With no tax payment grace period on imports for rexport, companies anticipate hard times

Sep 24, 2012. 800 million dollars was the figure cited by the Vietnam Textile and Apparel Association (Vitas) to show the unreasonable articles of the draft law on tax management, which was put into discussion at the National Assembly’s Standing Committee’s working session on August 15.

MOF, which is compiling the draft of the amended law on tax management, is going to impose a tighter management over the tax payment by enterprises.

The ministry plans to amend the Article No. 42 of the current law, requesting enterprises to make tax payment before the customs clearance time. The regulation would be applied to the enterprises that do the outsourcing for foreign partners (import materials, make products domestically for export), and the enterprises which import products for re-export later.

As such, if the amendment is made, garment companies would not be able to enjoy the 275-day tax payment grace period as stipulated in the current law.

In principle, the companies still can enjoy the grace period, if they are guaranteed by commercial banks. However, Vitas believes that it is nearly impossible to obtain the guarantee from banks, because of the overly strict requirements. Enterprises would have to pay a deposit and mortgage assets at banks, and of course, they have to pay fee.

A garment company with the annual turnover of 10 million dollars a year would have to extract 1.2 million dollars for tax payment. When it exports products, it would get the tax refund (under the current laws, garment exports can enjoy the tax exemption).

Vitas said the tentative new regulation would force enterprises to arrange money to pay tax first and get tax refund later, which would cause them a lot of time for administrative procedures, thus weakening the competitiveness of enterprises.

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