A notable real-world case was recently addressed by the General Department of Taxation (GDT) in Official Letter No. 5866/CT-CS dated 14 August 2026, concerning how the rule that “imported goods subsequently exported are not eligible for a VAT refund” is applied to businesses that do not import directly but instead purchase goods of import origin from local traders and then on-the-spot export them to export processing enterprises (EPEs). This is an issue that may affect many businesses in the supply chain serving EPEs in Vietnam, particularly suppliers of materials and components to FDI manufacturing and exporting groups. Trustlineax summarizes the case for businesses with a similar business model.
1. Legal basis cited
- Official Letter No. 5866/CT-CS dated 14 August 2026 of the GDT, responding to a petition from the business involved in this case and the Hanoi Tax Department regarding a VAT issue.
- A petition dated 15 June 2026 from the business involved in this case — submitted to the Prime Minister and relevant ministries and agencies.
- The rule cited: clause 6, Article 1 of Decree No. 100/2016/ND-CP (amending Decree No. 209/2013/ND-CP) and point b, clause 4, Article 1 of Circular No. 130/2016/TT-BTC, in effect from 1 July 2016 to before 1 February 2018:
“A business establishment shall not be entitled to a tax refund in the case of goods that are imported and subsequently exported, or exported goods that are not exported through a customs operating area as prescribed by the Customs Law and its guiding documents.”
2. What issue did the business run into?
The business involved in this case is a 100%-foreign-owned enterprise established in Hanoi in 2013, specializing in supplying materials and equipment to export processing enterprises (EPEs) in Vietnam’s manufacturing and export sector.
According to the petition, its business model is: the company purchases goods of import origin from local traders in Vietnam (i.e. a third party that has imported the goods from abroad and resold them domestically) — the company itself does not import directly — and then resells the goods to EPEs in the form of an on-the-spot export.
During the period when Decree No. 100/2016/ND-CP and Circular No. 130/2016/TT-BTC were in effect (1 July 2016 to before 1 February 2018), the tax authority applied the rule that “imported goods subsequently exported are not eligible for a refund” even to goods of import origin purchased through a local trader — meaning the company was not granted an input VAT refund, with accumulated outstanding tax reaching VND 58.2 billion.
The company’s argument
The company argues that this interpretation and application improperly extends the scope of the rule without a clear legal basis, because:
- The company is not the entity that directly imports the goods — the goods are purchased through an ordinary domestic sale transaction with Vietnamese traders that have already imported them.
- Under principles of statutory interpretation, the phrase “goods imported and then exported” should be understood as goods imported by the business establishment itself and then exported by that same establishment — not applicable to a case where import-origin goods are re-purchased through an independent domestic transaction.
Financial consequences cited by the company
- With over 80% of revenue coming from on-the-spot exports to EPEs (subject to a 0% VAT rate), the company does not generate enough output VAT to offset the accumulated input VAT, making the alternative of carrying the credit forward (instead of a refund) unworkable in practice.
- To cover the working-capital shortfall, the company had to borrow USD 5,000,000 from its overseas parent company and take out further loans from domestic commercial banks.
- The company states that total interest expense on these loans exceeds USD 400,000 per year.
3. How did the tax authority respond?
In Official Letter No. 5866/CT-CS, the GDT restates the rule under clause 6, Article 1 of Decree No. 100/2016/ND-CP verbatim, and affirms as a matter of principle that: a business establishment that imports goods and subsequently exports them is not entitled to a VAT refund.
However, the GDT also acknowledges the point raised by the company — that it does not import directly but purchases from a domestic business and then exports. On that basis, the GDT requests that the Hanoi Tax Department review the company’s actual records to consider and resolve the matter in accordance with regulations and within its authority, and report back to the GDT on the progress of resolving the issue before 28 August 2026.
Important note: Official Letter No. 5866/CT-CS is not a final conclusion confirming that the company will receive a refund. It is a directive instructing a review of the actual case file and delegating specific handling authority to the Hanoi Tax Department, with a deadline to report back. The specific outcome (whether part or all of the outstanding VND 58.2 billion will be refunded) is not stated in this letter.
4. Lessons for businesses with a similar model
For businesses supplying EPEs under a model of purchasing import-origin goods through a local intermediary (without importing directly) and then on-the-spot exporting them, this case suggests a few points worth noting:
- Clearly distinguish and fully retain records and supporting documents proving that the purchase transaction is a domestic sale with a Vietnamese trader (domestic VAT input invoices, domestic sale contracts, etc.), rather than the company itself carrying out the import procedures — this is an important piece of evidence if a similar VAT-refund issue arises.
- Where a local tax authority applies the import-then-export refund ban to goods purchased through a domestic intermediary as well, businesses may draw on the arguments and petition approach used in this case to ask the tax authority to reconsider based on the true nature of the transaction.
- This issue arose during the period Decree No. 100/2016/ND-CP and Circular No. 130/2016/TT-BTC were in effect (1 July 2016 to before 1 February 2018) — businesses with outstanding VAT from this period for the same reason may wish to review their records against the approach the GDT is now directing the Hanoi Tax Department to take.
- Since the specific outcome is still pending a report from the Hanoi Tax Department, businesses should continue to monitor how the matter is actually resolved before concluding that this issue has been definitively settled in the taxpayer’s favor.
This article was compiled by Trustlineax based on Official Letter No. 5866/CT-CS dated 14 August 2026 of the General Department of Taxation and a related petition submitted by the business involved in this case. It reflects one specific case and issue, is for reference only, is not a legal instrument, and does not replace professional tax advice for any specific case.