In the context of Vietnam's increasingly deep integration, policy tax free E31 E21 becomes an important "medicine" to help businesses reduce costs Import tax, enhance competitiveness in the international market. This article will analyze in detail tax exemption conditions for the two most popular types: Machining (E21) and Export production (E31), based on current legal regulations in 2026.

The importance of correctly understanding the E21 and E31 type codes

Type Machining (E21) is a form of Vietnamese enterprises importing raw materials, materials for processing, produced according to orders from foreign traders, then export the entire product. Opposite, type Production for export (E31) for businesses that produce their own goods for export, Using imported raw materials to create export products.

The biggest benefit of the policy tax free E31 E21 is a significant cost savings Import tax (Usually from 5-30% depending on the item), Helps export product prices become more competitive, thereby promoting Vietnam's export turnover. According to statistics, Thousands of businesses have saved hundreds of billions of dong each year thanks to this policy.

However, The risks are also huge. Just a small mistake in the application or non-response tax exemption conditions, Enterprises may be subject to full arrears Import tax plus late payment interest (0,03%/day) and administrative fines of up to 20-50% of the tax amount. So, understand clearly tax free E31 E21 is not only an advantage but also "insurance" for sustainable export activities.

Core legal basis

Entire policy tax free E31 E21 built on a solid legal foundation:

• Export Tax Law, Import tax No. 107/2016/QH13 (modify, supplemented in 2025) regulates tax exemption principles for imported goods for export processing and production.
• Decree 134/2016/ND-CP detailing the implementation of the Law on Import-Export Tax, clarifying tax exemption subjects and procedures.
• Decree 18/2021/ND-CP (Extremely important text, remains valid until 2026) modify, Additional tax exemption conditions, especially tighter with the type of export production (E31) to prevent abuse.

These documents are still the core legal basis, has not been replaced by any new decree as of March 2026.

III. Details of tax exemption regulations E31 E21

For type of Processing (E21)

Object: Ingredient, supplies, imported components for processing for foreign traders.

Tax exemption conditions:

• Must have a processing contract (or contract addendum) according to the law, clearly state the list of ingredients, consumption norms.
• Imported goods must be used directly to process export products, Do not sell domestically or use for improper purposes.
• After the contract ends, Enterprises are required to make final settlement with the Customs authority according to the prescribed form.

Special note: Sample, machines, Equipment temporarily imported for processing is also considered tax free or temporary tax exemption if properly registered and committed to re-export.

For export production type (E31)

Object: Ingredient, supplies, imported components to produce exported goods.

Tax exemption conditions according to Decree 18/2021/ND-CP (tighter than before):

• Production facility: Enterprises must have legal ownership or use rights of production facilities, machinery and equipment in Vietnam (Could be a factory, production line).
• Notify the production facility: Must notify the Customs Branch in charge before importing the first shipment (via VNACCS/ECUS system).
• Use for the right purpose: All raw materials must be put into actual production and exported (or sold into the non-tariff zone).
• Hire reprocessing: Decree 18 allows export manufacturing enterprises to outsource part or all of the process, But must notify customs, Set up norm tables and be responsible for raw material management.

Only when all 4 conditions above are met, declaration E31 just okay import tax exemption completely.

Compare the difference in tax exemption conditions between E21 and E31

Characteristic	Machining (E21)	Production for export (E31)
Ownership of raw materials	Belongs to the outsourcing party (foreign)	Belongs to a Vietnamese enterprise
Production facility	Must have a facility or be allowed to outsource	Must have a legal production facility in Vietnam
Customs procedures	Follow up according to contract/appendix	Follow up according to the actual norm table and facility notification
By-products	Handled according to contractual agreement	Decide for yourself (But must pay tax if sold domestically)

This difference helps businesses choose the type that suits their business model.

Risk scenarios cause businesses to lose tax exemption rights

Many businesses lost tax free E31 E21 because of the following common errors:

• Failure to notify the manufacturing facility before importing the first batch (Most common error with E31, resulting in an immediate tax charge).
• Accounting books do not match: Actual warehouse data differs from customs reports.
• Arbitrarily liquidating surplus raw materials domestically without changing their intended use (code A42).
• Subleasing tax-free machinery or using it for other than registered purposes.

Each case results in arrears Import tax plus heavy fines.

Expert advice to optimize your E31 E21 tax exemption

To avoid risks and make the most of it tax exemption conditions, businesses need:

• Check periodically: Conduct inventory every 6 months to check customs data.
• Transparent profile: Fully store import-export receipts, production order, Payment documents for at least 5 years.
• Technology updates: Use ECUS/VNACCS integrated warehouse management software to automate reporting.

According to experts of Logistics power – logistics unit specializing in import-export and customs consulting – “Enterprises should build a material management system to monitor actual norms right from the import stage. We have supported hundreds of export and processing enterprises to avoid arrears of billions of dong thanks to periodic document review services."

VII. Conclude

Correct compliance tax exemption conditions E31 E21 is the foundation for export businesses to develop sustainably, reduce costs Import tax and increase profits. In the context of increasingly strict regulations (especially after Decree 18/2021/ND-CP), Proactive updating and compliance is required.

Cuong Quoc Freight Forwarding Company Limited

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