In this article
An export processing enterprise (EPE – doanh nghiệp chế xuất) is treated like a non-tariff zone, so its bookkeeping, tax filing and inventory management differ substantially from those of a regular FDI manufacturer. Accountants used to domestic companies often struggle with purchases from and sales to the domestic market and with goods finalization reports to customs. This article summarizes the specific points the accounting team at ACCA Consulting Vietnam always checks when taking on an EPE.
1. What is an export processing enterprise and why is it different?
An export processing enterprise is a company that specializes in producing goods for export or providing services for export production, operating in an export processing zone, industrial park or economic zone. Under current regulations, an EPE must meet customs inspection and supervision requirements (a separating fence, camera system, inventory management software, etc.) and is subject to the rules applicable to non-tariff zones.
As a result, transactions between an EPE and the domestic market are treated as import and export transactions. Every shipment entering or leaving the EPE is tied to customs procedures, and the accounting books must reconcile with customs data.
2. EPE vs. a regular FDI company
| Item | Export processing enterprise | Regular FDI company |
|---|---|---|
| Regime | Treated as a non-tariff zone | Domestic enterprise |
| Importing raw materials | Not subject to import duty or import VAT, as prescribed | Pays tax, or uses the processing / export production customs regime |
| Purchases from domestic companies | Treated as an export by the seller, which may apply 0% VAT if conditions are met | Standard VAT applies |
| Sales into the domestic market | The buyer completes import procedures and pays import duty and VAT as prescribed | Standard VAT invoice issued |
| VAT refunds | Rare, since inputs are mostly not subject to VAT | May arise for investment projects or exports |
| Customs reports | Annual import – export – inventory finalization report | Depends on the customs regime, mainly for processing and export production |
| Corporate income tax (CIT/TNDN) | Same as other companies; incentives by location or sector if eligible | Same |
3. VAT on purchases from and sales to the domestic market
When an EPE buys materials from a domestic supplier, the seller may issue an invoice at 0% VAT if the conditions on contracts, payment and customs procedures are met. If the seller still issues an invoice at 10% or 8%, the EPE generally cannot deduct that VAT as a domestic company would, which increases costs. Some services consumed inside the EPE (for example catering or internal transport) may still be subject to the standard rate, depending on the regulations.
Illustrative example, assuming a 10% rate for a regular company and a valid 0% rate applied by the seller when selling to the EPE. Figures in VND million.
View as table
| Regular FDI company | Export processing enterprise | |
|---|---|---|
| VAT paid to the supplier | 100 tr | 0 tr |
| VAT awaiting deduction or refund | 100 tr | 0 tr |
| Total amount paid | 1,100 tr | 1,000 tr |
4. Goods finalization report to customs
An EPE must submit to customs a finalization report on imports, exports and inventory of raw materials, supplies and finished goods for each financial year, by the deadline set in current customs regulations. This is where accounting data and customs data are compared directly.
- 1Close the warehouse
Physically count raw materials, work in progress and finished goods at the financial year-end.
- 2Reconcile declarations
Compare total import and export quantities per customs declarations with the warehouse records.
- 3Check consumption norms
Review actual material consumption against the declared norms.
- 4Resolve differences
Explain losses, scrap and damaged goods following the proper procedures.
- 5Prepare and file the report
Prepare the finalization report on the current form and submit it through the customs system.
A practical tip: build a monthly reconciliation sheet with three columns for each material code: balance per the accounting books, balance per the warehouse software, and balance per customs data. Done monthly, this leaves only a few differences to resolve at year-end, instead of tracing a whole year of documents just before the finalization deadline.
5. Common accounting and tax mistakes at EPEs
- Incorrectly deducting input VAT on 10% invoices for domestic purchases, later disallowed during an inspection.
- Book inventory not matching customs inventory because scrap, samples and temporarily exported goods were not recorded.
- Disposing of assets or scrap into the domestic market without completing customs procedures.
- Missing CIT incentives or applying the conditions incorrectly; see CIT incentive conditions.
FAQ
Can an export processing enterprise sell into the domestic market?
Yes, but it must follow the import–export rules and customs procedures, and the domestic buyer pays the import-stage taxes as prescribed. The conditions in the Investment Registration Certificate (IRC – Giấy chứng nhận đăng ký đầu tư) should also be checked.
Does an EPE have to file VAT returns?
It depends on actual transactions and current guidance. The company should confirm with its managing tax office right after incorporation to set up the correct filing period.
How should an EPE handle a domestic purchase invoice showing 10% VAT?
Discuss with the seller whether the conditions for the 0% rate are met. If they are not, the VAT is usually considered as a cost rather than deducted; each case should be checked.
Accounting and tax review for export processing enterprises
ACCA Consulting Vietnam reconciles inventory, input invoices and customs reports to detect differences before the finalization period.
Free consultationZaloWhatsApp
