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ZERO TAX ON BONDED GOODS SOLD INTO DUTIABLE ZONE FOR FOREIGN CURRENCY
According to Article 7 Item 1 of the Value-Added and Non-Value-Added Business Tax Law, the rate of business tax on exported goods is zero. In an ruling dated 6 June 2002, the Ministry of Finance stated that this zero tax rate also applies when an enterprise within a sci-ence-based industrial park or export processing zone, or a bonded factory or warehouse under the supervision of the customs authorities, receives an order from an overseas customer for the pur-chase of bonded goods, and at the customer’s instructions delivers such bonded goods to a designated buyer within the domestic dutiable zone, and receives foreign currency income from the sale.
However, if a business in a duty-free zone re-ceives an order from an overseas customer for the purchase of non-bonded goods, or a business in the dutiable zone receives an order from an overseas customer for the purchase of any goods, and at the customer’s instructions either of them delivers such goods to a designated buyer within the domestic dutiable zone, in neither case does the transaction meet the criteria for exported goods under Article 7 Item 1 of the Business Tax Law. Therefore the zero tax rate does not apply, and business tax is payable at the rate of 5%.