Vietnam has officially implemented value-added tax (VAT) on low-value imports sent via express delivery, marking a significant regulatory shift for the country's treatment of imported goods. Effective from February 18, 2025, this regulation aims to create more equitable competition between domestic and foreign products.
The General Department of Customs has introduced this new VAT requirement primarily targeting low-value goods, which previously enjoyed tax exemptions. The decision to enforce VAT aims to bolster revenue collection for the government, addressing the increasing tide of affordable imported goods entering the market through e-commerce channels.
According to experts, the application of VAT is projected to yield substantial benefits for the state budget. It has been estimated by the customs department representative, Đặng Sơn Tùng, Deputy Director of the Department of Export and Import Taxes, who stated, "This new tax regulation will help create a more equitable business environment for domestically produced goods." This move is significant especially when considering how low-value imports often undermine local businesses struggling to compete against cheaper foreign options.
The VAT rate is set at 10% for most consumer goods, which means products frequently purchased online, under 1 million VND, will now incur additional costs. This change reflects practices adopted by various countries, such as Singapore and Australia, which previously implemented similar measures to protect their local industries.
Before this change, consumers enjoyed easy access to imported goods at lower prices due to exempt taxes, leading to fluctuated shopping habits, particularly among those who heavily rely on global online marketplaces. The VAT change is viewed as necessary for leveling the playing field by removing previous advantages held by foreign products.
Local businesses have welcomed this decision, expressing optimism over its influence on the market. “Lately, companies like ours have faced undue pressure from cheap imports benefiting from tax exemptions. The new tax structure will certainly help mitigate this,” expressed Thân Đức Việt, CEO of May 10 Company, highlighting how the VAT could favor local production amid the onslaught of affordable international goods.
On the industry front, representatives from apparel sectors also recognize the potential advantages brought forth by this implementation. An official from Erosska, noted, "The end of tax exemption for goods valued under 1 million VND is necessary for fair competition," indicating broad support within the industry for the regulatory updates.
While the new tax has been perceived favorably by business owners, there are concerns among consumers about rising prices for international products. With increased tax, local businesses may adjust their pricing strategies, potentially leading to higher costs for various imported goods. Although it may pose challenges for consumers, many experts argue this reform will encourage transparency and compliance among foreign suppliers, ensuring quality and standardization.
Briefly, this VAT legislation is anticipated to reshape Vietnam's retail and trade landscapes by establishing foundations for healthier competition and reducing tax evasion among foreign sellers. Moving forward, stakeholders will closely observe how these changes influence market dynamics and the broader economy.