Vietnam’s General Department of Customs (GDC) recently issued Official Letter No. 3747/TCHQ-TXNK (hereinafter, “Official Letter 3747”) to strengthen the management of duty-incentivized projects undergoing ownership changes. This follows increasing reports from provincial and municipal customs departments regarding related complications. In response, the GDC has outlined the conditions and procedures for ownership changes in investment-incentivized projects, citing several regulatory documents.
Regulatory basis of project ownership changes
According to Official Letter 3747, duty policies are applied in accordance with regulations governing changes in project ownership. In such cases, the new project owners are considered the users of duty-exempt goods and are responsible for registering a list of these goods with customs authorities.
Law on Import Duty and Export Duty No. 107/2016/QH13 and Decree No. 134/2016/ND-CP (as amended by Decree No. 18/2021/ND-CP) stipulate tax exemptions for imported goods used to create fixed assets for projects benefiting from investment incentives.
Additionally, the Law on Investment No. 61/2020/QH14 grants investors the right to:
- Adjust project objectives;
- Transfer part or all of the investment project;
- Merge projects;
- Divide or separate a project into multiple projects;
- Use land use rights and assets associated with the investment project as capital to establish an enterprise; and
- Engage in business cooperation or other activities in compliance with Vietnamese law.
Eligible cases of project ownership changes
Decree No. 134/2016/ND-CP (as amended by Decree No. 18/2021/ND-CP) outlines the procedures and conditions for maintaining tax incentives when project ownership changes occur in the following cases:
1) Transfer of investment incentive projects;
2) Transfer of duty-exempt imported goods from one investment incentive project to another, under the same owner; and
3) Instances not covered by the Law on Enterprises and the Law on Investment, such as:
- Transfer of imported goods used to create fixed assets in investment incentive projects as part of enterprise establishment or capital contributions;
- Separation;
- Mergers;
- Consolidation; and
- Other forms of business conversion.
Promulgated procedures
According to Official Letter 3747, when a project ownership change occurs, both the previous and new project owners must submit the following documents to customs authorities:
- Documents confirming the change in project ownership;
- The duty-exempt goods list previously registered by the original project owner, along with corresponding customs declarations;
- Documents outlining the transfer of duty-exempt goods, including whether it is a partial or full transfer, the transfer timeline, and any agreements regarding rights and obligations related to the project; and
- Signatures from both the original and new project owners.
Obligations of the new project owner
The GDC requires the new project owner to:
- Properly utilize the project’s tax-exempt goods; and
- Report the usage of tax-exempt goods annually to the customs authority that holds the Tax Exemption List.
Customs authorities’ duties
Upon receiving information about a project ownership change in an investment incentive project, the managing customs agency must invite both the original and new project owners to their office to collect and record the required documents as outlined above.
If the enterprise fails to cooperate or if there are signs of violations or risks, customs authorities are instructed to promptly inspect the use of duty-free goods, which may include:
- Collecting and verifying information at the project site;
- Documenting findings in an official record; and
- Applying other necessary inspection, supervision, and control measures.
To monitor the management of investment incentive projects with ownership changes, the GDC has instructed its units to report all such cases. These reports must be submitted to the GDC’s Department of Import and Export Duty by September 9, 2024.
