Auto-makers’ fears set to be allayed

The Government Office issued Announcement 199/TB-VPCP cited Deputy Prime Minister Hoang Trung Hai as saying he agreed in principle with the Ministry of Finance’s (MoF) proposal to address automobile component import tax troubles facing Vietnam-based automobile joint ventures.

Under its Dispatch 10246/BTC-CST to the prime minister, the MoF suggested that any non-breakdown component would be subject to tax imposed on component, if it meets some major conditions. Of which, the total value of the non-breakdown components does not exceed 10 per cent of the total components to build up any car and the components do not include chassis, body, trunk and cabin for trucks.

This new policy would help automobile makers not be accused of tax evasion and have to pay a big whack in tax arrears. Since 2005, no firms imported components whose total value had exceeded 10 per cent of total components to make a car.

For example, customs authorities recently required Honda Vietnam and Ford Vietnam to pay tax in arrears worth VND3.34 trillion ($160 million) and tens of billions of dong, respectively, after discovering that these firms made wrong tax declarations.

If the government’s new move was not promulgated, not only these two firms, but also some other automobile manufacturers like Toyota Motor Vietnam, Vidamco and Vietnam Motors Industry Corporation face the same plight.

Sources from Toyota Vietnam, Ford Vietnam and General Motors Vietnam said the move was a good sign for the firms. However, the MoF’s guiding regulations were needed.

Since May 2010, the MoF’s Vietnam Customs discovered that some businesses imported the synchronised and non-synchronised automobile components and got the lower tax rate for automobile components. However, after the customs clearance, some of the components were found not to match the Ministry of Science and Technology (MST)’s Decision 05/2005/QD-BKHCN on breakdown levels of automobile components. Thus, the customs agencies had decided to collect the tax of the component as the tax imposed on imported complete built unit (CBU) cars.

On June 17, 2011, Vietnam Automobile Manufacturers’ Association (VAMA) sent a document to the MoF, MST and Ministry of Industry and Trade (MoIT) strongly proposing that the MoF not impose the CBU rate of 82 per cent on VAMA member companies’ imported components, if there were only some parts failing to meet breakdown level requirements in the Decision 05.

This decision, issued in 2005 in order to provide guidance for the localisation ratio calculation, stipulates automobile components’ specific breakdown levels. It is concretised in terms of import tax rates via the MoF’s Circular 184/2010/TT-BTC dated November 15, 2010 specifying the import tax rates on automobiles.

This circular stipulates that if at least one component included in the imported set of components has a breakdown level lower than that prescribed in the Decision 05, the set would be subject to import tax rates inflicted on CBU. The tax rates for components and CBU are 0-27 and 82 per cent, respectively.