Effective implementation of tax incentives as driving force for growth in trade turnover between Vietnam and Cuba

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Following commitment to cut tariffs with 618 tariff lines

Cuba is a potential market that has diversified import and export needs and does not require strict technical standards. However, the two-way trade turnover between the countries sees a low rate. Therefore, there is still a lot of space for development.

The Vietnam-Cuba Trade Agreement officially took effect on April 1, 2020. The agreement is a key legal framework that further promotes economic, trade and investment cooperation between Vietnam and Cuba.

The agreement's implementation in 2020 has shown positive effects on bilateral goods trade. However, the proportion of goods eligible for a special preferential tax rate under the agreement is still low. The products are mainly imported into Vietnam from Cuba as pharmaceutical products and cigarette raw materials.

On December 30, 2022, the Government issued Decree No. 114/2022/ND-CP on Vietnam's Special Preferential Import Tariff to implement the Vietnam - Cuba Trade Agreement for 2022 - 2027 to perform in line with the Vietnam Export and Import Classification Nomenclature.

This Decree replaces Decree No. 39/2020/ND-CP dated April 3, 2020, on Vietnam's Special Preferential Import Tariff for implementing the Vietnam - Cuba Trade Agreement for 2020 - 2023.

Vietnam's Special Preferential Import Tariff for the implementation of the Vietnam - Cuba Trade Agreement for 2022-2027 includes codes, descriptions, and special preferential import tax rates under periods for each code of goods. The tariff is partial schedule, ensuring the implementation of Vietnam's commitments on cutting tariffs for items. The tariff for 2022-2027 includes 618 tariff lines at 8-digit level.

The tax rate is built based on following the Vietnam's tariff reduction roadmap in the agreement. However, the agreement's roadmap will come to an end in 2023. Accordingly, the average special preferential import tax rate in 2022 is 2.4%, from 2023 to 2027 at 2.1%.

The special preferential import tax rate for items subject to tariff quotas of headings as 17.01 (sugar), and 24.01 (tobacco) is the tax rate within the quota for goods imported from Cuba. The list and annual import tariff quotas as prescribed by the Ministry of Industry and Trade (within the quota for all WTO members) and the import tax rates outside the quotas will be applied in line with the Government's regulations at the import time.

Bringing great benefits to the business community

To effectively take advantage of tax incentives, Decree No.144 also provides conditions for goods imported into Vietnam to be eligible for special preferential import tax rates under the Vietnam - Cuba Trade Agreement.

The goods must be listed in the Special Preferential Import Tariff, be imported into Vietnam from the Republic of Cuba, meet the regulations on the origin of goods and be issued C/O following the provisions of the Vietnam - Cuba Trade Agreement.

Article 5 of this Decree maintains the provisions of Decree No. 39/2020/ND-CP for Vietnamese goods produced in non-tariff zones. Accordingly, the special preferential import tax rate is applied to goods imported from non-tariff zones into the domestic market if they are eligible for import, the same as goods imported from Cuba into Vietnam.

The promulgation of the Decree contributes to ensuring the synchronization of the legal system, creating a stable and transparent legal framework, facilitating import and export activities, bringing great benefits to the business communities of the two sides, promoting two-way trade turnover and the Vietnam - Cuba economic and trade relations to a new height.

The Ministry of Finance has posted the content of the Decree on the National Database of Legal Documents and the portals of the Government and the Ministry of Finance.

Decree No. 114/2022/ND-CP includes seven Articles and one attached Tariff. The promulgation of the Decree on Vietnam's special preferential import tariff to implement the Vietnam-Cuba Trade Agreement for 2022-2027 completes law internalization to continue implementing Vietnam's commitments in the agreement. The provisions in the articles inherit Decree No. 39/2020/ND-CP to ensure the stability of the legal regulations.