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VIETNAM: PM Ponders Options on Duty Cuts to Imported Auto Parts

Import duties on certain automotive parts are to be cut as of 1 January 2018, thus levelling the playing field between imported automobiles (completely built units – CBUs) and those assembled locally from components sourced from overseas suppliers. The cuts will apply to auto parts used in the assembly of cars with up to nine seats and trucks with a capacity of up to five tonnes.

The government is still considering two options before the implementation. First, the existing duties on 163 imported components will be abolished, while removing the duty on 19 imported items that are currently taxed at between 3% and 50%. In the latter case, the designated items would include engines, gear-boxes, automatic transmission systems and fuel injection pumps. Both options will be presented to the country’s Prime Minister later in the year, with the approved alternative then expected to be in force until 2022.

To qualify for the tax cuts, a domestic car maker would have to demonstrate an annual growth rate of 16% and produce a minimum of 34,000 units. In the case of truck manufacturers, an annual growth rate of 18% would be required, together with a minimum production output of 8000 units. Both of these criteria would have to be met by the end of 2018, while all such vehicles would also have to comply with the stipulated energy-efficiency norms and the required international emission standards.

The tax cuts are said to be in line with the country’s WTO commitments and are also expected to boost the domestic automotive industry. The measures are also scheduled to come into force ahead of the implementation of the full duty exemption on CBUs imported from ASEAN countries, which is due to come into effect later in 2018.

Content provided by Picture: HKTDC Research
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