Tax on import of used cars: No change

Regulations on used import cars and new cars are different.

As stipulated in the provisions of Decree 122/2016 / ND-CP on Export Tariffs, preferential import tariffs, the list of goods, the absolute tax rate, the mixed tax, import duty outside tariff quotas, the tax rates of import duty on this item, as well as tax calculations are still unchanged compared to the past.

From Decision "to" Decree

Besides the Guide on import and export Tax Law No. 107/2016 / QH13 dated 1-9-2016, the Government also issued Decree 122/2016 / ND-CP on Export Tariffs, preferential import tariffs, the list of goods, the absolute tax rate, the mixed tax, and import duty in addition to tariff quota (Decree No.122). Under Decree 122, there are 4 annexes, of which the list of goods and absolute rates, mixed tax for passenger used cars of 15 seats or less (including the driver) is regulated in an appendix.

This appendix details the calculation of import duty on used cars. Specifically, passenger cars of 9 seats or less (including the driver) with 1,500 cc cylinder capacity in 87.03 goods and passenger cars from 10 to 15 seats (including the driver) in the 87.02 commodities are applied absolute tariffs.

Passenger cars of 9 seats or less (including the driver) with a cylinder capacity of 1,500 cc and above 87.03 commodities have mixed tariff application.

Passenger cars of 16 seats or more (including the driver) belonging to 87.02 and transport vehicles with a total vehicle weight not over 5 tons within the group of 87.04 (except for freezer cars, waste collection cars with waste compressors, cisterns cars, armored vehicles for the transport of valuable goods, tub-style cement trucks and mud trucks with separated lifting barrels) are applied preferential tariff rates of 150%.

Other cars under headings 87.02, 87.03, 87.04 respectively are at the rate of 1.5 times higher than the preferential tax rate of new cars of the same category in the same group.

Thus, import duty on used cars is still calculated in two different ways with different levels (mixed tax and absolute tax) depending on the number of seats (including the driver) and cylinder capacity.

Talking to reporters of Customs News, representatives of the Bureau of import and export tax- General Department of Customs claimed that there are no changes in the provisions in the annex of this Decree compared with the previous regulations (Decision No. 36/2011 / QD-TTg issued in 2011) of the Prime Minister promulgating the import duty on used passenger cars of 15 seats or less (which was amended by Decision No 24/2013 / QĐ- TTg of the Prime Minister).

To put it simply, the regulation on old car import duty was "duplicated' from Decision 36 to the annex of the Decree No. 122.

However there is a point not included in Decree 122. In detail, in Decision No. 36, the Prime Minister asked the Ministry of Finance to base on the actual situation in each period in order to issue the Decision adjusting increase or decrease within the 20% level tax, but not to exceed the ceiling under the Vietnam commitments to WTO. The aim is to achieve controlling objectives regulating consumption and prevent commercial fraud. In case of adjustment of more than 20%, the Finance Ministry will submit to the Prime Minister for final decision.

Used import cars are not encouraged.

As stated earlier, the implementation of import duty on used cars has had no change for years.

Some automotive businesses complain that while new import cars are subject to three taxes (import duty, luxury duty and VAT), old cars are also subject to the top tax. As a result, prices of many types of used import cars will be higher than that of new cars due to this tax calculation.

It can be confirmed that the management of old cars and new cars is not the same. Thus, in order to ensure the environmental criteria and avoid making Vietnam a "landfill" and promote the development of domestic automobile production, the Government does not encourage import of second hand vehicles.

Used import car prices may still rise

On the other hand, it is not easy to determine the exact value of used cars for calculating import duty (because the value of the car depends on longevity, testing machinery, spare parts ...). Therefore, the application of the absolute duty for imported used cars is to avoid tax fraud, avoid tax losses (in fact, there were some cases of legitimizing new import cars to used cars to Vietnam to evade fraud taxes. The absolute duty on used cars is to prevent such fraud)

The absolute duty on used cars aims at encouraging businesses to import new and modern vehicles which ensure emission and environment standards

Although second-hand car import duty does not change, automobile trading businesses give the estimation about the price increase of cars in general and the edge up of old ones.

According to Decree 100/2016/ND-CP detailing and guiding the implementation of some articles of the Law amending and supplementing some articles of the Law on Value Added Tax and Special Consumption Tax (SCT) and the Law on Tax Administration, SCT calculation prices for cars in general (including used cars from July 1 2016) has some changes. In detail, instead of CIF prices as before, since July 1, SCT calculation prices for cars have to add a portion of profits, and freight costs from the importer to the dealers.

Along with that the special consumption tax on cars with a cylinder capacity of 2.500cc and older will at a considerable high (from 55% to 150% depending on cylinder capacity) along with the increase of VAT for vehicles of this kind.

It is common that old import cars are usually vehicles with a large capacity or high-value so changing SCT and VAT means that purchasing price also rises.

It can be said that the management of import of used cars had been implemented rather smoothly although the government does not encourage the import of such ued cars. However, to ensure business freedom and comply with commitments under international integration, tax policy for old vehicles have been enacted and implemented in recent years, contributing to prevent commercial fraud and stabilizing domestic production.