Proposal to abolish tax exemption for low-value imported goods: What does the Ministry of Finance say?

The Ministry of Finance is submitting a draft decree to the Government, which proposes abolishing the VAT exemption for imported goods valued at less than 1 million VND.

The Ministry of Finance issued a press release addressing several issues of public and social concern. Among them, the ministry stated its position on the proposal to abolish the tax exemption for imported goods valued at less than 1 million VND sold through online trading platforms. e-commerce.

According to the Ministry of Finance, it previously reported to the Prime Minister that regulations on import duty and value-added tax exemption for express delivery services were based on the International Convention on Harmonization and Simplification of Customs Procedures (Kyoto Convention), which Vietnam has signed: "National law must stipulate a minimum value and/or minimum amount of customs duties and other taxes below which no customs duties or other taxes shall be collected."

The specific context of Vietnam during that period also necessitated appropriate policies to simplify customs procedures for imported goods in order to facilitate trade development, including goods sent via express delivery that were of low value but in large quantities.

In the aforementioned Submission No. 127/TTr-BTC, the Ministry of Finance submitted to the Prime Minister a Decision stipulating the quotas for imported goods sent via express delivery services that are exempt from import tax and value-added tax; excise tax does not apply because goods subject to excise tax are those whose import is discouraged (such as tobacco, alcohol, beer...).

Regarding the value of goods imported via express delivery services that are exempt from tax, based on the experience of several countries in the Asia-Pacific region, the average tax-exempt value in these countries at the time of drafting Decision No. 78/2010/QD-TTg was approximately 130 USD.

Statistics show that the value of imported goods sent to Vietnam via express delivery services at that time was not very high; most were worth around 1 million VND (accounting for 60% to 70% of the total value of imported goods sent via express delivery).

Accordingly, in order to simplify customs procedures and fulfill international commitments, the Ministry of Finance submitted to the Prime Minister in Proposal No. 127/TTr-BTC: "to apply a tax exemption limit of 1 million VND (equivalent to approximately 50 US dollars) to suit the actual situation."

Đề xuất bỏ quy định miễn thuế hàng nhập khẩu giá trị nhỏ: Bộ Tài chính nói gì? - Ảnh 1. — Illustrative image.

However, international trade has recently undergone many changes. EU countries have abolished the VAT exemption for shipments of €22 or less. The United Kingdom (England, Scotland, and Wales) also abolished the VAT exemption for imported goods with a total value of £135 or less from January 1, 2021.

Similarly, in Singapore, the exemption from value-added tax (VAT) for low-value goods, especially in the e-commerce sector, also began to be abolished from January 1, 2023. To ensure fair trade practices, from May 1, 2024, Thailand will also collect VAT on all imported goods, regardless of value.

Furthermore, at the workshops, experts from the Trade Facilitation Project (TFP) also advised Vietnam to consider abolishing the regulation exempting low-value imported goods from value-added tax.

In this context, the Ministry of Finance has submitted to the Government a draft Decree on customs management of goods exported and imported through e-commerce, which proposes abolishing the value-added tax exemption for imported goods sent via express delivery services with a value under 1 million VND (this content has been subject to consultation with organizations and individuals as prescribed, has been assessed by the Ministry of Justice and reported to the Government and the Prime Minister).

However, the issuance and implementation of the Decree on customs management for goods exported and imported through e-commerce transactions needs to be carried out in conjunction with the completion of the information technology infrastructure system, so more time is needed for preparation.

Accordingly, to meet the new requirements and based on the recommendations of several agencies during the project development process, Value Added Tax Law (Revised), the Ministry of Finance is urgently coordinating with relevant units to prepare a dossier to submit to the competent authority for promulgation of a legal document to repeal Decision No. 78/2010/QD-TTg in accordance with the procedures stipulated in the Law on Promulgation of Legal Documents, without waiting for the progress of the aforementioned Decree drafting project, ensuring compliance with international practices in the context of the increasing trend of cross-border e-commerce activities.

At the same time, continue to strengthen the implementation of solutions to prevent and combat trade fraud and tax evasion for imported goods in general and low-value imported goods in particular.

Source