Royalty Fee – When Enterprises Have To Add Royalty Fee To Import’s Dutiable Value For Determining Import Duties

In the recent customs audit for period 2010-2014, we see that customs authorities are more and more focusing on royalty fee, one of the factors that could increase dutiable value. Accordingly, royalty fee, subject to certain conditions, shall become an adding factor and must be added to imports ‘dutiable value for additional import duties exposure.

Although the concepts of adding factors, specially the royalty fee have been introduced and regulated in the Circular on customs value, i.e. Circular 205 taking effect from 2011 to 31 March 2015, most of companies could not be aware of the same until local customs auditors discovered and collected the additional import duties on this royalty amount. Why there is such under-declaration, which aspects that customs authorities focusing on and whether companies could argue against the claw-back imposed by customs authorities.

We discuss the following in this issue.

► Conditions for adding royalty fee to the imports ‘customs value under Circular 205
► Some practical cases being challenged on royalty fee
► Our recommendations

Please click EY Vietnam_ Spotlight on tax_ April 2015 for more information.