What are the preferential import duty rates imposed on imported auto parts of automobiles under the Tax Incentive Program in Vietnam?

What are the preferential import duty rates imposed on imported auto parts of automobiles under the Tax Incentive Program in Vietnam?

According to Clause 1, Article 8 of Decree 26/2023/ND-CP on the preferential import duty rates imposed on imported auto parts of automobiles under the Tax Incentive Program, the regulations are as follows:

The regulation sets a preferential import duty rate of 0% for imported auto parts classified under group 98.49 in Clause 3, Section 1, Appendix 2 issued together with Decree 26/2023/ND-CP as follows:

- At the time of customs declaration registration, the declarant must declare and calculate tax for imported goods according to the normal import tax rate, preferential import duty rate, or special preferential import duty rate as stipulated, without applying the 0% preferential import duty rate of group 98.49.

- The application of the 0% preferential import duty rate for auto parts classified under group 98.49 is carried out according to the provisions in Clauses 2, 3, 4, 5, 6, 7, and 8, Article 8 of Decree 26/2023/ND-CP.

What are the preferential import duty rates imposed on imported auto parts of automobiles under the Tax Incentive Program in Vietnam? (Image from the Internet)

What are regulated entities and eligibility requirements of the preferential import duty rates imposed on imported auto parts of automobiles under the Tax Incentive Program in Vietnam?

According to Clauses 2 and 3, Article 8, Decree 26/2023/ND-CP, the subjects and eligibility requirements of the preferential import duty rates imposed on imported auto parts of automobiles under the Tax Incentive Program are as follows:

* Eligible subjects

Enterprises with a Certificate of Eligibility for Automobile Manufacturing and Assembly issued by the Ministry of Industry and Trade.

* Eligibility requirements

- Imported auto parts must meet the following conditions:

+ Auto parts are listed in group 98.49 and are domestically unproduced and used for the production and assembly of automobiles during the preferential review period (including stockpiled parts from previous preferential review periods used for producing and assembling cars manufactured during subsequent review periods).

The determination of auto parts that are not yet produced domestically is based on the regulations of the Ministry of Planning and Investment regarding the List of domestically produced materials, supplies, and semi-finished products.

+ Imported auto parts must be directly imported by automobile manufacturing and assembling enterprises, entrusted for import, or authorized for import.

+ In case an imported kit (including multiple sources and multiple shipments) contains an auto body and frame, it must meet the following requirements:

The auto body must include at least the following sets: roof set, floor set, left side set, right side set, front set, rear set, and connecting panels (if any) separated and not electrostatically painted;

Auto frame: For those shorter than 3.7 m in length, whether linked or not, they must not be electrostatically painted; for those 3.7 m or longer, whether linked or not, they may be electrostatically painted before import.

+ Imported auto parts do not include items listed in group 87.07 (body, including the cab).

- For enterprises manufacturing and assembling electric cars, fuel cell cars, hybrid cars, fully biofuel cars, and natural gas cars, there is no need to register the car model when participating in the Tax Incentive Program.

+ Enterprises do not need to meet the minimum production volume in the first period of registration to participate in the Tax Incentive Program and the next consecutive review period; if they meet the regulations in clause 2, point a, clause 3, clause 4, clause 6, clause 7, clause 8 of Article 8 Decree 26/2023/ND-CP, they will be eligible for a 0% tax rate on all imported parts used to produce and assemble the group of cars registered by the enterprise for the Tax Incentive Program and manufactured during the review period.

+ In subsequent review periods, enterprises must meet the minimum production volume as regulated in point b, clause 5 of Article 8 Decree 26/2023/ND-CP and comply with the conditions in clause 2, point a, clause 3, clause 4, clause 6, clause 7, clause 8 of Article 8 Decree 26/2023/ND-CP to enjoy a 0% tax rate for all imported parts used in the production and assembly of the group of cars meeting the production volume required for preferential review.

- For enterprises manufacturing and assembling gasoline and diesel cars:

+ Emission Standards Condition

Production and assembly of cars must meet level 5 emission standards from 2022 onwards and for cars that meet level 4 emission standards, which were certified for quality safety and environmental protection before January 01, 2022, and remains valid according to Decree 116/2017/ND-CP and its amendments, supplements, or replacements (if any).

+ Car Model Condition

Enterprises that manufacture and assemble cars using gasoline or diesel are allowed to register one or more car models when participating in the Tax Incentive Program.

During the implementation of the Tax Incentive Program, enterprises can change or add registered car models and their quantities. The production volume of changed or supplemented car models is added to the minimum general production volume for preferential review but must still meet the specific minimum production volume for each review period. Car model criteria for different vehicle groups are as follows:

Car model for the group of vehicles carrying up to 9 people, with an engine capacity of up to 2,500cc belonging to group 87.03 must simultaneously meet the criteria: the same engine type and engine capacity of up to 2,500cc; the same body (or chassis); fuel consumption under 7.5 liters/100 km.

The fuel consumption criterion under 7.5 liters/100 km is based on the combined cycle fuel consumption certification issued by the Vietnam Register;

Car model for the minibus group (carrying 10 to 19 people belonging to group 87.02) and the bus/passenger car group (carrying 20 or more people belonging to group 87.02) is a model having the same engine criteria and chassis;

Car model for the truck group (motor vehicles used to transport goods belonging to group 87.04 and specialized motor vehicles belonging to group 87.05) is a model having the same engine criteria and the same cabin criteria.

The determination of the engine criteria of the car model is based on the engine capacity or type or power stated in the Automobile Safety and Environmental Protection Quality Certificate issued by the Vietnam Register.

The determination of the body (or chassis) criteria, chassis, and cabin is based on the basic technical characteristics of the automobile and the body structure in the technical design description and technical drawings of the vehicle approved by the Vietnam Register.

+ Minimum General Production Volume Condition (the production volume for each group of automobiles) and Minimum Specific Production Volume Condition (the production volume of registered car models participating in the Tax Incentive Program)

Enterprises must meet the minimum general production volume and minimum specific production volume under one of the following cases:

++ If an enterprise meets the minimum general production volume for each vehicle group and the minimum specific production volume for at least one car model for each review period, as stipulated in point a, clause 5, Article 8 Decree 26/2023/ND-CP and meets the conditions specified in clause 2, points a, c.1, c.2, clause 3, clause 4, clause 6, clause 7, clause 8, Article 8 Decree 26/2023/ND-CP, the enterprise will be eligible for a 0% tax rate on all imported parts used to produce and assemble the group of cars that meet the required production volume and are manufactured during the preferential review period.

If producing and assembling both gasoline, diesel and electric cars, fuel cell cars, hybrid cars, fully biofuel cars, and natural gas cars, the general minimum production volume for gasoline and diesel vehicles can include the production volume of electric cars, fuel cell cars, hybrid cars, fully biofuel cars, and natural gas cars assembled within the preferential review period into the general minimum production volume of the corresponding gasoline and diesel vehicle group when reviewing for preferential treatment.

++ If an enterprise has a production volume of a single registered car model that carries up to 9 people during the preferential review period reaching 1.3 times or more of the specific minimum production volume for such models under point a, clause 5, Article 8 Decree 26/2023/ND-CP and if the conditions in clause 2, points a, c.1, c.2, clause 3, clause 4, clause 6, clause 7, clause 8, Article 8 Decree 26/2023/ND-CP are met:

The enterprise will be eligible for a 0% tax rate on the imported parts used to produce and assemble the registered car model that is manufactured during the preferential review period.

++ If an enterprise has a total production volume of two registered car models that carry up to 9 people during the preferential review period reaching 1.5 times or more of the specific minimum production volume for such models under point a, clause 5, Article 8 Decree 26/2023/ND-CP and if the conditions in clause 2, points a, c.1, c.2, clause 3, clause 4, clause 6, clause 7, clause 8, Article 8 Decree 26/2023/ND-CP are met:

The enterprise will be eligible for a 0% tax rate on the imported parts used to produce and assemble the two registered car models manufactured during the preferential review period.

++ If an enterprise registers to participate in the Tax Incentive Program for two or more vehicle groups and the actual production volume of all registered groups during the review period is at least equal to the total minimum general production volume of the corresponding vehicle groups stipulated in point a, clause 5, Article 8 Decree 26/2023/ND-CP and meets the conditions specified in clause 2, points a, c.1, c.2, clause 3, clause 4, clause 6, clause 7, clause 8, Article 8 Decree 26/2023/ND-CP:

The enterprise will be eligible for a 0% tax rate on the imported parts used to produce and assemble the cars from the groups that the enterprise registered to participate in the program and that are manufactured during the preferential review period.

++ For the enterprise's first preferential review period for automobile production and assembly as specified in points c.3.1, c.3.2, c.3.3, c.3.4, clause 3, Article 8 Decree 26/2023/ND-CP, if the review period does not cover a full number of months, the enterprise achieves an actual production volume of the group of cars at least equal to the average 1-month production volume of the general minimum volume multiplied by the participation period (number of months) of the review period of the Tax Incentive Program, and achieves an actual production volume of the registered model at least equal to the average 1-month specific minimum volume multiplied by the participation period (number of months) of the review period, and also meets the general and specific minimum production volumes for the next review period, the parts used for manufacturing and assembling cars during the first preferential review period will be eligible for a 0% tax rate if the enterprise meets the conditions in clause 2, point a, c.1, c.2, clause 3, clause 4, clause 6, clause 7, clause 8, Article 8 Decree 26/2023/ND-CP.

If the first month of Tax Incentive Program participation is 15 days or more, it will be counted as a full month.

If the first month of Tax Incentive Program participation is less than 15 days, it will not be counted.

What are preferential import duty rates for materials, supplies, and accessories used for manufacturing, processing under the tax incentive program for automobile manufacturing and assembly in Vietnam?

Pursuant to clause 1, Article 9 Decree 26/2023/ND-CP:

Import tax rates for materials, supplies, and parts for the production, and processing (assembly) of priority supporting industrial products for the automobile manufacturing and assembly sector until December 31, 2024 (referred to as the tax incentive program for automobile manufacturing and assembly)

1. The preferential import duty rate of 0% for domestically unproduced materials, supplies, and parts for the production and processing (assembly) of priority supporting industrial products for the automobile manufacturing and assembly sector (referred to as automotive supporting industrial products) until December 31, 2024, is as follows:

a) At the time of customs declaration registration, the declarant shall declare and calculate tax for imported materials, supplies, and parts according to the standard import tax rate, the preferential import duty rate, or the special preferential import duty rate as prescribed, without applying the 0% tax rate yet.

b) The application of the 0% preferential import duty rate for materials, supplies, and parts of the tax incentive program for automobile manufacturing and assembly shall be implemented according to the provisions in clauses 2, 3, 4, 5, 6, 7, and 8 of this Article.

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Thus, the preferential import duty rate for domestically unproduced materials, supplies, and parts for the production, and processing (assembly) of priority supporting products for the automobile manufacturing and assembly sector until December 31, 2024, under the tax incentive program for automobile manufacturing and assembly is 0%.