According to the new tax amendment that will comes into effect in this July, the luxury tax for automobiles with a small engine capacity less than 1,500 cm3 and having less than 10 seats will be cut from 45% to 40% and it is expected to drop to 35 % after January 1, 2018.
Through this change, the prices of cars with engines smaller than 1.5 liters will decrease by $500 – $1,000 each in the near future and the changes in the tax rates are expected to causes an increase in sales of small cars in Vietnam.
There are many famous small cars brands in Vietnam market, including - Toyota Vios, Toyota Yaris, Honda City, Ford Fiesta Ecoboot, Hyundai i10 and i20 models, Kia Morning and Chevrolet Spark. Each of these cars has an engine capacity smaller than 1.5 liters and the cost of these cars averages 300 million VND ($14,000 USD) for lower feature models up to700 million VND ($32,000) for higher feature models.
In contrast, the luxury tax rates for cars with engines larger than 3 liters will significantly increase from the current rate of 60% to tax rates of 90% - 150% in he future.
With the growing demand on these small cars in the future, many automobile businesses incline to increase in the amount of small cars imported into Vietnam market. Euro Auto, which imports and distributes BMW cars, for instance, has recently launched a new 1.5-liter seven-seat car in Vietnam.
The market share of small cars is also projected to exceed 50% automobiles in Vietnam by the end of 2016, with some economists saying that the 50% threshold will be reach by July.
Following are the rates for automobiles that will come into effect in July.
Cylinder Capacity |
Current Tax Rate |
Tax Rate after July 1st 2016 |
Tax Rate after January 1st 2018 |
Lower than 1,500 cc |
45% |
40% |
35% |
1,500 cc – 2,000 cc |
45% |
45% |
40% |
2,000 cc – 2,500 cc |
50% |
50% |
- |
2,500 cc – 3,000 cc |
50% |
55% |
60% |
3,000 cc - 4, 000 cc |
60% |
90% |
- |
4,000 cc – 5, 000 cc |
60% |
110% |
- |
5,000 cc – 6,000 cc |
60% |
130% |
- |
Greater than 6,000 cc |
60% |
150% |
- |