How to Calculate Import Tax and Duty in Vietnam
Imports to Vietnam are growing steadily every year. In this article, we will provide you some insights on how to calculate import tax and duty in Vietnam. Table of contents 7 key facts about import to Vietnam Before diving into import taxes in Vietnam, here’s a quick overview of some essential points you should know […]
7 key facts about import to Vietnam
Before diving into import taxes in Vietnam, here’s a quick overview of some essential points you should know about importing to Vietnam:
#1 In May 2017, imports to Vietnam reached an all-time high of nearly 18,5 billion US dollars in one month, according to Trading Economics.
#2 In order to import to Vietnam, you need to have a company registered in Vietnam. Another option would be to use an importer of record service.
#3 Foreign investors are allowed to establish up to 100% foreign-owned import companies.
#4 There is no set minimum capital requirement for trading companies in Vietnam. However, you need to make sure it complies with revenues and expenses.
#5 You don’t need to apply for a separate import license, the Investment License which you will obtain during incorporation will already allow import/export. However, you will need a trading license if you want to engage in wholesale/retail sale in Vietnam.
#6 Certain products, e.g cosmetics, food supplements, dairy products, require additional registration.
#7 Some products, for example, second-hand items and newspapers, are not allowed to be imported to Vietnam.
Import tax in Vietnam
Most goods imported into Vietnam are subject to duty. Tax rates vary, depending on the type of the product you want to import. Take into account that consumer goods, especially luxury goods such as cars, alcohol, and cigarettes face higher import duties than raw materials, equipment, and machinery that are used for manufacturing.
Import taxes are to be paid before customs clearance as your goods won’t be released otherwise. Late payment will risk the success of on-time customs clearance and furthermore, it may also result in higher costs.
Value-added tax (VAT)
In addition to import duty, goods brought to Vietnam are also subject to value-added tax (VAT). VAT rates are either 0%, 5% or 10%. Certain products, e.g goods that are necessary but cannot be produced in Vietnam can even enjoy VAT exemption.
Currently, the value-added tax is under discussion in Vietnam to be raised to 12% at max. However, it has not been confirmed yet.
|VAT tax rate||Examples of goods this rate applies to|
|0%||Machinery that cannot be produced in Vietnam, teaching and vocational training as provided for by law, humanitarian aid, etc.|
|5%||Medical equipment, sugar, special-purpose machinery and equipment for agricultural production, clean water, fresh and live food, etc.|
|10%||Standard VAT rate, imposed on goods not eligible for 0% or subject to 5% VAT|
Special consumption tax (SCT)
Some consumer goods are classified as luxury items and an additional tax will be imposed on those products. The special consumption tax or also known as the luxury tax applies to certain imported goods, e.g alcoholic beverages, tobacco products, and petroleum products.
SCT rates start at 7% and can be more than 100% for some products such as cars with a higher engine capacity. For example, E10 gasoline is taxed at 7%, cigarettes face 70% SCT until December 31, 2018. Starting from January 2019, however, the tax will rise to 75%, according to the Law No. 70/2014/QH13.
Environmental protection tax (EPT)
EPT is a tax imposed on products that have a harmful effect on the environment. According to the Law No. 57/2010/QH12, goods such as plastic bags, gasoline, coal, etc. are subject to the environmental protection tax.
Tax rates are calculated based on the amount of money paid on one unit. For example, plastic bags are subject to 30,000-50,000 VND (~1,32-2,2 US dollars) of EPT per kilogram.
Also, note that the tax calculation system is quite complicated and regulations change periodically. Therefore, it is best to consult with local tax advisors for further information. Contact us via email@example.com to discuss particular cases.
Duty exemption in Vietnam
ASEAN Free Trade Area
As Vietnam is a member of ASEAN Free Trade Area (AFTA), intraregional import taxes for certain products vary between 0-5%. This concerns products such as:
- Meat and fish
- Milk and cream
- Agricultural machinery
Other import tax exemptions
In addition, Article 16 of the Law No. 107/2016/QH13 on export and import duty regulates tax exemptions for many other products as well, including:
- Materials, supplies, and components used for manufacturing export products
- Goods temporarily imported for re-exports
- Raw materials and components which cannot be domestically produced
- Machinery and equipment that are fixed assets of an entity that is eligible for incentives
Circular No. 34/2013/TT-BCT of the Ministry of Industry and Trade lists goods that you cannot import to Vietnam.
For example, you cannot import the following products to Vietnam:
- Petroleum oils and oils obtained from bituminous minerals
- Newspapers, journals, and periodicals
- Discs, tapes, and other recorded media
- Second-hand items (including electronics and automotive)
An example of how to calculate import tax in Vietnam
In order to generally demonstrate the import tax calculation, we have provided some simple formulas and illustrative examples. Let’s say you want to import hair lacquers to Vietnam with a total value of 10,000 US dollars. How to calculate the total tax?
Calculation formula for the Import Tax:
[Total value of the imported products + SCT (if any) + EPT (if any)] x tax rate = Import Tax The import tax rate for hair lacquers is 15%, thus:
[$10,000 + 0 (no SCT nor EPT for hair lacquer)] x 15%=$1,500
For the Value-Added Tax:
(Total value of the imported products + import tax) x VAT tax rate = VAT
Hair lacquers fall under the standard VAT rate, thus:
($10,000 + $1,500) x 10%=$1,150
For the Special Consumption Tax:
Value of special consumption x SCT rate = SCT
As hair lacquers are not excised products, let’s take another example. For example, you want to import motorcycles with a total value of 100,000 US dollars and the SCT for motorcycles is 20%. Thus:
$100,000 x 20%= $20,000
For the Environmental Protection Tax:
The quantity of taxable goods x EPT rate = EPT
As neither hair lacquers nor motorcycles are subject to the environmental protection tax, let’s use another example. When the EPT for taxable plastic bags is 40,000 VND per kg and you wish to import 100 kg of plastic bags, then:
100 kg x 40,000 VND/kg= 4,000,000 VND (~$176)
Calculation formula for the total tax:
Total tax = Import Tax + VAT + SCT (if any) + EPT (if any)
The total tax for hair lacquers with a total value of $10,000 would then be:
$1,500 + $1,150 + 0 SCT + 0 EPT=$2,650