Many car lines from Russia to Vietnam are about to be subject to 0% tax

Some car lines from Russia to Vietnam will be taxed from October 5 according to the Protocol signed between the two countries and the import level will be regulated according to specific quotas for each year.

Specifically, the Ministry of Industry and Trade has just announced the draft Decision of the Prime Minister on the implementation of the Protocol between Vietnam and Russia on supporting the production of motor vehicles in Vietnam to collect comments.

Accordingly, enterprises such as International Trading Company (KAMAZ), Automobile Manufacturing Plant (GAZ, Llc), Ulyanovsky Avtomobilny Zavod Public Joint Stock Company (UAZ), and enterprises authorized by the Russian side to enter into joint ventures with Vietnam to produce means of transport.

These joint ventures will mainly focus on producing UAZ (MIC) SUVs (multi-purpose sports vehicles), motor vehicles for transporting 10 or more people, including the driver (M2, M2G, M3, M3G), trucks (N1, N1G, N2, N2G, N3, N3G) and special-purpose vehicles (SB, SC, SD) as agreed by both parties. The list of vehicle models must be included in the joint venture's production plan.

The decision is expected to take effect from October 5.

To achieve the above export target, Vietnam will allow joint ventures to import a number of complete vehicles tax-free to test market capacity and demand, and at the same time enjoy specific tax-free quotas for auto assembly components and spare parts for 5 years.

This is the period before import tax on auto components and spare parts under the Eurasian Economic Union (VN - EAEU FTA) is gradually reduced to 0%.

Specifically, the tax rate for Russian cars will be applied at 0% according to the quota from October 5. In 2016, there were 800 cars, in 2017 there were 850 cars, in 2018 there were 900 cars. Thus, in the first 3 years, there will be approximately 3,000 cars from Russia to Vietnam enjoying the 0% tax rate.

In addition, Vietnam also granted quotas allowing joint ventures to import 13,500 vehicle components with a 0% tax rate for 5 years.

The annual quota allocation for each joint venture will be based on the actual production plans of the joint ventures. The quota volume granted the following year will depend on the localization rate of the joint venture stated in its implementation plan.

To be subject to a 0% tax rate in Vietnam, car lines must have rules of origin as well as ensure the requirements of the VN - EAEU FTA.

At the end of March this year, Vietnam and Russia officially signed the Protocol on Cooperation on Automobiles. Previously, Vietnam also signed a Free Trade Agreement with the Eurasian Economic Union (VN - EAEU FTA), of which Russia is a member.

According to the protocol, Russia will cooperate with a number of Vietnamese enterprises to establish joint ventures to produce cars to serve the domestic market and export to Southeast Asia, because cars with a localization rate of 40% or more from Vietnam will be exempt from import tax to ASEAN countries.

According to Zing