Viet Nam Reduces Tax Rate on Hybrids to 42%

Hybrid, or gasoline-electric or bio-electric, autos can enjoy luxury tax preferences if importers can show manufacturers’ documents on the fuel consumption levels, according to the Ministry of Finance

Published: 24-Sep-2009

Under the current laws, hybrids cars will be taxed at 42 percent, instead of the 60 percent imposed on gasoline-powered autos.

The fuel consumption level is still an issue, as the actual rate of fuel use has not been set to differentiate between regular cars and what constitutes a hybrid vehicle. Such standards are necessary to determine which cars can enjoy the tax preferences.

The Vietnam Registration Authority (VRA) on August 14 said that it is very difficult to define the petrol and electricity level used by hybrid cars as there is no fixed level for all models of hybrids.

MOF has decided that importers will be able to enjoy the preferential tax rate of 42 percent if importers can show manufacturers’ certificates on the fuel consumption level. Hybrid imports will be compared with vehicles that have the highest fuel economical levels with the same numbers of seats and cylinder capacity available on Vietnam’s market.

The fuel consumption level will be announced by automobile manufacturers that have legal status in Vietnam. Fuel consumption levels must be calculated for every 100 kilometers for both city and highway driving. Tax preferences will not be given if only one of the two fuel consumption level indexes is shown.

If Vietnamese enterprises import vehicles without manufacturers’ statements on the fuel consumption level, the 60 percent luxury tax will be imposed.

The Tax Policy Department under MOF has confirmed that that the department recently received a lot of questions on the tax policies for hybrids.

Some importers cleared their imports after paying 42 percent in tax, but they still hesitate to sell import vehicles because government agencies may decide that the luxury tax rate must be 60 percent. In this case, a change to the higher tax rate would force sellers to pay arrears, thus resulting in vehicles being sold at a loss.

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