Car dealers in Vietnam that sell domestically produced cars have been granted an extension on Special Consumption Tax payments to November 20 of this year. The value of these delayed tax payments is an estimated VND 8,560 billion or US$336.3 million.
Special Consumption Tax is paid by the consumer at the point of purchase of the vehicle to the dealership who then holds on to those funds to pass on to the Tax Department when they fall due. By delaying these payments, this policy acts like a short term loan to these operations. This has been a popular means of supporting local enterprises over the past few years as the car market has struggled through a broader economic downturn.
Indeed, car sales so far this year have been tepid too. May did record an increase over May of last year of about 13 percent, however, for the first five months of the year, car sales were down 7 percent, according to the Vietnam Automotive Manufacturers Association. In this context, these delayed tax payments may be a risky way of doing business with no guarantee that these businesses will be able to recover those funds, should they choose to use them, between now and November.
See also: Vietnam’s Automotive Industry 2024: Foreign Investor Cheat Sheet