More policies to encourage businesses producing and assembling cars in the country

VCN - The Government has been providing preferential tax policies to support the domestic automobile industry. Facing the fact that the turnover of imported cars is increasing, a number of new preferential policies will continue to be proposed.  
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Since2017, the Government has put forward preferential policies to support the domestic automobile industry. Photo: N.Hà.

Auto components do not suffer from special consumption tax

According to information from the Tax Policy Department, Ministry of Finance, the domestic automobile industry has enjoyed many incentives.

Under the provisions of the Special Consumption Tax Law, cars with 24 seats or fewersuffer from special consumption tax but automotive components are not subject to special consumption tax. Imported cars must pay tax under the provisions of the Law on Export Tax, Import Tax, Special Consumption Tax and Value Added Tax must pay import tax and special consumption tax (applicable to vehicles of 24 seats or fewer) and value added tax.

In particular, the import tax rates comply with WTO international commitments and 14 signed FTAs; dutiable value is the customs value in strict compliance with the provisions of the customs law, in accordance with the GATT valuation principle of the World Customs Organization (WCO).

The special consumption tax rate, value-added tax on complete automobiles and the value-added tax on automobile components are similar to those imposed in some countries around the world.

The method of calculating import tax, special consumption tax and value-added tax on imported goods is specified in the Tax Laws, in accordance with international practice.

The Law on Value-Added Tax stipulates that goods trading establishments that are liable to value-added tax may declare and deduct input value-added tax.

When selling imported CBU cars or domestically manufactured or assembled cars, all the value added tax paid at the importation stage or paid when buying goods and services to domestically serve activities producing and trading in automobiles, business establishments are entitled to input value-added tax deduction in accordance with the law on value-added tax.

Do not encourage businesses to participate just for priorities

In particular, in 2017, the Government issued 2 Decrees – Decree 116/2017 / ND-CP dated October 17, 2017 providing conditions, production, assembly, import and provision of maintenance warranty services. cars and Decree No. 125/2017 / ND-CP dated November 16, 2017 on amending and supplementing Decree No. 122/2016 / ND-CP on the Export Tariff, Preferential Import Tariff, list of goods and absolute tax rates, mixed taxes, and import duties outside the tariff quota.

In particular, Decree 125 has supplemented the tax incentive program for imported automobile components to produce and assemble cars with the main goal of encouraging domestic production and assembly of vehicles, increasing the scale and market capacity for domestically assembled cars, while contributing to reducing production and assembly costs in the country.

According to the provisions of Decree No. 125, one of the conditions for application of the tax incentive program for imported automobile components is that the automobile manufacturing and assembling enterprise must meet the conditions on production output. Manufacturing and assembling certain vehicles according to the prescribed roadmap for the period of 2018 to 2022.

This is a necessary condition to ensure that the incentive program achieves its goals because the most important factor for the development of the automotive industry is the market size. Any tax incentive program must be accompanied by certain conditions to ensure that the incentive program is applied to the right audience, achieving the goals set out in the Preferential Policy.

Facing the situation that car import turnover tended to increase sharply in 2019, the Ministry of Finance is continuing to coordinate with other ministries and branches to submit to the Government the Decree amending and supplementing Decree No. 125 to facilitate and encourage the participation of domestic manufacturing and assembling enterprises in the incentive program to promote the domestic automobile manufacturing and assembly industry to maintain its growth under the fierce competition of imported cars.

At the same time, the Ministry of Finance proposed to the Government to supplement an import tax incentive program for imported raw materials, supplies and components to produce imported automotive components with the aim of developing auxiliary industries for the automotive industry.

If the Government approves this new preferential policy, this will be a good support policy for the automotive industry under the pressure of imported cars.

By HongVan/Bui Diep

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