Responded by units: The Ministry of Finance

Official letter: 6117/BTC-CST, dated: 2017-05-11

Responded contents:

Recommendations of the Vietnam Beverage Association do not raise any specific problems regarding special consumption tax (SCT). However, in the recent years, the Ministry of Finance has received the Association's proposal related to the price of SCT for imported wine and beer, specifically:

(1) To allow enterprises to deduct SCT payable on imported goods in accordance with Decree 108/2015 / ND-CP dated October 28, 2015 by the Government from 1 January  2016 until June 30, This solution is fully in line with the spirit of the Resolution No. 19/2016 / NQ-CP and will make a real and positive change for the business environment.

(2) In order to create a stable tax environment for investors in Vietnam and maintain a good relationship with business partners, it is recommended to revise the SCT policy including taxable price and tax rate for the alcoholic beverage industry.

Regarding above recommendations, on 19 October, the Ministry of Finance signed Official Letter No. 14834 / BTC-CST, replying to the A Vietnam Beverage Association with the following contents:

"1. Regarding the deduction of SCT amounts due to the change of tax calculation prices:

According to provisions of the Law on Special Consumption Tax and guiding documents, the deductible SCT shall apply only to two cases:

(i) Taxpayers who produce goods are subject to the SCT with materials that aresubject to SCT shall be entitled to deduct SCT already paid on raw materials imported or paid for raw materials purchased directly from the SCT domestically produced when specifying the amount of SCT payable.

(ii) SCT payers of goods are subject to the SCT shall be entitled to deduct the SCT already paid at the import stage when determining the amount of SCT to be sold domestically.

Accordingly, the  recommendation on allowing enterprises importing alcohol and beer  are deducted SCT payable of imported goods from January 1, 2016 to June 30, 2016 (according to the provisions of Decree No. 108/2015 / ND-CP datedOctober 28, 2015 by the Government) with the amount of SCT payable is not appropriate and has no basis. Therefore, it is recommended to comply with current regulations.

2.  Regarding the proposals for the special consumption tax policy applicable to imported alcoholic beverages

2.1. The price for calculating SCT on imported alcoholic beverages:

In order to ensure fairness in determining the SCT prices between SCT-liable goods and domestically produced goods, against transfer pricing of imported goods (declaring low at the import stage while selling in the domestic with much higher prices due to most of these items have high import tariffs and SCT) is in line with international integration, in the Decree 108/2015 / NĐ-CP (Effective from 1 January 2016 and Law No. 106/2016 / QH13 amending and supplementing a Number of Articles of the VAT Law, the Law on Special Consumption Tax and Law on Tax Administration (effective from July 1, 2016) has specified that goods aresubject to the SCT (including beer and wine) must be declared for the SCT when they are imported. They must also declare and pay the SCT and the SCT amount already paid at the stage of importation, which is deducted when determining the payable SCT amount.

The above-mentioned provisions are applied to all goods to be subject to the SCT, so it is recommended that the SCT calculation price for alcoholic beverage industryis inappropriate and unfair with goods are subject to other SCT. Therefore, it is recommended to comply with current regulations.

2.2. Regarding the special consumption tax rate for liquors and beers:

- For liquors:

Before January 1, 2010, SCT rates for alcohol are distinguished by the following wines: 40 degrees alcohol is up 65%; alcohol from 20 degrees to below 40 degreesis 30% and alcohol under 20 degrees, fruit wine, alcohol is 20%. Implementing commitments when joining the WTO, the National Assembly has approved the Law on Special Consumption Tax No. 27/2008 / QH12 that has stipulated: Alcohol from 20 degrees up 45% applied from January 1, 2010 to December 31,  2012 and 50% from January 1, 2013; alcohol under 20 degrees applied 25% from January 1,2010.

The reduction of SCT rates on alcohol has increased the purchasing power of these items, contributing to alcohol abuse (excessive use of alcohol has harmful effects on the health of drinkers and is a factor of many other problems.). Therefore, to limit the use of alcohol, at the 8th session of the National Assembly XIII, the National Assembly has adopted the Law No. 70 amending and supplementing a number of articles of the SCT, in which there are provisions increasing SCT rates for the wine item as follows:

+ For liquors of 20 degrees and more: The tax rate of 55% shall apply fromJanuary 1, 2016, 60% from January 1, 2017 and 65% from January 1, 2018;

+ For alcohol that is  under 20 degrees: The tax rate of 30% shall apply fromJanuary 1, 2016 and 35% from January 1, /2018.

- For beer:

Before January 1, 2010, the excise tax on beer shall be differentiated according to the type of beer: bottled beer and canned beer shall be subject to the tax rate of 75% of the price excluding the value of empty bottles and cans; the draft beer í applied 30% in 2006, 2007 and 40% since 2008. Implementation of WTO commitments (within 3 years after WTO accession will apply a tax rate of general (%) for types of beer (irrespective of the form of packaging), The Law on Special Consumption Tax (No. 27/2008 / QH12) shall apply a uniform tax rate of 45% 2010 to December 31, 2012 and 50% from January 1, 2013. The reduction of the tax rate for bottled beer, canned beer from 75% to 45% - 50% is to support local brewers (the proportion of beer is slightly higher) to restructure their production, toimprove the quality of products for competition, thereby contributing to creating jobs for local people.

Up to now, local brewing establishments have grown strong enough to compete in the market. On the other hand, lowering the tax rate on beer has increased the purchasing power (consumption) of beer, which easily leads to beer abuse. Thus, at the 8th session of the National Assembly XIII, the National Assembly has adopted the Law No. 70/2014 / QH13 amending and supplementing a number of articles of the SCT, which provides for the increase of the SCT rates for beer as follows: From July 1, 2015 increased from 50% to 55%; from January 1, 2017 increased to 60%; and from January 1, 2018 shall increase up to 65%.

The Ministry of Finance found that the excise tax rate on alcohol and beer stipulated in the Law No. 70/2014 / QH13 has contributed to limiting alcohol and beer abuse, protecting people's health and there are some of the countries in the region that are applying (the absolute level in USD per 100 liters of beer in Vietnam is ranked fourth in comparison with other countries in the region [1]). Therefore, the proposed amendment of SCT rate for alcohol and beer of the Association and enterprises is not appropriate. "

[1] The SCT rates for beer in absolute terms in USD per 100 liters with countries in the region are as follows: Malaysia: USD 226.22; Thailand: $ USD 183.42; Singapore: USD 182.80; Indonesia: USD 97.39; Vietnam: USD 57.54.