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Conditions for application of preferential import tax
The Agreement on Trade in Goods under the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea (from now onreferred to as the AKFTA Agreement for short) was signed between ASEAN countries and Korea on August 24, 2006, in the Republic of the Philippines and approved by the Government of the Socialist Republic of Vietnam in Official Dispatch No. 1743/TTg-QHQT October 30, 2006, and takes effect from June 1, 2007.
The Government has issued legal documents to fulfil Vietnam’s commitment to import tax in the AKFTA Agreement. For 2018-2022, the Government issued Decree No. 157/2017/ND-CP dated December 27, 2017, promulgating Vietnam’s special preferential import tariff to implement the Agreement on Goods Trade ASEAN-Korea for the 2018-2022 period, effective from January 1, 2018. The promulgation of Decree No. 157/2017/ND-CP has followed the roadmap of Vietnam’s commitment tocutting special preferential import tax following the provisions of the AKFTA Agreement and the List of imported and exported goods of Vietnam for 5 years and contributed to supporting customs statistics on import and export, ensuring uniformity and consistency, creating a transparent business environment on tax rates, creating favourable conditions for businesses and Customs authorities in implementation.
On March 8, 2022, the Government issued Resolution No. 29/NQ-CP approving the List of ASEAN Harmonized Tariffs version 2022 (the AHTN 2022 List). To harmonize with the List of export and import goods of Vietnam to deploy the List of AHTN 2022 and to continue to implement the commitments on import and export tax in the AKFTA Agreement, the Ministry of Finance has developed and submitted to the Government for approval. Accordingly, the Government signed and promulgated Decree No. 125/2022/ND-CP dated December 30, 2022, promulgated Vietnam’s Special Preferential Import Tariff to implement the AKFTA Agreement for the period of 2022-2027.
Ensuring consistency in implementation and maintaining the stability of legal regulations, the conditions and regulations in Decree 119/2022/ND-CP dated December 30, 2022, basically inherit the provisions of Decree No. before. Accordingly, it is similar to the provisions of the Government’s Decrees on Vietnam’s tariff schedule for the implementation of current FTAs, and this Decree stipulates the conditions for goods imported into Vietnam to be applied special preferential import tax under AKFTA includes: under the special preferential import tariff; be imported into Vietnam from countries that are members of the ASEAN – Korea Agreement on Goods trade; meet the regulations on origin of goods (including regulations on direct transport), have a Certificate of Origin (C/O) form AK or have a document certifying the origin of goods, according to provisions of the ASEAN-Korea Agreement on Goods trade and current legal regulations.
To ensure the interests of Vietnamese goods produced in the non-tariff zone, Decree 119/2022/ND-CP continues to reserve the provisions of Decree No. 157/2017/ND-CP for this subject. Accordingly, it is allowed to apply special preferential import tax rates to goods imported from non-tariff zones into the domestic market if the same conditions are satisfied as for goods imported from the member of the ASEAN-Korea Trade in Goods Agreement into Vietnam.
Continue to implement tariff commitments for the period 2022 – 2027
Most of the product codes in the Tariff table are unchanged compared to the Tariff table promulgated together with the current Decree No. 157/2017/ND-CP. Thus, the promulgation of the Decree has no impact on the implementation of commitments under the Agreement and, at the same time, ensures the stability of the special preferential Tariff, as well as does not affect the state budget revenue and policies on the management of domestic production activities as well as commodity management policies.
In general, the AKFTA Tariff Schedule under AHTN 2022 for 2022-2027 includes 11,447 tax lines (including 264 CKD tax lines), of which 11,386 tariff lines are at an 8-digit level, and 61 tax lines are detailed at a 10-digit level. Imported goods that are eligible for special preferential import tax rates under the AKFTA Agreement must fully satisfy the conditions to be included in the Special Preferential Import Tariff; be imported into Vietnam from AKFTA member countries, including goods from the non-tariff zone imported into the domestic market; meet the regulations on origin of goods or have proof of origin according to the provisions of the AKFTA Agreement.
Vietnam’s commitment to cut taxes under the AKFTA Agreement was completed in 2021, so the tariffs in the issued Tariff will not change from 2022 onwards. Furthermore, most of the product codes in the Tariff are unchanged from the Tariff according to the current Decree No. 157/2017/ND-CP. Thus, the promulgation of the Decree has no impact on the implementation of commitments under the AKFTA Agreement and, at the same time, ensures the stability of the special preferential Tariff.
The provisions of Decree No. 119/2022/ND-CP promulgating the Preferential Export Tariff and the Special Preferential Import Tariff of Vietnam for the implementation of the AKFTA Agreement in the 2022-2027 period are inheriting the provisions of Decree No. 157/2017/ND-CP promulgating Vietnam’s special preferential import tariff to implement the ASEAN – Korea Trade in Goods Agreement for the 2018-2022 period. During the implementation of the Decree, the Ministry of Finance did not record cases where enterprises and customs offices encountered problems with the provisions of the Decree.
To facilitate the search and enforcement, Decree No. 119/2022/ND-CP on Vietnam’s Special Preferential Import Tariffs for the implementation of the ASEAN-Korea Trade in Goods Agreement for 2022– 2027 has been published on the National Database of Legal Documents, the Government Portal, and the Ministry of Finance Portal.
The promulgation of the Decree on Vietnam’s special preferential import tariffs for implementing the AKFTA Agreement is the completion of the institutional building to continue to implement Vietnam’s tariff commitments and implement objectives and guiding viewpoints on the work of international economic integration. This also shows Vietnam’s compliance with international commitments, being a reliable partner. In addition, the promulgation of the AKFTA Tariff Decree for 2022 -2027 contributes to further facilitating and promoting trade exchanges between ASEAN (including Vietnam) and South Korea, which is expected to continue to bring about positive effects onVietnam’s economic development.