A company enjoyed import-duty exemption on machinery for its investment project — then two years later, customs issued a decision recovering billions of dong in tax, plus late-payment interest and administrative penalties. The cause was not fraud: the company had sold part of the equipment to another party without declaring it to customs. Import-export tax incentives are not a “one-time grant”: the law imposes ongoing maintenance conditions throughout the incentive period, and breaching any of them can lead to revocation of the incentive and recovery of the exempted tax.
Conditions to maintain import-export tax incentives
To keep import-export tax incentives (especially import-duty exemption tied to an investment project), an enterprise must continuously satisfy the following conditions throughout the incentive period:
1. Use goods for the correct exempt purpose
This is the core, continuous condition. The Law on Tax Administration 108/2025/QH15 (effective 01/7/2026, replacing Law 38/2019/QH14) requires taxpayers to use tax-exempt goods and services for their correct purposes; if the purpose changes, they must re-declare and pay the tax plus any amounts arising under regulations. In other words, goods exempted to serve a project must remain serving that project — selling, leasing, transferring or diverting them to other purposes without declaration breaches this condition.
2. Notify the list of tax-exempt goods
Under Article 30 of Decree 134/2016/ND-CP (as amended by Decree 18/2021/ND-CP and Decree 182/2025/ND-CP), enterprises must notify the customs authority of the list of goods expected to be imported duty-free, and update the list when changes occur. Customs must acknowledge the list within a maximum of 03 working days.
3. Report on the use of tax-exempt goods
Under Article 31 of Decree 134/2016/ND-CP (amended by Decree 18/2021/ND-CP), no later than the 90th day from the end of the fiscal year, the enterprise must report the use of tax-exempt goods to the customs authority that received the exemption list. From 01/7/2026, tax administration of import-export goods — including the exemption list, usage reports and new forms — follows Circular 86/2026/TT-BTC (replacing Circular 06/2021/TT-BTC).
4. Five-year raw-material exemption: declare the unused balance at expiry
For raw materials, supplies and components exempted from import duty for 05 years (Clause 13, Article 16 of Law 107/2016/QH13 on Export and Import Duties, per consolidated document 96/VBHN-VPQH dated 31/3/2026; Article 15 of Decree 134/2016/ND-CP, amended by Clause 8, Article 1 of Decree 18/2021/ND-CP): when the 05-year period from the start of production expires, within 30 days the enterprise must register a new customs declaration and declare and pay tax on the exempted quantities not yet used. Failure to declare on time results in customs determining the tax.
5. Continue to meet the project’s investment-incentive conditions
Import-export tax incentives are typically tied to investment projects qualifying for investment incentives (by sector or location). Enterprises must continue to satisfy the investment-incentive conditions under the Investment Law 143/2025/QH15 and Decree 96/2026/ND-CP (replacing Decree 31/2021/ND-CP; Investment Law 61/2020/QH14 has expired). If the project no longer qualifies for investment incentives, the attached import-export tax incentives lose their basis.
When are incentives revoked and tax recovered?
- Goods not eligible for exemption but declared as exempt and cleared;
- Exempted goods used for the wrong purpose: transferred, sold or diverted to domestic consumption without declaration (or declared only after the transfer or domestic sale) — triggering tax recovery, late-payment interest and administrative penalties under Decree 128/2020/ND-CP on administrative sanctions in customs (specific fine levels should be checked against the current text);
- Imported goods not matching the notified exemption list;
- Project termination or adjustment: customs recovers the corresponding exempted tax and stops exemption procedures (point d, Clause 6, Article 30 of Decree 134/2016/ND-CP);
- A change of use purpose with declaration is permitted, but requires registering a new customs declaration and applying the tax policy in force at the time of the new registration — the mechanism in Article 17 of Law 107/2016/QH13 (per consolidated document 96/VBHN-VPQH) and Clause 5, Article 25 of Decree 08/2015/ND-CP (per consolidated document 46/VBHN-BTC dated 24/11/2025; amended by Clause 12, Article 1 of Decree 167/2025/ND-CP as cited in Circular 86/2026/TT-BTC).
Three easily confused concepts
| Concept | Nature | Consequence |
|---|---|---|
| Incentive revocation | Recovery of exempted tax due to breached conditions | Repay tax + late-payment interest + administrative penalties |
| Incentive expiry | E.g. the 05-year raw-material exemption ends — not a “violation” | Declare and pay tax on the unused balance within 30 days |
| Project termination | Investment project stops or adjusts operations | Recover the corresponding exempted tax; stop exemption procedures |
Similarly, distinguish “use for the wrong purpose” (tax recovery plus penalties) from “change of use purpose with declaration” (permitted, but requires a new customs declaration and tax payment under the policy in force at the new time).
Recommendations for enterprises
- Keep complete records of exemption lists, declarations and annual usage reports; file reports by the 90th day after the fiscal year end;
- Before transferring, selling or changing the use purpose of any exempted goods, complete the declaration and register a new customs declaration;
- Track the 05-year period for exempted raw materials and proactively declare the unused balance within 30 days of expiry;
- When the investment project changes (sector, location, scale), reassess the investment-incentive conditions and the attached import-export tax incentives.
Frequently asked questions
Is late reporting of exempt-goods usage penalised?
It may attract administrative penalties in customs under Decree 128/2020/ND-CP (check the current text for specific levels). More importantly, non-reporting increases the risk of post-clearance audit.
What if raw materials remain in stock when the 05-year exemption ends?
Within 30 days of the expiry of the 05-year period (counted from the start of production), the enterprise must register a new customs declaration and pay tax on the unused balance; failure to declare on time leads to customs determining the tax.
Can the use purpose of exempted goods be changed?
Yes, but it must be declared: register a new customs declaration and pay tax under the tax policy in force at the time of the new registration (Article 17 of Law 107/2016/QH13). Changing the purpose without declaration is misuse, triggering recovery and penalties.
Applicable legal documents
- Law on Tax Administration 108/2025/QH15 (effective 01/7/2026, replacing Law 38/2019/QH14);
- Law on Export and Import Duties 107/2016/QH13 — per consolidated document 96/VBHN-VPQH dated 31/3/2026 (Articles 16, 17);
- Decree 134/2016/ND-CP (amended by Decrees 18/2021/ND-CP and 182/2025/ND-CP) — Articles 15, 30, 31;
- Decree 08/2015/ND-CP — per consolidated document 46/VBHN-BTC dated 24/11/2025 (Clause 5, Article 25; amended by Decree 167/2025/ND-CP);
- Circular 86/2026/TT-BTC (effective 01/7/2026, replacing Circular 06/2021/TT-BTC);
- Investment Law 143/2025/QH15 and Decree 96/2026/ND-CP (replacing Decree 31/2021/ND-CP);
- Decree 128/2020/ND-CP on administrative sanctions in customs.
Note: this article reflects the law in force as of 14/10/2026. Specific article and clause numbers should be checked against the latest consolidated texts before applying to a particular case.
Need a review of your import-export tax incentive conditions or facing a tax recovery decision? Contact FLAT Law Firm for advice.
The information above is for reference only and does not constitute legal advice.
For reference only, not legal advice. Content quality-checked by the AI Legal Council; not yet reviewed by a human lawyer.