What is an export processing enterprise (EPE)?
30 April, 2020
In this article, we will explain:
-What is an export processing enterprise, 100% foreign owned?
-Why export processing enterprise receiving so many preferences from the Government?
-Conditions to be an export processing enterprise?
-Compare an export processing enterprise VS a normal processing enterprise for export
1. What is an export processing enterprise, 100% foreign owned?
Export processing enterprise is an enterprise established and operating in an Export processing zone or an enterprize specializing in manufacturing products for 100% export locates in an industrial zone or an economic zone.
Export processing enterprises which are not located in export processing zones are separated from the outside areas, have private entrancce according to the regulations applicable to non-tariff areas by the law on export and import taxes.
Purchases and sellings between export processing enterprises (or export processing zones) with other non-export processing enterprises in territory of Vietnam are considered as import-export activities.
Legal basics: Decree 82/2018 / ND-CP (the management of industrial parks and economic zones).
2. Exclusive preferences for export processing enterprises
-0% VAT when leasing factory or warehouse for manufacturing
-0% import and export tax, by the law of import-export tax 2016
-Preference for land leasing (clause 19, Decree 46/2014/ND-CP):
Exempt land leasing for 7 years
-Preferences for Corporate income tax-CIT (clause 19, circular 78/2014/TT-BTC by the Minister of Finance:
- Exempt from CIT for 2 years and 50% payable CIT for the next 4 years for new investment projects (except for export processing enterprises located in Cities grade I or speccial), By circular 151/2014/TT-BTC
- Preferential tax rate at 17% for 10 years for new investment projects, By circular 78/2014/TT-BTC
-Other preferences, depending on particular city or province
3. Conditions to be an export processing enterprise
Conditions to be an Export Processing Enterprise (EPE)- According to Decree 82/2018/ND-CP by the Vietnam Government:
-EPE to be separated with regular enterprises by fences, partition, private entrance
-Products produced are 100% for export
-Ensure conditions for survaillance and check by Customs and Authorities
-Have a letter of Customs about the approval of establishing the EPE
EPE will be regulated on the Investment certificate
4. Compare an export processing enterprise VS a normal processing enterprise for export
-About tax incentives: while export processing enterprises are exempt from almost taxes: CIT, VAT, import tax, export tax. Normal processing enterprise for export are dutiable for most of them (CIT is 20%, VAT is 10%, import and export tax as regulated on particular products and HS codes.
-About processing of establishment:
- Must have an approval letter from Customs to be able to establish an Export processing enterprise, while a normal enterprise, that is not necessary
- An export processing enterprise is tightly surveilled by Customs and athourities during manufacturing, import-export process, while a normal processing enterprise there is no such surveilliance
- Be able to become an export processing enterprise, must have validation of Customs about equipments, scale of business, products, other conditions during manufacturing, if approved, apply for an export processing enterprise. While a normal processing enterprise (for export) does not incur any validation from Customs