The Government promulgated Decree No. 108/2015/ND-CP (“Decree No. 108”) to implement the Law on Special Consumption Tax (“SCT”) which takes effect from 1 January 2016 and replaces Decree No. 26/2009/ND-CP as amended by Decree No. 113/2011/ND-CP (“Decree No. 26”). Decree No. 108 effectively increases the taxable base for imported goods and tightens the margin in selling prices between manufacturers, importers and distributors.
Increase of the taxable base of imported goods
Prior to the effectiveness of Decree No. 108, the taxable price of imported goods is the dutiable price plus import duty.
From 1 January 2016, however, imported goods, except for gasoline, will be subject to SCT at two stages. When goods are imported, they will be subject to SCT at the import stage which is assessed based on dutiable price plus import duty (“import SCT”). When importers sell the imported goods, SCT will be assessed again based on the selling price before value added tax, environmental tax (if any) and SCT (“distribution SCT”). Importers can deduct import SCT already paid against distribution SCT toarrive at the SCT amount payable upon selling imported goods. Deduction of import SCT will be further detailed in a coming circular by the Ministry of Finance.
Effectively, imported goods, except for gasoline, will be ultimatelysubject to SCT based on the importers’ selling price. This reflects the Government’s aim to unify the taxable price for both imported goods and locally produced goods.
Tightening the margin in selling prices betweenmanufacturers and distributors
Generally, the selling price of manufacturers/importers will be the taxable price at the distribution stage. According to Decree No. 108, however, the taxable price will be subject to stricter margins than those in the current regulations, particularly:
- For importers (except for automobiles under 24 seats and gasoline), manufacturers (except for automobiles under 24 seats) selling imported goods via their distributors, the taxable price is the selling price which must not be 7% lower than the average selling price of the distributors. This current margin is 10%.
- For imported automobiles under 24 seats, the taxable price is theimporters’ selling price which must not be 105% lower than theimport cost. The import cost includes the dutiable price, importduty and import SCT.
- For automobiles under 24 seats manufactured or assembled locally, the taxable price is the manufacturers’ selling price which must not be 7% lower than the average selling price of the distributors. This current margin is 10%. The average selling price of distributors excludes prices for additional equipment or options as per customers’ requests.
If the selling price of manufacturers/importers is lower than the stipulated margins, the taxable price will be determined by the tax authorities.