Issuing Preferential Import Tariffs and Preferential Export Tariffs to implement CPTPP

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Draft Preferential Export Tariffs include 519 tariff lines. The average tax rate for 2019 is 19.1%; 2020 is 17.4%; 2021 is 15.7%; and 2022 is 14.1%.

519 preferential export tariff lines

According to the drafting agency, in order to implement Vietnam's commitments on import and export taxes under the CPTPP, relating to regulations of Article 11 of Law on Import and Export Duties in 2016 on the competence to promulgate tariff schedule and tax rates, the Ministry of Finance needs to develop and issue a Decree on Vietnam’s Preferential Export Tariffs and Special Preferential Import Tariffs for each period, firstly for the period from January 14, 2019 until December 31, 2022. This is necessary to implement international commitments and ensures the consistency of the legal system and complies with the Law on Import and Export Duties in 2016.

Specifically, the draft Preferential Export Tariffs includes 519 tariff lines. The average tax rate for 2019 is 19.1%; 2020 is 17.4%; 2021 is 15.7% and 2022 is 14.1%.

Regarding the tax rate for the 2019-2022 period, applying the provisions of the Agreement in practice, Mexico announced that the first time of tax reduction falls on the effective date of the Agreement for Vietnam (January 14, 2019). Australia, Canada, Japan, New Zealand, Singapore announced that the first time of tax reduction is on the effective date of the Agreement for these countries (December 30, 2018). Accordingly, the roadmap for tax reduction in Vietnam will apply to two groups of countries: (i) Mexico applies the tax rate according to the tariff cut roadmap from the first year; (ii) Australia, Canada, Japan, New Zealand, Singapore apply the tax rate according to the cut roadmap from the second year.

The Ministry of Finance intends to set conditions for applying preferential export tax rates under the CPTPP, which are transport documents and imported declaration showing the destination in the territories of the above countries. Conditions on transport documents and import declarations are to ensure the control of actual goods imported to the territories of these countries as prescribed, because the export process does not require the certificate of origin (C / O) as in the import process. In fact, at the time of Customs clearance, export goods often do not have transport documents and import declarations showing the destination as prescribed, so the Decree provides at this time that goods are subject to tax rates prescribed in the current Export Tariffs (but not the preferential tax rates), after transport documents as prescribed are submitted, the tax agency will deal with the overpaid tax amount according to the Law on Tax Administration (Article 47) and guiding provisions.

In addition, at the time of customs clearance, export goods are subject to tax rates specified in the Export Tariffs in accordance with the List of taxable goods in the Government’s Decree No. 125/2017 / ND-CP amending and supplementing a number of articles of the Government’s Decree No. 122/2016 / ND-CP on the Preferential Import Tariffs and Preferential Export Tariffs, List of goods, flat tax, compound tax, out of quota import tariff (Decree No. 125) and revised documents. In the case where the export goods are subject to preferential export tax rate lower than the export tax rate of the corresponding goods specified in Decree No. 125, the preferential export tax rate shall be applied.

Within 1 year from the registration date of customs declaration, if the customs declarant submit the transport documents and the copied import declaration, the tax administration agency shall handle overpaid tax according to the current law provisions. The deadline for submission of transport documents and copied import declaration is not specified in the CPTPP. The 1-year term as mentioned above is equivalent to the 1-year term for submission of the certificate of origin (C / O) to enjoy tax incentives in import under the commitments in CPTPP and the maximum term for submission of C / O according to current law.

In the case where export goods are not listed in the Export Tariffs in accordance with the List of taxable goods in Decree 125 or export goods are entitled to the preferential export tax rate equal to or higher than the export tax rate of the corresponding goods described in Decree No. 125, the preferential export tax rates shall not be applied.

Compound tariff on used cars

For import tariff, the Import Tariffs include 10,216 tariff lines at the 8-digit level and 1,442 tariff lines at the 10-digit level. The average tax rate for 2019 is 9.1%; 2020 is 7.7%; 2021 is 6.3%; and 2022 is 4.8%.

The application principle is similar to the export tax, the import tax rates applicable to the period of 2019-2022 as follows: allowing Mexico to apply the tax rates according to the cut roadmap from the first year; Australia, Canada, Japan, New Zealand, Singapore to apply tax rates according to the cut roadmap from the second year.

For goods imported from Vietnam's non - tariff area to the domestic market, to ensure benefits for enterprises in Vietnam’s non - tariff area, the Ministry of Finance proposes to apply a roadmap from the second year (as applicable for Australia, Canada, Japan, New Zealand and Singapore). Conditions for applying the special preferential import tax comply with the CPTPP.

In addition to introducing the draft Special Preferential Import Tariffs to implement the CPTPP, the Ministry of Finance also expects to develop a List of goods and special preferential import tariffs for used cars in accordance with tariff quotas to implement CPTPP.

Regarding this content, the draft of the Ministry of Finance clarifies the formula for calculating special preferential import tariffs for used cars in the headings 87.02, 87.03, 87.04 subject to tariff quotas. Specifically, for imported used cars in tariff quotas in accordance with the CPTPP, the preferential import tariffs are compound tax rates, include: Tax rate (%) and flat tax rate for used cars are specified in the List of goods and special preferential import tariffs at the registration time of customs declarations. Tax amount applying calculation method of compound tax for used cars = X + Y, in which X is the taxable price on used cars according to the law, multiplying with the tax rate of the tariff line for used cars of same type at the registration time of the Customs declaration; Y is the flat tax rate on used cars at the registration time of Customs declarations.

For imported used cars outside the tariff quotas in accordance with the CPTPP, import tax rate is provided in the Government’s Decree No. 125/2017 / ND-CP amending and supplementing a number of Articles of the Government’s Decree No. 122/2016 / ND-CP on the Preferential Import and Export Tariffs, List of goods and flat tax, compound tax, out-of quota import tariff and revised documents.

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In terms of validity, because the CPTPP enter into efforts for Vietnam from January 14, 2019, the Decree is possibly signed for promulgation after the effective date of the CPTPP while the Ministry of Finance develop draft regulations on tax treatment for Customs declarations registering from January 14, 2019, before the effective date of the Decree if they are eligible for enjoying preferential import and export tariffs prescribed in this Decree.