Cars made in Vietnam may be considered for tax incentives

According to the Ministry of Finance, the Ministry has received Official Dispatch 970/BTC-CN dated January 31, 2018 from the Ministry of Industry and Trade, which also proposes to amend the Special Consumption Tax policy as well as recommendations from Thanh Cong Group.

However, the Ministry said there are also opinions that if the regulation is amended to exempt special consumption tax for the domestic production value applied to automobile products, it may violate WTO commitments.

Therefore, regarding this content, the Ministry of Finance said it has taken note to coordinate with relevant Ministries to research and report to competent authorities for consideration and decision.

Regarding the issue of import tax exemption and reduction for raw materials for auto parts manufacturers investing in Vietnam, the Ministry of Finance said that tax incentives and exemptions for these businesses as well as products have been clearly stated in legal regulations.

Specifically, according to the List of industries and professions with investment incentives in Appendix I issued with Decree 118/2015/ND-CP detailing and guiding the implementation of the Investment Law, it clearly states that "The automobile support industry manufacturing industry is an industry with special investment incentives, according to the decision of the Prime Minister".

Accordingly, auto parts manufacturing projects are exempted from import tax on goods creating fixed assets of the project according to the provisions of Clause 11, Article 16, Law on Export Tax and Import Tax No. 107/2016/QH13.

In addition, investment projects in the manufacturing industry of supporting industrial products (according to the list attached to Decree 111/2015/ND-CP) are also exempted from import tax for 5 years, from the start of production or import for production.

Regarding tax rates, the Ministry of Finance said that in the period of 2018 - 2025, 10 bilateral and multilateral free trade agreements (FTAs) that Vietnam signed will enter a period of strong import tax reduction (basically 0%), accordingly, the special preferential import tax rate (ATIGA-ACFTA) of auto components will be 0%, leading to the MFN tax rate of raw materials and supplies being higher than the tax rate of finished cars.

However, the authority to regulate import tax rates belongs to the Government, so the Ministry of Finance has asked Thanh Cong Company to provide a detailed list of domestically produced raw materials and materials that can be imported to produce components. The Ministry of Finance said it will coordinate with relevant ministries and report to the Government for consideration and decision in the coming time.