Ministry of Finance proposes to adjust preferential import tax for some car models

The Ministry of Finance said that currently, some imported car models with HS codes 8703.23.63, 8703.23.57 and 8703.24.51 are subject to relatively high MFN tax rates.

Specifically, HS code 8703.23.63: Passenger vehicles with common luggage compartment and sports cars (except 4-wheel drive), cylinder capacity over 2,000cc to 2,500cc, the current MFN tax rate is 64%, while the tax rate under the ASEAN Trade in Goods Agreement (ATIGA) is 0%, according to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is 31.8%.

HS Code 8703.23.57: Sedan-type vehicles with a cylinder capacity of over 2,000cc to 2,500cc, have a similar MFN import tax rate of 64%, while other Free Trade Agreements (FTAs) apply tax rates from 0% to 78%.

HS code 8703.24.51: Cars of the 4-wheel drive type, currently have an MFN tax rate of 45%, while the commitment under CPTPP is 25%, and ATIGA enjoys a tax rate of 0%.

The Ministry of Finance proposed to reduce the MFN import tax rate for these three groups of vehicles to create consistency in tax policy, while helping consumers have more choices of imported vehicles at competitive prices.

Specifically, vehicles with HS codes 8703.23.63 and 8703.23.57 will have their import tax reduced from 64% to 32% - a level close to the commitment under CPTPP in 2025.

Vehicles under HS code 8703.24.51 will be reduced from 45% to 32%, helping to unify tax rates within the same segment.

Vietnam's automobile market currently has a scale of about 510,000 vehicles/year, of which domestic production and assembly reaches 338,000 vehicles, the remaining 173,000 vehicles are imported, mainly from ASEAN countries enjoying FTA tax rate of 0%. Compared to the region, the size of Vietnam's market is still small, but it is forecasted that by 2030, demand may reach 1-1.1 million vehicles/year, requiring the domestic automobile industry to double its growth to meet the market.

The Ministry of Finance said that the import turnover of all three car lines mainly comes from countries that enjoy preferential tariffs under free trade agreements. Adjusting MFN tax can increase trade shifts, helping people access high-end car lines at more reasonable prices.

However, in reality, the trend of shifting trade towards automobiles also depends on many other factors such as consumer tastes, prices, after-sales services, and fuel consumption. In addition, because automobiles are valuable assets, Vietnamese people tend to choose popular car models on the market. At the same time, the domestic automobile manufacturing industry has not yet developed car models with large cylinder capacity, so the demand for this segment mainly depends on imports.

In addition, tax adjustments will also help create momentum for the automobile market to develop in a more diverse direction, promote competition between domestic and imported car manufacturers, and encourage domestic manufacturers to expand their product portfolio to meet the increasing needs of consumers.

According to the Ministry of Finance's calculations, the proposed reduction of MFN import tax could reduce state budget revenue by about 8.81 million USD (based on the import turnover subject to MFN tax in 2024). However, this reduction could be offset if the volume of imported vehicles from MFN countries increases, replacing imported vehicles from ASEAN and other regions.

The Ministry of Finance is seeking opinions from agencies, organizations, businesses and experts on the draft Decree amending the MFN import tax rates of a number of goods in Decree 26/2023/ND-CP. Once completed, the Ministry will submit it to the Government for consideration and approval, expected to be issued in March 2025 and take effect immediately thereafter.

If approved, this policy will have a significant impact on the Vietnamese automobile market, not only helping people access high-end cars at more reasonable prices but also promoting the development of the domestic automobile industry in a more sustainable and competitive direction.

Source: https://nhandan.vn/bo-tai-chinh-de-xuat-dieu-chinh-thue-nhap-khau-uu-dai-doi-voi-mot-so-dong-xe-o-to-post868104.html