Port of Singapore, one of the most dynamic ports in the world. Illustration: ST

Conditions for application of preferential import tax

The ASEAN Regional Comprehensive Economic Partnership (RCEP) was signed by the member countries on November 15, 2020. On July 6, 2021, the Government issued Resolution No. 18/NQ-CP approving the RCEP Agreement. On December 14, 2021, the Ministry of Foreign Affairs issued Document No. 37/2021/TB-LPQT on the entry into force of the international treaty, which announced the RCEP Agreement taking effect for Vietnam from January 1, 2022.

On March 8, 2022, the Government issued Resolution No. 29/NQ-CP approving the List of AHTN 2022 (replacing the List of AHTN 2017).

Implementing the Resolution, the Ministry of Finance issued Circular No. 31/TT-BTC dated June 8, 2022 on the List of Vietnam's import and export goods, effective from December 1, 2022. To fulfill the import tax commitments in the RCEP Agreement and comply with international commitments, Vietnam needs to issue a Decree on special preferential import tariffs for the 2022-2027 period, consistent with the List of goods export and import of Vietnam according to AHTN 2022.

Basically, the provisions of the RCEP Tariff Decree are regulated similarly to other FTA Tariff Decrees - applied stably and without any problems during the recent implementation, with the addition of Articles on the application of special preferential import tax rates RCEP to specifically guide the case of goods with different applicable RCEP tax rates between RCEP member countries and supplement the retroactive provisions in Article 1. Article on the effect of the Decree to ensure the implementation of Vietnam's commitments from January 1, 2022.

In order to ensure consistency in implementation as well as maintain the stability of legal regulations, the conditions and regulations in Decree 129/2022/ND-CP dated December 30, 2022 are similar to those of Decree No. Other FTA Tariffs - applied stably and without any problems during the implementation process, supplemented with a number of specific provisions in line with the RCEP Agreement.

Accordingly, similar to the provisions of the Government's Decrees on Vietnam's tariff schedule for the implementation of current FTAs, this Decree stipulates the conditions for goods imported into Vietnam to be applied the special preferential import tax under the RCEP Agreement includes: under the Special Preferential Import Tariff promulgated together with the RCEP Decree; are imported from member countries of the RCEP Agreement; meet the requirements of the origin of goods in the RCEP Agreement (including regulations on direct transport), have documents certifying the origin of goods in accordance with the provisions of the RCEP Agreement and the current regulations of law.

In order to ensure the interests of Vietnamese goods produced in non-tariff zones, Decree 129/2022/ND-CP has provisions for this subject. Accordingly, it is permissible to apply special preferential import tax rates to goods imported from non-tariff zones into the domestic market in case the same conditions are satisfied as for goods imported from other member countries of the RCEP Agreement into Vietnam.

The effect of the Decree on goods of member countries

The RCEP tariff includes 11,414 tariff lines at an 8-digit level (including 264 CKD tariff lines), of which a number of tariff lines are detailed at a 10-digit level (83 lines of 10 numbers in tariff lines for China, Japan, Korea), 85 lines of 10 numbers in tables for Australia, New Zealand, ASEAN countries.

The Tariffs issued together with the RCEP Decree include: Appendix A: Special preferential import tariffs for ASEAN countries including Brunei, Cambodia, Indonesia, Laos, Malaysia, Singapore, Thailand and the non-tariff zone of Vietnam (including only ASEAN countries for which the RCEP Agreement has come into force); Appendix B: Special Preferential Import Tariffs for Australia; Appendix C: Special Preferential Import Tariffs for China; Appendix D: Special Preferential Import Tariffs for Japan; Appendix E: Special Preferential Import Tariffs for Korea; Appendix F: Special Preferential Import Tariffs for New Zealand.

Consistently implementing the effective time similar to the List of Vietnam's exports and imports, the Decree promulgates the preferential import and export tariff schedule, Decrees promulgate the preferential export and import tariff schedule, Decrees promulgate the RCEP Tariff which takes effect from December 30, 2022.

For customs declarations of imported goods registered from January 1, 2022 (for RCEP member countries implementing the Agreement at the same time as Vietnam), registration from February 1, 2020. 2022 for Korea, registration from March 18, 2022 for Malaysia, until before the effective date of this Decree, if all conditions are met to enjoy the RCEP tax rate as prescribed in the Decree and if the tax has been paid at a higher tax rate, the customs office will handle the overpaid tax according to the provisions of the law on tax administration.

Particularly for the case of Indonesia, for goods imported from Indonesia and registered for import customs declaration from January 2, 2023, if all conditions are met, they will be entitled to a special preferential import tax in the Decree.

Basically, the provisions of the RCEP Tariff Decree are similar to other FTA Tariff Decrees - applied stably and without any problems during the recent implementation, with some additions of rules. According to Vietnam's import tax commitments in the RCEP Agreement, the rate of tariff elimination for ASEAN is 90.3%, Australia and New Zealand 89.6%, Japan and Korea 86.7 % and China is 85.5%.

To facilitate the search and enforcement, Decree No. 129/2022/ND-CP on Vietnam's Special Preferential Import Tariff for the implementation of the RCEP Regional Comprehensive Economic Agreement for the period of 2022 – 2027 has been posted on the National Database of Legal Documents as well as the Government Portal and the Ministry of Finance's Web Portal. In general, the implementation of the current market opening commitments along with the process of tariff liberalization in FTA frameworks for many years, Vietnam is not under much pressure on the level of goods market opening when implementing the RCEP Agreement, the implementation of commitments under the RCEP framework basically does not create pressure on Vietnam's import tax reduction.