Vietnam to Give Certain Automobiles a Special Consumption Tax Rebate
HCMC – Vietnam’s Ministry of Finance has announced that certain automobiles, depending on their engine displacement values, will receive a special consumption tax (SCT) rebate beginning July 1, 2016. However, other cars will see a higher tax compared to their current levels.
The recently proposed tax changes are part of the Vietnam government’s strategy to develop the country’s auto industry and reduce car prices in the domestic market.
In particular, the government will reduce SCT on prioritized cars (those with an engine displacement of below 1,000 cm3 to 2,000 cm3) by between five percent and 20 percent. The tax will be continually reduced until January 1, 2018.
In less positive news, cars with an engine displacement of more than 2,000 cm3 to 3,000 cm3 will have SCT imposed at between 60 percent to 75 percent of their value, this is 10 percent to 15 percent higher than the current rates.
The special consumption tax is a form of excise tax that applies to the production or importation of specific goods and to certain services. According to SCT Law, SCT is levied on the production and importation of 11 categories of products and six types of services that are considered to be luxurious or non-essential. Generally, goods and services subject to SCT are also subject to VAT.
SCT is levied on each goods item only once. SCT refunds are available for exported goods upon request of the taxpayers in the following cases: goods temporarily imported for re-export, raw materials imported for manufacture, or processed goods for export.
The current SCT rates on automobiles with fewer than nine seats range from 45 percent to 60 percent, depending on engine capacity.
Due to increasing consumer demand, a young workforce, and strong governmental support for the auto industry, many analysts are optimistic about the potential of Vietnam’s auto industry, with some predicting that the country may have the fastest growth in Southeast Asia over the next 20 years.
Vietnam is also set to cut its car import tariff incrementally over the next four years for goods originating in ASEAN countries, according to the ASEAN Trade in Goods Agreement. The current import tariff of 50 percent is expected to be reduced to 35 percent in 2015, 20 percent in 2016, 10 percent in 2017, and will be zero in 2018. As such, global auto companies like GM and Ford are eager to expand their operations in one of Asia’s key growth markets.
Key recent Vietnam auto industry statistics:
- Vietnam imported 9,504 complete built units (CBUs) in July with a total value of US$208.5 million (a month on month fall of 1.8 percent in quantity and 32.1 percent in value)
- 9,678 CBUs were imported in June (a 9.8 percent drop from May)
- As of July, Vietnam had imported 64,421 CBUs, worth a total value of over US$1.7 billion (US$130 million higher YoY, but 7,600 CBUs lower)
- 20,349 cars were sold in the Vietnamese market in July, a month on month increase of 9 percent and 61 percent YoY increase (15,013 were locally-assembled cars and 5,336 were imported cars)
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