To exercise the rights of import and distribution cars, FDI Enterprises will have to meet the licensing conditions to officially operate.
According to Vietnam’s WTO Commitments, the right to import, wholesale and retail distribution of automobiles and repair automobiles has been committed by Vietnam, specifically wholesale distribution, retail distribution and repair services for automobiles (wholesale service of motor vehicles (CPC 611, 6111, 61111, 622), retail service of motor vehicles (CPC 631, 632, 611, 6111, 61112, 6121), motor vehicle maintenance and repair services (CPC 611, 6112, 61120) currently have no restrictions for foreign investors.
However, because these are conditional business sectors, after carrying out procedures for investment registration and company establishment, the investors must meet the licensing conditions to officially operate:
- To import, investors shall apply for a License for automobile import.
- To repair (maintenance and warranty), investors shall apply for a Certificate of automobile warranty and maintenance.
- To retail automobiles, investors shall apply for the Trading license.
Conditions for car retail distribution
- In case a foreign investor is from a country or territory that is a party to an international treaty to which Vietnam is a contracting party, and there is a commitment to open the market for goods trading and activities related to goods trading.
- Meeting the conditions on market access in international treaties to which Vietnam is a contracting party;
- Have a financial plan to carry out the activities of applying for a Trading License;
- Have no overdue tax debt if established in Vietnam for 01 year or more.
- In case the foreign investor is not from a country or territory participating in an international treaty to which Vietnam is a contracting party, in addition to the above conditions, the investor must also meet the following additional criteria:
- Consistent with the provisions of specialized laws;
- Consistent with the level of competition of domestic enterprises in the same field of operation;
- Ability to create jobs for domestic employees;
- Ability and level of contribution to the state budget.
Conditions for automobile import
- Only enterprises are considered for issuance of a License for automobile import.
- Enterprises are entitled to import automobiles after meeting the conditions and obtaining a License for automobile import according to the provisions of Decree 116/2017/ND-CP.
- Enterprises importing automobiles must comply with regulations on automobile import management in Decree No. 116/2017/ND-CP and relevant legal documents.
- Enterprises established in accordance with the law shall be granted a License for automobile import when it meets the following conditions:
- Having an automobile warranty and maintenance establishment owned by the enterprise, or signed by the enterprise, or under the enterprise’s authorized dealer network that meets the provisions of this Decree:
- Having an automobile warranty and maintenance facility owned by the enterprise, or leased by the enterprise, or under the enterprise’s authorized dealers that meet the provisions of this Decree.
- Having a written certification or documents proving that the enterprise is authorized to act on behalf of the foreign automobile manufacturer and assembler to carry out the recall order for imported automobiles in Vietnam.
Notes: For importing special-use automobiles, special-use passenger automobiles and special-use cargo automobiles as defined in Vietnam Standard TCVN 6211: Road vehicles – Types – Terms and definitions; Vietnam Standard TCVN 7271: Road vehicles – Automobiles – Classification by purpose of use will not be required to apply for the above-mentioned License for automobile import.
Conditions for the business of automobile warranty and maintenance establishments
An enterprise established in accordance with the law shall be granted a Certificate of automobile warranty and maintenance as meeting the following conditions:
- The workshop is built on the land under the legitimate use right of the enterprise.
- The premises and the workshop are guaranteed to serve the implementation of warranty and maintenance.
- Having areas to perform the work of receiving, handing over, maintaining, repairing, inspecting the workshop, with an operator, a warehouse of parts and accessories, a car wash area to meet the job requirements.
- Having a full range of tools and equipment for car warranty and maintenance work. Measuring equipment for automobile warranty and maintenance work must comply with the provisions of the law on measurement.
- Having equipment to diagnose the engine and technical condition of the vehicle (for cars equipped with an electronic control unit) suitable for the vehicles that are warranted and maintained by the facility. Diagnostic device software must comply with intellectual property regulations.
- Having a team and a quality management system to ensure quality for automobile warranty and maintenance.
- The above-mentioned conditions of an automobile warranty and maintenance facility must satisfy the requirements for premises, equipment, tools, human resources, and quality management system for the maintenance and repair establishment according to the respective types of automobiles in the Vietnam Standard TCVN 11794 Standards of establishments for maintenance and repair of cars and similar vehicles
- Having a commitment to provide technical support and provide components and accessories for automobile warranty and maintenance:
- Domestic automobile manufacturing and assembling enterprises (in the case of providing warranty and maintenance services to domestic automobile manufacturers and assemblers); or
- Foreign automobile manufacturers and assemblers (in the case of providing warranty and maintenance services for enterprises importing automobiles)
Changes in the tax rate in 2021
According to the ASEAN Trade in Goods Agreement (ATIGA), which took effect on January 01, 2018, for automobiles with a localization rate in ASEAN of 40% or more, the import tax rate will be 0% with the manufacturer meets the following criteria:
- Having a facility for car warranty and maintenance in accordance with standards.
- Having a recall authorization letter from a foreign manufacturer.
- There is a certificate of quality from the manufacturer.
- Check the quality of 1 vehicle in every imported shipment.
- Minimum warranty of 2 years or 50,000 km for used cars.
- Having sufficient import documents as prescribed from 01/01/2018.
On June 8, 2020, after the Free Trade Agreement between Vietnam and the European Union (EVFTA) is approved by the National Assembly, Vietnam will gradually eliminate import tax on vehicles from Europe. According to the tax reduction roadmap of the EVFTA Agreement, from August 1, 2020, Vietnam will cut taxes for 10 years, averaging about 7% each year and proceed to cut taxes to 0% after 10 years. That means that the tax rate applied to cars imported from Europe (models with 9 seats or less) into Vietnam is 0% within 07 – 10 years. The tax rate will be reduced on a yearly or cyclical basis.
- Vehicles with a large displacement of over 2,500 cc will reduce to 0% after 9 years.
- Vehicles with a displacement of less than 2,500 cc will be reduced to 0% after 10 years.
Decree No. 111/2020/ND-CP has been issued and taken effect from December 30, 2022, on import and export tax exemption for goods under the EVFTA in the period of 2020 – 2022. Details can be found in the Appendix attached to Decree 111/2020/ND-CP.
Note: The content of the EVFTA Agreement also clearly states that Vietnam’s tax commitment does not apply to used automobiles, cars, cars with 10 seats or more and cargo vehicles.