No need to reduce the output of manufacturing and assembling automobile to enjoy preferential tariff

The government has issued many policies to support the domestic automobile manufacturing and assembly industry. Photo: ST

Commenting on the draft Decree amending and supplementing some articles of Decree No. 26/2023/ND-CP on Schedule of Export Tariffs, Schedule of Preferential Import Tariffs, Tariff nomeclature and fixed duties, mixed duties, out-of-quota import duties, VAMA proposed to revise the regulation on output at Point c.3.4, Clause 3, Article 8 of Decree No. 26/2023/ND-CP in one of two ways. Accordingly, for the case that an enterprise registers to participate in the Tax Incentive Program for 02 (two) headings of vehicles or more, have the total actual manufacturing and assembling output of vehicles of all these makes of vehicles registered within a consideration period which is at least equal to total minimum general output of vehicles belonging to respective headings of vehicles according to point a clause 5 of this Article, and meet regulations laid down in clause 2, point a, c.1. c.2 clause 4, clause 4, clause 6, clause 7 and clause 8 of this Article, they shall be entitled to the 0% duty rate applied to all components imported for use in the manufacturing and assembly of vehicles belonging to registered headings of vehicles that leave the factory within that period.

Explaining this issue, the Ministry of Finance said that the tax incentive program for automobile production and assembly is stipulated in Decree No. 125/2017/ND-CP (amended and supplemented in Decree No. No. 57/2020/ND-CP, Decree No. 101/2021/ND-CP) and recently Decree No. 26/2023/ND-CP (replacing the above Decree). Conditions for participating in the Tax Incentive Program and applying the MFN tax rate of 0% are that the enterprise has a certificate qualified to manufacture and assemble cars issued by the Ministry of Industry and Trade and meet the conditions prescribed in the Decree (including conditions on components; conditions on vehicle models; conditions on output; conditions on emissions; conditions on incentive consideration period; conditions on documents and procedures).

In particular, businesses must meet the production conditions (including minimum general output for all types of vehicles and minimum specific output for each vehicle model) following the regulations for each vehicle group. Regulations on output conditions are intended to encourage businesses to invest and expand production scale. Businesses will not enjoy the Program's preferential policies if they do not meet the output conditions during the tax incentive consideration period (6 months or 12 months). Output conditions are an important and prerequisite condition for businesses to invest capital, expand production, and increase the localization rate, thereby contributing to bringing the output of the automobile industry in the right direction and policies of the Party and the State.

According to the Ministry of Finance, in 2021, amid the impact of the Covid-19 epidemic, automobile manufacturing and assembling enterprises face many difficulties and cannot meet the output conditions of Tax Incentive Program to enjoy a tax rate of 0% on imported components and spare parts for automobile production and assembly. To remove difficulties for automobile manufacturing and assembling enterprises, the Ministry of Finance submitted to the Government to promulgate Decree No. 101/2021/ND-CP, in which, based on the calculation of factors regarding market trends and socio-economic conditions, Decree No. 101/2021/ND-CP has extended the application deadline of the Tax Incentive Program to December 31, 2027 and adjusted to reduce output in 2021 and 2022 of some vehicle groups under the Tax Incentive Program in appropriate with actual conditions. At the same time, Decree No. 101/2021/ND-CP also does not raise the issue of increasing output conditions over the years but stipulates that it remains stable for the entire period of 2022-2027. Currently, Decree No. 26/2023/ND-CP has also inherited the output regulations in Decree No. 101/2021/ND-CP.

Recently, to continue supporting businesses to restore production and business, the Ministry of Finance has submitted to the Government to promulgate Decree No. 36/2023/ND-CP extending the deadline for paying special consumption tax, especially for domestically produced and assembled cars and Decree No. 41/2023/ND-CP regulating registration fee rates for cars, trailers or semi-trailers pulled by cars and other vehicles similar to vehicles domestically produced and assembled cars (50% reduction in registration fees from July 1, 2023 to December 31, 2023). Particularly, battery-powered electric cars have been exempted from registration fees for the first time within 3 years from March 1, 2022, and registration fees are applied at 50% of the rate for cars running gasoline and diesel with the same number of seats for the next 2 years. “Thus, the Government has many policies to support the domestic automobile manufacturing and assembly industry. VAMA's continued proposal to reduce output is not appropriate for the current situation," the Ministry of Finance affirmed.

Regarding amending Decree 26/2023/ND-CP, Honda Vietnam Company proposed to include electric cars, cars using fuel cells, hybrid cars, and cars using biofuels. Cars using natural gas are manufactured and assembled within the incentive consideration period.

Regarding this issue, the Ministry of Finance said that to encourage businesses to produce and assemble environmentally friendly cars, Decree No. 57/2020/ND-CP has added environmentally friendly car lines into the Tax Incentive Program, which stipulates that the minimum general output condition for these vehicle models is 250 vehicles/year (much lower than other fossil fuel-powered vehicles such as vehicles with less than 9 seats is 23,000 vehicles/year) so that businesses can research, test and manufacture electrified vehicles in Vietnam in the early stages. At the same time, at point c.3.1, clause 3, Article 8, there is a regulation allowing the output of environmentally friendly cars to be added to the overall output of the group of vehicles using gasoline fuel when considering incentives. Thus, the current regulations in Decree No. 26/2023/ND-CP already cover emerging realities and there is no need to amend this content.