On the basis of the above, the Romanian tax authorities have estimated significant additional VAT obligations of companies on tolls for historical VAT periods (subject to prescribed limitation periods) and related penalties. Vietnam`s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on January 14, 2019 and the ratification of the EU-Vietnam Free Trade Agreement (EVFTA) on August 1, 2020 eliminated import and export taxes for many tariff lines. For example, nearly 100% of Vietnam`s exports to the EU will be exempt from import tax after the 10-year EVFTA trip. So far, this is the highest level of commitment a partner gives Vietnam in a trade deal. This is especially important when the EU was one of the country`s two largest export markets. When we provide a non-resident company with a supplier for a system, we get a program that allows us to optimize taxes. An offshore company buys raw materials and concludes a contract for the processing of raw materials on a contract basis. VAT is not included in the processing costs, as the services are exported and a zero rate is applied. This system is suitable for companies that own a production company engaged in the production of goods, processing and storage of raw materials. Production scheme on toll raw materials – this is a production activity related to processing under the terms of a raw materials contract for the customer with the transfer of the finished products to him.

The list of documents that the owner of raw materials (an authorized person) must present to customs officers in order to obtain a permit is contained in Article 141, Part 2, of the Customs Code of Ukraine. In particular, you will need: a foreign agreement on processing, technological processing systems, agreements on the processing of goods with other companies (if other operations or a full processing cycle are carried out by another company), other documents at the request of the owner. Finally, the exact terms and agreements in manufacturing contracts (toll or contract or other) determine the impact of VAT on the customer and manufacturing companies. Understanding the terms of the agreement could help your business optimize the VAT structure in a particular jurisdiction. At present, the most exposed operating models appear to be those where the procuring entity has concluded contract manufacturing agreements with Romanian toll manufacturers, in particular if they are related parties. In Romania, such agreements are very common in the automotive industry, but all sectors are potentially affected. If there are no special rules in tax treaties, the principal can calculate on an arm`s length basis. This constellation is not directly addressed in Vietnamese laws. Contract manufacturing for a single contracting entity may give rise to an MOU if the tax authorities interpret the commercial activity of the foreign company as a form of `installation and assembly work` in accordance with Article 1.4.b of Decree No 24/2007/ND-CP [pls.

see point II.4 above]. Corporate tax exemptions and reductions are listed in the Corporate Tax Act 2008, Circular 78/2014/TT-BTC, Circular 151/2014/TT-BTC and Circular 96/2015/TT-BTC. However, it is not doubtful that this interpretation is compatible with EU VAT rules and the principles of European case-law on permanent establishments. In particular, in view of the fact that, in the Welmory case, the ECJ addressed a number of points which appear relevant in the present case, in particular the issues in which the human and technical resources/infrastructure of one company are imputable to another company and, therefore, a permanent establishment for VAT purposes should be created. 6. Suppose an extreme set of facts where, in addition to the above factors, the customer has a high degree of control over the operations in the factory. For example, let`s say the customer hires the employees and his employees in the factory have the power to stop production to solve problems. When does customer control of plant activity lead to an MOU? 2.

In many cases, the local subcontractor is a wholly owned subsidiary of the customer. In such cases, the contracting entity may wish to compensate the contract manufacturer on the basis of the increased cost, where the dynamism is a percentage of the manufacturing costs (and not the value of the final product). Is this approach feasible in your jurisdiction and what problems/risks arise in relation to the use of costs plus transfer pricing? In Vietnam, overseas companies that operate through Vietnam-based institutions are subject to corporate tax. Transfer pricing rules in Vietnam require the company to pay and Vietnam to receive a reasonable rate of return on its operations as if the parties were not bound [the arm`s length principle]. Vietnamese tax legislation does not provide for special rules regarding transfer costs and pricing. Have you received a letter from HMRC confirming that you are NOT eligible to recover import VAT? Many of our clients have and are concerned about the impact on their trading operations. In a contract manufacturing model, the contract manufacturer owns factories and equipment and purchases raw materials according to the standards agreed with the main company. The processor also bears the risks associated with storage and its activities are generally treated in the same way as the supply of goods for VAT purposes. In certain circumstances, this facility could benefit the main business.

For example, in many cases, the main undertaking is a branch located outside the jurisdiction of the manufacturing undertaking, i.e. outside the VAT territory. When an off-premises customer uses a contract manufacturing model, local ownership of materials, inventory and other assets is transferred to the local manufacturing company and not to the primary business. This could avoid a high VAT compliance burden for the customer (e.g. B, tax representation) in several countries. Under Article 7.3 of the Tax Administration Act, importers are required to pay taxes, including VAT, in full and on time. .