Export Processing Enterprises (EPEs) are a favored model for FDI manufacturers setting up factories in Vietnam, thanks to a near “separate zone” tax regime: duty-free imported materials, no value-added tax, and goods moving as if within a non-tariff zone. But the incentives only arrive once the enterprise meets all recognition conditions — especially the customs supervision requirements that many investors underestimate.
This article summarizes the EPE recognition conditions under Decree 35/2022/ND-CP (still in force), the current tax and customs incentives, and the practical points FDI investors should prepare before going operational.
1. What is an export processing enterprise?
Under Clause 21, Article 2 of Decree 35/2022/ND-CP, an export processing enterprise is an enterprise conducting export processing activities within an export processing zone, industrial park, or economic zone. “Export processing activities” means activities specializing in manufacturing exports, supplying services for export manufacturing, and exporting.
In other words, an EPE is geared entirely toward export production. For customs and tax purposes, an EPE is treated as a non-tariff zone: purchases and sales of goods between the EPE and the domestic market count as import/export and require customs procedures.
2. Conditions for EPE recognition
Clause 2, Article 26 of Decree 35/2022/ND-CP sets three mandatory conditions:
2.1. Physical separation by fencing
The export processing zone, the EPE (or the industrial-park subdivision dedicated to EPEs) must be separated from the outside territory by a fencing system with its own gates and entrances. Goods may only enter or leave through these gates.
2.2. Conditions for customs inspection and supervision
The enterprise must ensure conditions for inspection, supervision, and control by customs and relevant authorities, under the non-tariff-zone rules of import/export duty legislation.
2.3. Customs confirmation BEFORE going operational
This is the gatekeeper condition: an EPE seeking investment incentives and the non-tariff-zone tax regime must be certified by the competent customs authority as meeting the customs inspection and supervision conditions before officially commencing operations.
To stress the point: holding an Investment Registration Certificate stating the objective of “establishing an export processing enterprise” is not enough to automatically enjoy the non-tariff-zone tax regime. Without customs certification, the incentives do not apply.
3. Detailed customs supervision conditions (Article 28a, Decree 18/2021/ND-CP)
Decree 18/2021/ND-CP (amending Decree 134/2016/ND-CP) details three groups of conditions:
- Hard fencing: complete separation from the outside area; gates ensuring goods enter and leave the EPE only through designated gates;
- Camera system: covering gates, entrances, and goods storage areas 24 hours a day, including weekends and holidays; footage streamed online to the managing customs authority and retained at the EPE for at least 12 months;
- Goods management software: tracking duty-exempt imported goods, supporting the import–export–inventory finalization report on the use of imported goods as required by customs law.
In practice, installing the online-connected camera system and deploying the finalization software are the most time-consuming and costly items. Investors should build them into the plan from the factory construction stage, not leave them until just before operations.
4. Tax incentives for EPEs
4.1. Import and export duty exemption
Under Vietnam’s import/export duty legislation, the following are duty-exempt:
- Goods imported from abroad into the EPE to form fixed assets (machinery, equipment, production lines);
- Raw materials, supplies, components, and semi-finished goods imported for export manufacturing;
- Goods exported from the EPE abroad;
- Goods moving between non-tariff zones.
This is the core incentive, significantly lowering input costs versus ordinary manufacturers.
4.2. No value-added tax
Under VAT regulations, EPEs are not subject to VAT as non-tariff zones. Meanwhile, goods and services supplied by domestic businesses to EPEs enjoy the 0% VAT rate (subject to export documentation requirements) — helping domestic suppliers price competitively and claim VAT refunds smoothly.
4.3. Corporate income tax incentives
EPEs may enjoy CIT incentives under the current framework — the Law on Corporate Income Tax 2025 (No. 67/2025/QH15, effective 1 October 2025) and its guidance (Decree 320/2025/ND-CP). The specific incentive level (preferential rate, tax holiday, reduction period) depends on the sector, location, and scale recorded for the project.
Note: older materials citing the 2008 CIT Law and Circular 151/2014/TT-BTC are out of date — incentives now follow Law 67/2025/QH15. Cross-check the incentives stated in the Investment Registration Certificate and confirm with the directly managing tax authority.
4.4. Land rental incentives
EPEs in industrial parks or economic zones may be exempted from or granted reductions on land rental depending on the investment location, especially in areas with difficult socio-economic conditions.
5. Customs management of EPEs: practical points
- Annual finalization report: each year the EPE reports to customs on the use of duty-exempt imported goods via its management software. Unusual gaps between imported materials and exported finished goods can trigger post-clearance audits.
- Domestic sales: an EPE wishing to sell into the Vietnamese market must complete import procedures as for ordinary imported goods (paying import duty and VAT as applicable). Goods may not leave the supervised area informally.
- Transactions between EPEs: handled under simplified customs procedures for non-tariff zones.
- Post-clearance inspection: EPEs are closely supervised; misuse of duty-exempt goods can lead to retroactive tax collection, administrative penalties, and review of EPE status.
6. A practical roadmap for FDI investors
- Investment registration: apply for the Investment Registration Certificate with the objective of “establishing an export processing enterprise” at the industrial/economic zone Management Board (under the 2025 Investment Law);
- Build supervision infrastructure: fencing, controlled gates, camera system streaming online to customs, goods management software;
- Request customs inspection and certification of the supervision conditions — completed before officially commencing operations;
- Operate: file periodic import–export–inventory finalization reports and comply with goods movement rules.
7. Frequently asked questions
Can an operating company convert to EPE status?
Yes, if it fully meets the conditions: specializing in export manufacturing, located in an export processing zone/industrial park/economic zone, fenced separation, and customs supervision conditions. The company must amend its Investment Registration Certificate and obtain customs certification.
Can an EPE sell to domestic buyers?
Yes, but through customs procedures as exports into the domestic market (the buyer completes import procedures and pays applicable duties). Goods do not circulate as ordinary domestic goods automatically.
Does a branch outside the industrial park enjoy the incentives?
No. Incentives attach to the location meeting the non-tariff-zone conditions. Activities outside the fenced, supervised area are not covered.
Sources
- Decree 35/2022/ND-CP dated 28 May 2022 (effective 15 July 2022, still in force) — Article 2(20), 2(21); Article 26(2).
- Decree 18/2021/ND-CP — Article 28a (customs inspection and supervision conditions for EPEs).
- Law on Export Duty and Import Duty 2016.
- Circular 219/2013/TT-BTC — Article 4(20), Article 9.
- Law on Corporate Income Tax No. 67/2025/QH15 (effective 1 October 2025); Decree 320/2025/ND-CP.
- Investment Law No. 143/2025/QH15 (effective 1 March 2026).
This article is for general information only. Specific conditions and incentive levels depend on the project, location, and legislation in force at the time of application; investors should consult a professional before acting.
Contact FLAT Law Firm: we assist FDI investors from EPE registration and customs-supervision preparation to tax incentive reviews. See more articles on foreign investment at flaw.vn.
This article was prepared by the FLAW AI Legal Council, has passed internal QA review, and is pending owner approval. It is not the opinion of a licensed human lawyer and does not replace direct legal advice.
