The EVFTA agreement proves to the world that Vietnam is becoming increasingly open to international trade, although this openness has various shades. Concurrently, despite New Caledonia being a constituent territory of France (which is covered in EVFTA), investors from this territory cannot benefit from this treaty’s provisions. This article will thus explore the import tax atmosphere for goods entering Vietnam from New Caledonia.
Since the Nouméa Accords (1998) on New Caledonia’s wide autonomy from France, French treaties do not automatically apply to New Caledonia (Article 3.1.1), as it can choose whether to participate in such treaties. One such treaty is the European Union-Vietnam Free Trade Agreement (EVFTA, effective since 1st August 2020), which New Caledonia chose not to be a party to. Consequently, The General Department of Vietnam Customs confirmed this when citing the Government’s Decree No. 111/2020, stating that New Caledonia is not subject to the List of EU member territories enjoying tax incentives under the EVFTA specified in Appendix 3 issued together with the decree.
Currently, Decree No. 111/2020/DC-CP has expired and has been replaced by Decree No. 116/2022.ND-CP, however, the content of Appendix III remains the same as before.
Hence, one can wonder about the applicable tax duty between New Caledonia and Vietnam. Overall, investors and suppliers from New Caledonia can refer mainly to the Law on Exports and Duties (2016). This article will explore some of its main provisions:
1. The law considers taxpayers
- Owners of exports and imports.
- Entrusted exporters and importers.
- People entering and leaving Vietnam carrying exports or imports, sending or receiving goods through Vietnam’s border and border checkpoints.
- Taxpayers’ guarantors and other entities authorized to pay tax on behalf of taxpayers, including:
- Customs brokerage agents in case authorized by the taxpayer to pay export and import duties;
- Providers of postal services or international express mail services paying tax on behalf of taxpayers;
- Credit institutions or other organizations operating under the Law on credit institutions that provide guarantee or pay tax on behalf of taxpayers;
- People authorized by goods owners in case goods are gifts of individuals; any luggage sent before or after its owner’s arrival or departure;
- Any branch of an enterprise authorized to pay tax on its behalf;
- Other people authorized to pay tax on behalf of taxpayers as prescribed by laws.
- Any person who purchases or transports goods within the tax-free allowance applied to border residents which are sold domestically instead of being consumed or used for manufacture; foreign traders permitted to deal in exports and imports at bordering markets the Law might consider.
- Owners of exports or imports that are initially tax-free but then taxed.
- Other cases as the Law sees fit.
2. The Basis for calculation of proportional duties
- The amount of export or import duty is determined according to the taxable value and duty rate (%) of each article at the time of tax calculation.
- Export duty rate of each article is specified in the export duty schedule.
Where goods are exported to a country or group of countries or territories having an agreement on concessional export duties with Vietnam, such agreement shall apply.
- Import duty rates include preferential rates, special preferential rates, and ordinary rates as follows:
- Preferential rates apply to imports originated in any country or group of countries or territories that accord Vietnam most-favored nation treatment (to which New Caledonia does not apply, but France does); goods that are imported from a free trade zone to the domestic market and originating in a country or group of countries or territories that accord Vietnam most-favored nation treatment;
- Special preferential rates apply to imports originated in any country or group of countries or territories that have an agreement on special preferential import duties with Vietnam; goods that are imported from a free trade zone to the domestic market and originating in a country or group of countries or territories that have an agreement on special preferential import duties with Vietnam;
- Ordinary rates apply to imports other than those mentioned in points a and b of this Clause. The ordinary rate is 150% of the preferential rate applied to the corresponding article. In case the preferential rate is 0%, the Prime Minister shall decide the application of the ordinary rate pursuant to Article 10 of this Law.
3. The Basis for calculation of fixed duties and mixed duties
- The amount of fixed export or import duty imposed depends on the actual quantity of exports or imports and the amount of duty per unit of goods at the time of tax calculation.
- The amount of mixed duty imposed upon exported or imported goods is the total amount of proportional tax and fixed tax as prescribed by Clause 1 Article 5 and Clause 1 Article 6 hereof.
4. The Duties imposed upon imports applying tariff quotas
- Goods imported inside the tariff quota shall apply the duty rates and fixed duties specified in Clause 3 Article 5 and Article 6 hereof.
- Goods imported outside the tariff quota shall apply the out-quota rates and fixed duties specified in Clause 3 Article 5 and Article 6 hereof.
5. The Taxable value and time for tax calculation
- The taxable value is the customs value prescribed by the Law on Customs (2014).
- The time for calculating export or import duty is the time of registration of the customs declaration.
In case of exports or imports that are not subject to taxation, exempt from export or import duties, or applying in-quota duty rates or fixed duty but then the eligibility for tax exemption or in-quota duties is legally changed, the time for tax calculation is the time of registration of the new customs declaration.
The time of registration of the customs declaration shall comply with the regulations of the Law on Customs (2014).
Under Articles 12-15, Vietnam can apply anti-dumping/countervailing/safeguard duties to protect its economy should the government consider that particular goods arriving from New Caledonia pose a threat to the local industry. However, in some cases, Article 16 allows for tax exemptions if Vietnam considers particular imports to be of significant value to its economy. For example: specialized imported goods that cannot be produced domestically can directly serve education.
Hence, despite not being covered under the scope of EVFTA, New Caledonian investors can still enjoy from occasional tax cuts. Should the taxpayer want a tax refund, they shall notify the customs authority of goods eligible for tax exemption to be imported, which is regulated by the law on Tax Administration (2019).
6. Tax deduction
Article 18 states that should export/imports that are damaged or lost under customs supervision and the damage or loss is verified by a competent organization, a tax reduction proportionate to the loss in goods shall be granted. If goods are completely damaged or lost, a full tax exemption is granted, since there is nothing to sell in Vietnam in such circumstances. This procedure is also followed under the Law on Tax Administration (2019).
7. Tax refund
7.1 Cases of tax refund
- Preferential rates apply to imports originated in any country or group of countries or territories that accord Vietnam most-favored nation treatment (to which New Caledonia does not apply, but France does); goods that are imported from a free trade zone to the domestic market and originating in a country or group of countries or territories that accord Vietnam most-favored nation treatment;
- Special preferential rates apply to imports originated in any country or group of countries or territories that have an agreement on special preferential import duties with Vietnam; goods that are imported from a free trade zone to the domestic market and originating in a country or group of countries or territories that have an agreement on special preferential import duties with Vietnam;
- Ordinary rates apply to imports other than those mentioned in points a and b of this Clause. The ordinary rate is 150% of the preferential rate applied to the corresponding article. In case the preferential rate is 0%, the Prime Minister shall decide the application of the ordinary rate pursuant to Article 10 of this Law.
The amount of import duty refunded depends on the remaining value of goods when they are re-exported, according to the period over which they are used or stay in Vietnam. If the goods are no longer usable, import duty shall not be refunded.
Tax shall not be refunded if the refundable amount is below the minimum level specified by the Government.
7.2 Tax on the goods specified in points a through c of Clause 1 of this Article shall be refunded if such goods have not been used or undergone working or processing
7.3 The procedures for tax refund shall comply with regulations of the Law on Tax Administration
8. Conclusion
Overall, New Caledonian investors will not be subject to preferential duty tax treatment in Vietnam by default, since there are no particular trade agreements between these lands, although they can still enjoy tax reductions on an individual basis. However, this might change for the better in the future. Recently, Vietnam strengthens its ties with the Vietnamese communities (and consecutively New Caledonia), establishing more meetings to strengthen their cooperation[1], providing us with more reasons to look at the Vietnam-New Caledonian trade future with greater optimism.
