Misubishi Motors proposed the Ministry of Finance for tax incentives

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Deputy Finance Minister Vu Thi Mai and Mr. Kozo Shiraiji

At the meeting, Deputy Minister Vu Thi Mai said that the view and goal of the Vietnam Government is to develop the automotive industry to become an important industry of the country, meeting the needs of the domestic market for trucks, passenger cars and some specialized cars; to become a supplier of components, spare parts and some high value components for the world's automotive industry, contributing to economic growth and promoting the development of other industries. Thus, the Government of Vietnam in general and the Ministry of Finance in particular have welcomed the second plant investment project of Mitsubishi Motors in Vietnam.

Sharing with the leaders of the Ministry of Finance on the project, Mr. Kozo Shiraji said that Vietnam was one of the important production areas, potential markets of the group in Southeast Asia with young and skilled labour resources and great advantages in the field of motorbike and car production.

At present, Mitsubishi Motors has a car plant in Ho Chi Minh City and is studying the investment project to build a second automotive plant in Vietnam. It is expected that the plant will have a total investment of US$ 250 million and start its operation from mid-2020 with a planned capacity of 50,000 units per year. This capacity is expected to increase by more than 30,000 units per year by 2023. Therefore, the plant will provide jobs for about 1,000 employees.

The Group is interested in placing the plant in industrial parks, developed economic areas or areas near to seaports with the ability of large domestic and international transport. And it believes that the project will contribute to the socio-economic development of Vietnam.

For the project to be effective, Vice Chairman of Mitsubishi Motors made some recommendations on tax policy to the Ministry of Finance. Regarding the new policy, Mr. Kozo proposed to consider tax exemption for imported components of automobile assembly and manufacture in order to increase competitiveness for domestically assembled and manufactured cars in the context that imported CBU cars from ASEAN receive preferential tax rate 0%; exemption from special consumption tax on the localized parts of the domestically manufactured cars; and reduction of 10% tax on domestically manufactured cars for at least 10 years.

"I understand that if such above incentives are contradictory to the WTO commitments, it will be difficult to decide. However, we would like the Government of Vietnam to consider other policies with similar supportive conditions “. Mr. Kozo Shiraji said.

With current policies, Mitsubishi Motors expects that the existing plant shall be exempt from import duty on import components from 2018 until the second plant goes into operation.

According to him, investment projects in automotive manufacture are able to place a foothold in the market and are almost unaffected by the changes of other factors such as price, labour, so they can maintain an existence up to 20 years. Therefore, Mitsubishi Motors representative hopes that the Government and the Ministry of Finance of Vietnam will support the Group to carry out this project smoothly.

Deputy Prime Minister Vu Thi Mai responded that in respect of import tax exemption, the Government issued Decree No. 125/2017 / ND-CP promulgating the Preferential Import Tariff, which stipulates import tax exemption for this commodity from 1st January 2018 to 2022. Of course, in order to receive preferential treatment, enterprises must satisfy some conditions of production scale and minimum output. She hoped that the Group would meet these conditions to receive preferences as desired.

Regarding the special consumption tax, the Deputy Minister stated that any tax polices should be in line with international commitments and WTO commitments. Currently, the Ministry of Finance is studying to amend and supplement the Law on Special Consumption Tax, the draft offers 2 options which are tax exemption for localized parts and maintaining the current regulation. The Ministry of Finance as well as the relevant agencies and the Government must also consider the commitments, especially WTO commitments to make appropriate policies without breaching these commitments.

Deputy Minister Vu Thi Mai also suggested that the Group provide some international experiences on other supportive policies for the Ministry of Finance to study and assist in the cases where preferential tax policies cannot be met.

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"The Government and the Ministry of Finance are always ready to support enterprises to invest, develop production and business in Vietnam and at the same time wish to provide utmost support to encourage localization of domestic production.” The Deputy Minister stressed.