Tax exemptions proposed for assemblers of green autos
The Ministry of Finance has proposed exempting taxes for domestic automobile firms that import parts to assemble vehicles running on clean fuels.
These policies, included in draft amendments to the Government's Decree 125/2017/ND-CP, are offered for enterprises producing electric automobiles, cars running on bio-fuels and natural gas and hybrid automobiles.
According to Decree 125, importers of automobile parts will be entitled to tax exemptions if they meet requirements on the minimum volume.
At present, no local firms have manufactured these kinds of automobiles. Only VinFast has plans to annually assemble 500 electric buses from 2020. However, it cannot meet requirements on volume in the initial stage.
Therefore, the amended decree will not require local manufacturers and assemblers of automobiles running on clean fuels to meet these requirements in the initial stage.
According to the Ministry of Finance, Vietnam has committed to gradually exempting the import tariffs on completely-built-up (CBU) cars for seven to nine years, under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The country has also signed the European Union-Vietnam Free Trade Agreement, pledging to gradually cut tariffs on CBU automobiles imported from the European Union over the next nine to 10 years.
CBU automobile imports from other ASEAN markets are now entitled to import tax exemptions in Vietnam. Thus, the local market may be opened to large automobile firms from the ASEAN, Japan, Mexico and the European Union.
Last year, the volume of imported CBU automobiles declined due to the strict requirements in Government Decree 116 on automobile manufacture, assembly, imports, maintenance and warranty services. However, many local automobile firms have met these requirements, so the volume of imported CBU vehicles surged in the first half of this year.
The situation may put local carmakers at risk. Therefore, the Ministry of Finance has proposed incentives to encourage them to produce and assemble green automobiles.