HANOI: As Vietnam continues to attempt to build up its domestic auto industry the Ministry of Finance has announced that it has drafted a plan to increase the special consumption tax (SCT) on imported cars by changing the basis on which the tax is calculated.
The Vietnamese government has been concerned that the current method of SCT calculation has resulted in a competitive advantage for importers – the new method seeks to correct this imbalance.
The special consumption tax is a form of excise tax that applies to the production or importation of specific goods and to certain services; please see below for an in-depth explanation. The current SCT rates on automobiles with fewer than nine seats range from 45 to 60 per cent depending on engine capacity.
As a result of the new method of calculation there will be an average increase of 5.0 per cent on imported car prices. This will mean that domestic sale fees will be added to the total value of cost, insurance, freight, and import tariff costs.
Changes to Vietnam SCT will add an extra 5% to the cost of imported vehicles such as this Mercedes-Maybach S600’s – 10 of 50 being built this year are heading to Vietnam
Changes to Vietnam SCT will add an extra 5% to the cost of imported vehicles such as this Mercedes-Maybach S600’s – 10 of 50 being built this year are heading to Vietnam
The Finance Ministry has stated that it will provide a period within which stakeholders who are affected by the tax change will be able to give their opinions on the new method. The new SCT plan is scheduled to be submitted for approval next month and would go into effect January 1, 2016.
Many companies are currently reconsidering their Vietnam business strategy in reaction to the Asean tax cut roadmap that Vietnam must follow.
The Asean Trade in Goods Agreement which will be implemented in 2018 will allow cars to be imported duty-free from other Asean countries. This may result in Vietnam becoming increasingly dependent on foreign vehicles as import taxes levied on automobiles will sharply drop or be exempted following the roadmap of tariff reduction commitments resulting from the trade agreement.
According to Vietnam 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 Vietnam SCT are also subject to VAT. The basis of VAT calculation is the selling price plus Vietnam SCT. For imported products, VAT is imposed on the dutiable value plus import duties plus SCT.
