Vietnam’s New Tax Schedule for 2012

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By Nguyen Huyen My

Feb. 21 – Vietnam’s Ministry of Finance issued Circular No.157/2011/TT-BTC on November 14, 2011, stipulating the tax rates of export and import tariff preferences under the list of taxable items. The Decree takes effect from January 1, 2012.

The 2012 tax schedule has been renewed with many changes compared with the 2011 schedule, both in terms of commodity lists and tax rates. The highlight is the list of commodity codes with 8 digits (formerly 10 digits) which leads to an increase in the number of tariff lines in import duty preference with 1,258 tariff lines more than the ASEAN harmonized list of description and coding of goods in 2007, and 336 tariff lines more than the current import duty preference list of Vietnam. This also changes the tax rate of more than 1,000 tariff lines in the preferential import tariff schedule and the tax rates of more than 40 lines in the export tax schedule.

The export tax schedule comprises of 87 commodity groups, mainly minerals, such as: ore, stone, sand, scrap metal, gold, iron, copper and some other items that are not encouraged for export. Most of the items comply with the current tax rates, while some new items have been added and some have been revised with new tax rates.

There are 24 commodity groups of “scrap and debris metal” that enjoy the reduction on export tax rates under WTO commitments confirmed in 2012. Accordingly, the export tax rates of those scrap and debris metals have been adjusted from 29 percent and 22 percent to 22 percent and 17 percent, respectively. Export tax rates of “processed white limestone” have also been reduced from 17 percent to 14 percent.

Regarding the Preferential Import Tax Schedule, the Ministry of Finance has changed the tax rate of 945 commodity items in order to comply with the tariff reduction schedule stipulated in the WTO commitment of 2012. To protect production and reduce trade deficit, the Ministry has also increased the import duty of 157 tax lines for the items found necessary to be adjusted such as: items belonging to the list of goods not encouraged as imports, issued by the Government; goods outside the State managing list for stabilizing price; or goods in the list of machinery, equipment, spare parts, and means of transport which are domestically produced.

There are 87 tax lines of the import tax schedule which are reduced tax rates. This includes materials, accessories, components which have not been produced domestically, to name a few.

Another prominent point of the 2012 tax schedule (besides 97 chapters for the list of Vietnam export, import commodities) is Chapter 98, which covers the regulation of preferential import tax rates of some special commodities, groups of commodities which have been applied in the past, and the need to avoid tax rate changes – in the form of combining tax lines – majorly impacting on some domestic production industries.

Specifically, 22 items and group items have been selected for inclusion in Chapter 98 with dedicated import tariff preferences. Those are the output products of agriculture (such as pheasant, carp and crustaceans); input materials of some industries including cement, tires, high-voltage transmission lines (such as bleached kraft paper used for cement bags, woven fabric used as a reinforcing layer in rubber coated fabric and power transformers using high liquid dielectric); and products that should be tightly controlled and consumption restricted (such as hunting rifles, disc and tape)

Chapter 98 also includes seven specific commodity groups that enjoy preferential policies with low or 0 percent import tax rates, or with the floor level of the tax bracket specified by the Standing Committee of the National Assembly, such as: machinery and equipment exclusively used for coal mining (import tariff: 3 percent); items for building, repairing and maintenance of locomotives and wagons (import tariff: 0 percent and 10 percent), materials and imported equipment for the production of key mechanical products and for investment in the production of key mechanical products (import tariff: 0 percent).

This new Tax Schedule 2012 is issued to fulfill the country’s commitments to the World Customs Organization, the Harmonized Tariff Schedule of ASEAN in 2012, and the commitment to reduce export tax and import duty preferences under the WTO commitment schedule.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in Vietnam. To contact the firm, please email vietnam@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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