Race is on for luxury car imports

The tax hike for luxury cars, beginning in July, has prompted a surge in auto imports Photo: Le Toan

From late April to early May, the Customs Department in the central city of Danang had granted multiple licences for the import of completely-built unit (CBU), luxury cars purchased as gifts for businesses and individuals based in the city.

As well as Danang, the northern port city of Haiphong, which hosts an international seaport and is one of five locations eligible for direct car imports, also saw a sharp rise in requests for the import of brand-new CBU cars as gifts over the past month.

These cars include top-end brands such as Lexus, Toyota Highlander, Toyota Land Cruiser and Cadillac Escalade, all with cylinder capacities of 3.5L and upwards.

These luxury cars, among others, are on the list of vehicles which will see a sharp rise in excise tax, beginning July 2016.

As per the new Law on Special Consumption Tax, vehicles with a cylinder capacity ranging from 2.5L to 3L will have a new rate of 55 per cent, while the new rates for vehicles with cylinder capacity ranging from 3L to 4L, from 4L to 5L, from 5L to 6L, and over 6L will be 90 per cent, 110 per cent, 130 per cent, and 150 per cent, respectively.

Compared to the current excise tax rates of 50-60 per cent, some of the new rates show a marked increase.

According to Danang-based Nguyen Van Phuong Company Limited, which is licensed to import the brand new Lexus RX350, the tax difference before and after the new SCT Law comes into force is a whopping VND500-600 million ($22,900-$27,500).

Similarly, in the case of Son Khanh Linh Company Limited, which has the license to import the 2016 Lexus 570 model, the tax difference amounts to a staggering VND2 billion ($91,700).

Automobile dealerships have had to take into account the new tax hike when taking orders from new customers.

According to Tran Tan Trung, general director of Lien A Quoc Te JSC – the official distributor of luxury brand car Audi – it takes approximately six months from order placement to car handover to customers.

“New contracts on vehicles which see tax increases from July 1 include a clause stating that the car cost shall be calculated based on the tariff and exchange rate at the time of delivery. This is to avoid runaway customers,” shared a luxury car trade representative.

“Earlier this year, two of our customers flatly refused to pay additional fees following the new special consumption tax calculation method, applicable from January 1, 2016, leaving our firm in a quandary,” the source stated.