The Ministry of Finance has asked relevant ministries, branches and agencies for feedback on a proposal to cut by half registration fees for domestically manufactured and assembled cars in Việt Nam.

In a dispatch on June 25 (No. 6506/BTC-CST), the ministry requested key departments reply to the proposal before any decision on the continuation of the reduced registration fees is finalised. The proposed tax cut would be effective from August 1, 2024, until January 31, 2025. 

The Ministry of Finance has previously implemented three six-month periods of a 50 per cent reduction in registration fee rates for domestically produced and assembled cars from 2020 to 2023. These reductions have contributed to stimulating demand for cars in the market and supporting economic development.  

The proposed reduction this year aims to stimulate consumption, provide financial support to individuals and businesses and boost the domestic automobile manufacturing and assembly industry in a challenging economic environment.

At the end of 2022, Việt Nam had over 40 automobile manufacturing and assembling enterprises, with a total designed capacity of approximately 755,000 vehicles per year.

Foreign-invested enterprises account for about 35 per cent of the industry, while domestic enterprises account for about 65 per cent. These companies collectively meet around 70 per cent of the domestic demand for cars with fewer than nine seats. It is projected that the domestic market demand will reach approximately 800,000 to 900,000 vehicles per year by 2025.

However, in the first three months of 2024, there was a significant fall in sales, including both passenger cars and commercial vehicles. According to the Vietnam Automobile Manufacturers Association (VAMA), sales by VAMA businesses during this period reached 58,165 vehicles, a 17 per cent decline compared to the same period in 2023.

To address these challenges and promote economic growth, the Ministry of Finance believes that continuing to reduce registration fees for domestically produced and assembled cars is a necessary measure.

After that, the registration fee collection rate would revert to the provisions outlined in Decree No. 10/2022/NĐ-CP, which was issued by the Government on January 15, 2022.

The Ministry of Finance has assessed the impact on State budget revenue and estimated that the reduction in registration fees may lead to a decrease in State budget collection by an average of VNĐ867 billion per month. The reduction could affect the revenue balance of local budgets since registration fees go to local budgets under the State Budget Law.

Despite the potential decrease in registration fee revenues, the Ministry of Finance expects that the 50 per cent reduction will result in increased car sales. Consequently, revenue from registration fees, special consumption tax and value-added tax could rise. — VNS