Legal Definitions - bonification

Bonification refers to a specific type of tax relief, typically granted on products or goods that are manufactured domestically but intended to be sold in international markets. The primary purpose of bonification is to remove the burden of domestic taxes from these export goods, thereby making them more competitively priced for foreign buyers. Essentially, it allows a product to be sold abroad as if it had never been subject to local taxes.

• Example 1: Automobile Manufacturing

  An automobile manufacturer in Germany produces cars. These cars are subject to a domestic value-added tax (VAT) if sold within Germany. However, if the manufacturer exports a batch of these cars to the United States, the German government might apply bonification.

  This means the manufacturer would receive a remission or refund of the VAT that would normally apply to those cars. This tax relief allows the German cars to be sold in the U.S. market at a price that doesn't include the German VAT, making them more competitive against cars produced in other countries or domestically in the U.S.

• Example 2: Agricultural Products

  A cooperative of avocado growers in Mexico cultivates avocados. When these avocados are sold within Mexico, they are subject to a specific agricultural sales tax. However, the cooperative plans to export a large shipment of avocados to Canada.

  Through bonification, the Mexican government would waive or refund the agricultural sales tax on the avocados destined for Canada. This ensures that the Canadian importer pays a price that reflects only the production and shipping costs, without the added burden of Mexico's domestic sales tax, thereby boosting the competitiveness of Mexican avocados in the Canadian market.

• Example 3: Textile Industry

  A textile company in Vietnam produces high-quality garments. If these garments are sold to local retailers in Vietnam, they are subject to a domestic consumption tax. However, the company has secured a contract to supply a major fashion brand in France.

  The Vietnamese government would grant bonification on the garments exported to France. This means the consumption tax that would normally apply to these textiles is remitted or refunded. As a result, the French fashion brand can purchase the garments at a lower cost, free from Vietnam's domestic taxes, which helps the Vietnamese company compete effectively in the global textile market.