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Duty-Free Business and What Tax Involves?

September 21, 2021


Vietnam’s duty-free retail is emerging as a new attractive investment channel for both local and foreign investors. With the issuance of new regulations recently, Decree No.100/2020/NĐ-CP of the Government, selling duty-free goods online is acceptable. In addition, less complicated procedures are provided for downtown duty free set up. Compared to airport duty-free shops, downtown stores boast lower rent-to-sales ratio, better product variety, and flexibility in product pricing and promotion. The development of duty-free outlets in downtown areas can attract customers of imported goods.

Also, passengers now who have completed the procedures for exit or transit and passengers awaiting exit may buy duty-free goods and receive them from abroad.

Passengers awaiting exit may also buy duty-free goods at downtown duty-free shops. Duty-free goods will be picked over counters inside isolated areas of international checkpoints where these passengers exit.

The new Decree also allows seafarers working on board international sea-going ships (including both Vietnamese and foreign ships) to purchase duty-free goods at downtown duty-free shops to meet their needs while the ships are anchored at Vietnamese seaports.

Tax related matters


A Vietnam company (or Operator) operates duty free shops should be aware of tax implications for its business activities, especially in certain scenarios where the duty-free goods may be sold back to domestic.

In general, selling of duty free goods is not subject to VAT. The Operator does not have obligation of VAT return filings unless it does have other VAT-able revenue sources (e.g. change the purpose of duty free goods for domestic sales).

The VAT exemption also applies to the importation of goods for sell as duty free goods. For goods purchased from domestic sources, it is considered as exported goods which is subject to zero VAT rate. The local vendor/seller will issue VAT with zero rate to the Operator.

The goods imported or purchased from domestic for duty free business purpose but be changed after that to be re-exported, then still no VAT applies. In case the change of purpose is to resell back to domestic, the revenue will be subject to VAT and with most popular rate of 10% applies.

From CIT perspective, the Operator is not entitled to any tax incentives. It has to pay CIT at the popular rate of 20% on its taxable income.

Import tax

It is noted that the Decree 167/2016/ND-CP (which expired on 15 October 2020) confirmed:

“1. Goods temporarily imported for sale in duty-free shops shall be exempted from import duty, and subject to neither special consumption tax nor value-added tax. (Art 4.1)”

However, under the new Decree 100, the rule is amended as

Tax policies for goods sold in duty-free shops and stored in duty-free goods warehouses shall comply with relevant regulations of laws on tax and tax administration. (Article 4).

As such, according to the Decree 134/2016/ND-CP dated 1 September 2016 providing the regulations on import tax export tax, among other categories entitled to import tax exemption, there are certain cases described as below:

“9. Goods temporarily imported for re-export or goods temporarily exported for re-import within a certain period of time, including:

a) Goods temporarily imported or exported to participate in fairs, exhibitions, product introduction, sports or art events, or other events; machinery and equipment temporarily imported for re-export for testing, research and development; machinery and equipment, tools temporarily imported or exported to be used for certain period of time or serve overseas processing, except for machinery, equipment, tools, vehicles permitted to be temporarily imported too serve investment projects, construction, installation, or manufacture;

b) Machinery, equipment, components, spare parts temporarily imported for replacement or repair of foreign ships or airplanes, or temporarily exported for replacement or repair of Vietnamese ships or airplanes overseas; goods temporarily imported to supply for foreign ships or airplanes in Vietnam’s ports;

c) Goods temporarily imported or exported for warranty, repair, or replacement;

d) Vehicles temporarily imported or exported to carry exports or imports;

e) Goods that are temporarily imported and re-exported by the deadline or extended deadline and a credit institution provides a guarantee or a deposit equivalent to import duties on the temporarily imported goods has been paid. (Art 16 (9) – Law on Import Tax Export Tax)

There are no further clarifications or detailed guidance that the importation of goods for duty free business continues be exempted from import tax. Therefore, given the above limitations, it is understood that the importation of goods for duty free business will now be subject to import tax unless there is bank guarantee or deposit as per item (e) above.

In terms of bank guarantee payment, guarantee is either a separate or joint guarantee. Separate guarantee means guarantee of full payment of duty on an export/import declaration offered by a credit institution which operates under the Law on credit institutions; Joint guarantee means guarantee of full payment of duty on more than one export/import declaration opened at one or more Sub-department of Customs offered by a credit institution which operates under the Law on credit institutions; Guaranteed amount of duty under a joint guarantee shall vary according to the amount of paid duty.

If case of deposit option is selected, the Operator shall transfer an amount of money equal to the import duty on such temporarily imported goods to the customs authority’s deposit account at a State Treasury. The deposit shall be returned in accordance with regulations of tax administration laws on return of overpaid taxes, late payment interest and fines.

Where temporarily imported goods are not re-exported by the deadline, the customs authority shall transfer the deposit to state budget. If there is a guarantee, the credit institution (the guarantor) shall transfer an amount equal to the import duty to state budget according to information on the customs information processing system or notification given by the customs authority.

The import tax also applies when the Operator changes the purpose of the imported goods for duty free but then selling to domestic market.

Special consumptions tax

Some luxury goods are subject to special consumption tax upon importation in normal trading activities. For duty free business, the importation of those goods is not subject to special consumption tax. Upon the expiration of the allowed term for those goods to be stored in Vietnam, if it is sold to Vietnam market, the Operator has to declare and pay special consumption tax respectively when clearing customs procedures. 

If the Operator purchases those goods from local vendors for duty free business, the goods are not subject to special consumption tax.  However, upon the expiration of the allowed term for those goods to be stored in Vietnam and if it is sold back to Vietnam market, the Operator has to declare and pay special consumption tax respectively. 

It is noted tobacco may not be repurposed or sold domestically and shall be re-exported via sea border checkpoints and border checkpoints at international civil airports.

Before transporting the goods out of the duty-free shop, the duty-free business shall dispose of the “VIET NAM DUTY NOT PAID” stamp affixed to each article and record number of stamps disposed of in writing. Currently, liquor, beer or tobacco is included in the list of goods which are subject to special consumption tax. Hence, upon changing the purpose from duty free goods to duty paid goods, the Operator shall pay import tax, special consumption tax and VAT. Import tax can be up to 150% for tobacco and 67,5% for liquor on imported price. Special consumption tax ranges from 35% to 65% would be added and plus 10% VAT on top. 


Thuan is an experienced tax and accounting adviser with over 15 years of work experience. He has advised on the tax implications of large construction and engineering projects, major acquisitions, and on several highly publicized real estate developments in Vietnam, Cambodia, Laos, and Myanmar. Thuan has assisted property funds with their divestiture in Vietnam and advised multinationals on their corporate restructuring projects. He oversaw the team that reorganized the supply chain for a cosmetic multinational in Vietnam, including customs duty aspects. He specializes in corporate tax strategies for multinationals, banks and investment funds.
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