Ministry of Finance will refund special consumption tax to businesses selling E5 gasoline

Before 2016, the Special Consumption Tax Law stipulated a tax rate of 10% for A92 gasoline used for blending. E5 and E10 gasoline were mixed at a ratio of 95% and 90% with A92 gasoline and 5% and 10% with bioethanol, respectively. Accordingly, the special consumption tax on 1 liter of E5 gasoline was 9.5% and 9% for E10 gasoline.

Since 2016, to further encourage the use of biofuels and contribute to environmental protection, the special consumption tax rate for E5 gasoline has been adjusted down to 8% and 7% for E10 gasoline. Enterprises base on the above tax rate and the proportion of mineral gasoline used to blend into biofuels to deduct special consumption tax.

However, during the implementation process, the Ministry of Finance found that petroleum companies are generating too much deductible tax, affecting the financial resources of enterprises. Some enterprises even have tax arrears to deduct up to tens of billions of VND per month. This number is forecast to increase much higher in 2018 when biofuel gasoline production is consumed a lot.

Therefore, businesses as well as the Vietnam Petroleum Association are requesting the Ministry of Finance and related ministries to provide guidance on the amount of special consumption tax that has not been deducted for mineral gasoline used to produce biofuel...

The proposal of enterprises as well as the Vietnam Petroleum Association is considered to be well-founded and consistent with the actual situation that from January 1, 2018, according to the Government's direction, enterprises are only allowed to sell Ron 95 gasoline and E5 gasoline. This also means that the amount of special consumption tax not deducted from raw materials to produce E5 gasoline will be very large. For Petrolimex alone, the amount of tax not deducted from 2018 is expected to be about 270 billion VND.

Previously, petroleum businesses also complained that E5 gasoline was being subject to a fairly high environmental protection tax, which caused the price to rise, making it difficult to encourage people to use it.

According to businesses, the current regulations are that the environmental protection level for fuel level IV and level II is being equalized (1,500 VND/liter), meaning that the environmental protection tax for E5 gasoline is equal to that for Diesel. Applying such a tax level is unreasonable according to businesses.

In a recent document sent to the authorities, Vietnam's largest petroleum distributor - Petrolimex proposed applying a policy to encourage the use of clean fuels (emission standards level IV, V); at the same time, applying a lower environmental protection tax rate, for example 90% of the tax rate for fuels with only level II standards.

In addition, in the petition, Petrolimex proposed applying environmental protection tax rates for E5 and E10 bio-fuel at 80% and 70%, respectively, of the tax rate for mineral gasoline.

If approved, Petrolimex proposes to apply the above tax rate from July 1, 2018.

H.Anh