Proposed Extension of Tax Incentive Program for the Automotive Supporting Industry

To encourage businesses to continue investing in and expanding automobile manufacturing and assembly, rather than importing completely built-up (CBU) vehicles, thereby creating a ripple effect for consumers and supporting enterprises such as repair, maintenance, and servicing, the Ministry of Industry and Trade, the Vietnam Automobile Manufacturers' Association (VAMA), and the Vietnam Association of Mechanical Industry (VAMI) have proposed to extend the tax incentive program for the automotive supporting industry.

In general, tax incentive policies—and particularly the tax incentive program for the automotive supporting industry—have played a vital role in promoting the development of Vietnam’s automotive industry in recent years. According to data from the Ministry of Industry and Trade, as of May 31, 2024, businesses participating in the program had produced more than 3.3 million products, with a total tax refund of 116.8 billion VND. Of this, 36.98 billion VND was refunded in 2023, and 10.86 billion VND in the first five months of 2024. The average annual tax refund is about 39 billion VND.

According to VAMI, member enterprises have rated the automotive supporting industry tax incentive program as effective. It has provided a foundation for businesses to stabilize production, expand operations, invest in new machinery and modern technology, improve productivity, and participate more deeply in the global automotive value chain.

The Ministry of Finance stated that in line with the directives of the Party and State on developing the supporting industries, the Government issued Decree No. 57/2020/ND-CP on May 25, 2020, which included the tax incentive program for the automotive supporting industry (currently detailed in Article 9 of Decree No. 26/2023/ND-CP dated May 31, 2023). This program is directly linked to the automotive manufacturing and assembly sector, aiming to promote production from raw materials to final products. By the end of 2024, the program is set to expire, while the tax incentive program for vehicle assembly and manufacturing (issued earlier) has already been extended once, through the end of 2027.

To continue supporting businesses and enhancing the role of the automotive supporting industry, the Ministry of Finance, in collaboration with the Ministry of Industry and Trade, has reviewed the program and drafted a new decree amending Article 9 of Decree No. 26/2023/ND-CP. This decree concerns export and import tariffs, the list of goods, and absolute, mixed, and out-of-quota import duties. The draft proposes to extend the program until December 31, 2027.

The Ministry of Finance believes that it is necessary to extend the tax incentive program to ensure the successful implementation of national industrialization and modernization strategies in line with the Party and Government's directives; ensure consistency in support policies; and contribute to enhancing the production capacity and localization rate of the automotive industry.

The Ministry is currently gathering public feedback on this draft. Under the proposed amendment, through December 31, 2027, raw materials, supplies, and components not yet produced domestically but used directly in manufacturing and assembling prioritized automotive supporting industry products will be eligible for a preferential import tariff of 0%.

Before this 0% import duty takes effect, customs declarants will need to declare and calculate import duties based on the current applicable rates, including normal, preferential, or special preferential rates.

Once the policy is in effect, to benefit from the 0% import tariff specifically for the automotive supporting industry, customs declarants must fully comply with all conditions and procedures as stipulated.

Source: Nguyễn Hiền / Natural Resources and Environment Newspaper
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