Vietnam's ministry of finance (MoF) has declared a new preferential tariff, under which a single tariff on separated car parts will be applied, while the tariff on complete knock-down (CKD) car parts imports will no longer be valid.

The single tariff on individual car parts imports will be applied from 1 January, 2007.

Nguyen Van Phung, deputy director of the Tax Policy Department under MoF, told Vietnamnet that the removal of the preferential tax on imported car parts under the CKD form was necessary, especially as the government had decided to remove preferences calculated on the locally made content of products. (Up till now, enterprises that were able to make products with the highest ratio of locally produced material enjoyed tax incentives).

However, Phung stressed that the single tariff on separated car parts imports would not come into effect immediately after its promulgation. Vietnamese enterprises will have three months to adjust to the new rules.

Until 31 December, they will be able to pay either the tax in accordance with the current tariff (imposed on car parts imports under the CKD form), or the newly promulgated tariff (on individual car parts).

Phung said that automobile manufacturers must submit their decisions in writing to their local customs agencies.

He said that a preferential tariff would be applied from 15 September and will involve tax cuts on 117 categories of products in accordance with international commitments. Most of the products will be assessed tax rates of between 0-5%. Only 16 categories of products will see higher tariffs.

High tariffs hit tax revenue

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