raw materials, semi-finished products, not the finished products.
Therefore, the Standing Committee of Finance and Budget asked the Ministry of Finance to check and require the GDC to stop requesting enterprises to supplement documents which are inconsistent with the provisions of the Law on Tax Administration and Law on Export Taxation, Import Taxation.
Regarding the imposition of export tax of 5-20% on export goods with the value of natural resources and minerals plus energy costs account for 51% of finished product cost or more, according to the Standing Committee of Finance and Budget, this regulation is unmanaged and unworkable because the management completely depends on the commitment of the producers. In case exporters are not producers, it will be impossible to determine the cost structure.
Therefore, the Standing Committee of Finance and Budget proposed Ministry of Finance to review and evaluate the implementation of regulations on determining the rate of natural resources and minerals plus energy costs which counted from 51% of the price applied to cement as well as other products in the Law on Value Added Tax, the Law on Export Tax and Import Tax; then to report it to the Government for an early submission to the National Assembly for consideration and amendment of this Regulation and solving difficulties, obstacles for rhe companies.
Commenting on this matter, Lawyer Le Dinh Vinh - Director of Vietthink Law Firm said that:
"The issuance of Official Letter No. 504/UBTCNS14 is a praiseworthy signal for the companies. It demonstrates that top-level state authorities are ready to listen to and embrace the legitimate aspirations of the businesses. Besides, it also shows that the recommendations of businesses and legal experts on the unreasonableness of Official Letter 9744/TCHQ-TXNK is grounded.
"The monitoring by the National Assembly closely observes law enforcement and is ready to solve problems of enterprises, with the determination to implement the motto "government create and develop" will create strong momentum for the economy and businesses. The Vietnamese business community in general and the cement industry in particular can be assured of a confident, open and transparent business environment”, Lawyer Vinh said.
However, according to Lawyer Le Dinh Vinh, Official Letter No. 504/UBTCNS14 is only the first step in removing difficulties for enterprises in the cement industry. The most important thing is
“The Ministry of Finance should expeditiously review and evaluate the unreasonable implementation of the Law on VAT, the Law on Export Tax and Import Tax, make reports to the Government for an early submission to the National Assembly for consideration and amendment. The above law aims to ensure the scientific and uniform application of the law, contributing to encourage the production and export of cement in our country".
Vietthink Law Firm will continue to cooperate with L&L Newspaper and Cement Association to propose to competent state agencies to consider and thoroughly amend the unreasonable imposition of export tax on cement. Besides, we will continue to participate in reviewing legal policies in investment and business in order to perfecting the market economy regime and the Vietnamese legal system./.
Vietthink News.