Imported cars may see a sharp price increase from January 1, 2016.

The price of imported cars in Vietnam could increase sharply when the government simultaneously changes the calculation time for the special consumption tax.

Although the new import tax rates under the trade agreements haven't been implemented yet, changes to other taxes and fees are already becoming a reality. Car importers in Vietnam haven't even had time to celebrate the reduction in import taxes before facing the challenge of increased prices due to other taxes and fees. Customers who love imported cars now face another obstacle in accessing their preferred models.

Importing cars is facing increasing difficulties.

Decree 108, which details several provisions of the amended Law on Special Consumption Tax, focuses on changing the timing of special consumption tax calculation for imported vehicles with fewer than 24 seats, which will directly increase retail car prices for customers.

Previously, these types of vehicles were subject to excise tax based on their cost price, but the new law calculates it based on the wholesale price (to dealers), which cannot be lower than 105% of the cost price. The calculation method for these prices is as follows:

Cost of goods sold = price including import tax.

Wholesale price = cost of goods sold + expenses (transportation, advertising, sales) + business profit.

These discrepancies will drive up the excise tax payable, forcing importers to increase the retail price of vehicles for customers.

This decision will take effect from January 1, 2016. Thus, this is the first proposal applied to imported vehicles to become a reality. In addition, imported vehicles are likely to face significantly increased special consumption tax rates in the near future, along with a series of other interventions aimed at restricting this type of vehicle.

Firstly, the excise tax rates that the government has presented to the National Assembly for discussion recently stipulate that vehicles with engine capacities of 2 liters or more will see a significant tax increase, while vehicles with capacities under 2 liters will receive a tax reduction of approximately half. For example, vehicles with engine capacities of 2-3 liters will see an increase in excise tax from the current 50% to 60%, while vehicles with capacities under 2 liters will see a reduction from 45% to 20-25%.

The new tax rate is unfavorable for imported cars and advantageous for domestically assembled cars. This is because most domestic assembly plants focus on the small and medium-sized car segment with engines under 2 liters. Conversely, only a few imported cars have engines under 2 liters, while the majority are luxury cars with engines over 2 liters.

Finally, in addition to tariffs, the Ministry of Industry and Trade also has plans to intervene in technical barriers to restrict imported vehicles, such as requirements regarding financial capacity, warranty systems, warehousing, or allowing only certain ports to import vehicles.

The major changes before 2018 were indicative of volatility in car prices in the Vietnamese market, where the government clearly expressed its stance of strongly restricting imported cars with engines over 2 liters, while encouraging smaller cars and protecting the domestic assembly industry.

According to VnExpress