Vietnam’s Finance Ministry declines Ford and Toyota’s proposals on tax reduction conditions

Vietnam’s Ministry of Finance (MOF) rejected the both proposals from Ford Vietnam and Toyota Vietnam on the adjustment of tax reduction conditions.

Vietnam’s Ministry of Finance submitted a report to the Government on the draft Decree amending and supplementing some articles of Decree 26/2023 on export tariffs and preferential import tariffs.

In the document, the ministry disagreed with the proposals on reducing the required output to apply for tax incentives, and adding some car parts and components to the list that subject to 0% MFN tax, according to Vietnamese media reports.

Vietnam’s MOF rejected proposals from automakers on adjusting tax reduction requirements. (Source: Ministry of Information and Communications of Vietnam)

Proposal on reducing required output

Prior to that, the Vietnam Automobile Manufacturers’ Association (VAMA) and People's Committee of Hai Duong province had proposed that the ministry and government consider Ford Vietnam’s proposal on reducing the required output of the Tax Incentive Program for automobile production and assembly.

Under the current regulations, to participate in the program and enjoy 0% preferential tariff on component and spare part imports that serve domestic production, automakers must have a Certificate of eligibility for car manufacturing and assembly issued by the Ministry of Industry and Trade, as well as meet the requirements prescribed in the decree (on components, models, output, emissions, tax incentive review period, documents and procedures).

The aim of this program is to encourage business to invest and expand production scale. Businesses must meet the output conditions, including minimum output for each model and in general, during the tax incentive consideration period, six or twelve months, in order to enjoy the program’s preferential policies.

The ministry said that there have been many policies to support the domestic automotive manufacturing and assembly industry recently, and the request on lowering the required output “is not appropriate with the current situation”.

Proposal on expanding list to apply 0% MFN tax

Toyota Vietnam proposed on adding some car spare parts and components to the list (Group 98.49) of products subject to the 0% MFN tax.

The list names the items which cannot be produced domestically, bear high scientific and technology content, and is complicated to manufacture to promote the industry. These help domestic automobile industry develop and reduce production costs.

The MOF explained its rejection as some of the Harmonized Commodity Description and Coding System (HS codes) suggested by Toyota Vietnam have been domestically produced, while some also have been included in group 98.49.

As basic goods, including raw materials, supplies, consumables or electronic components of cars (such as pipes, screws, bolts, etc.) can be produced domestically, there is a need to protect domestic production.