The mechanical engineering industry in Vietnam has developed significantly in recent years, however, there is still a high dependence on imported components for production. This makes the production and supply of the mechanical engineering industry more difficult and more expensive.
With the goal of promoting the development of the domestic mechanical engineering industry, the Vietnamese Government issued Decree 218/2013 on tax incentives for supporting industrial products. Accordingly, domestically produced products will enjoy lower tax rates than imported products.
Applying this tax incentive policy helps businesses in the mechanical engineering industry increase production capacity, limit dependence on imported components and improve product reliability. In addition, this policy is also a driving force for businesses to continue researching and developing new products, coming up with innovative solutions and improving production processes.
1. The situation of mechanical components production in Vietnam
Vietnam's mechanical engineering industry is one of the country's largest industries, making an important contribution to the socio-economic development of Vietnam. Currently, the mechanical engineering industry is growing strongly thanks to the investment demand from foreign enterprises. However, the localization rate of components in this industry is still low, only reaching about 10-15%. This increases product costs and causes many difficulties for the domestic manufacturing industry.
Most of the key components used in mechanical engineering production must be imported from China, Korea and Japan. This causes product costs to increase significantly, significantly affecting the sales of domestic enterprises. In addition, over-reliance on imports is also a weakness for Vietnam's mechanical engineering industry, when the market can be dominated by foreign partners in the supply of components.
Therefore, to solve the above problems, Vietnam needs to develop domestic component and spare part manufacturing facilities. This helps reduce dependence on imports, increase product added value and enhance the competitiveness of the domestic mechanical manufacturing industry. However, to be able to develop domestic component and spare part manufacturing facilities, there needs to be proper investment and strategic planning from the government, combined with support from domestic and foreign financial institutions.
2. Decree 218/2013 and its impact on the mechanical engineering industry
Decree 218/2013 stipulates a 0% VAT rate for domestically produced components and spare parts. This is an important policy to encourage investment in component production and reduce costs for the mechanical industry. Many enterprises have invested in component production lines after the Decree took effect. The localization rate has improved significantly. However, mechanical enterprises also face difficulties due to the lack of human resources and modern component production technology. Supporting industrial products enjoying a 0% VAT rate include: components, spare parts, semi-finished products, and materials for production. Preferential mechanical products include: gears, screws, ball bearings, ball bearings, valves, bolts, screws, etc. Rolled steel, shaped steel, steel billets, etc. are also subject to VAT reduction when sold to the mechanical manufacturing industry. Tax exemption and reduction helps reduce costs and increase the competitiveness of domestic supporting industrial products.
See more articles: List of products enjoying support industry incentives
3. Benefits of tax incentives
In general, Decree 218/2013 has had a positive impact in promoting the development of Vietnam's mechanical engineering industry. Enterprises need to take advantage of opportunities to expand production to meet market demand.
Enjoying tax incentives under Decree 218/2013 has brought many benefits to Vietnam's mechanical engineering industry. First, reducing input costs helps enterprises lower product prices and increase competitiveness in domestic and international markets.
In addition, tax incentives also help encourage new investment and expand production of domestic supporting industrial products, thereby gradually reducing dependence on imported components and increasing the localization rate.
Enjoying tax incentives also has a positive impact in creating more jobs and income for workers in manufacturing plants. All of these benefits help promote the development of Vietnam's mechanical engineering industry.
Therefore, businesses need to take advantage of the opportunity to expand production to meet market demand and benefit from tax incentives under Decree 218/2013.
See more article: How to apply for confirmation of incentives for supporting industrial products
4. Conclude
Tax incentives in the mechanical engineering support industry are an important support policy of the government to promote the development of the electronics and telecommunications industry. Enjoying this incentive not only helps reduce production costs but also encourages businesses to invest in research and development. At the same time, thanks to tax incentives, the mechanical engineering support industry can increase competitiveness and promote exports.
However, there are still many concerns of businesses surrounding the issue of product codes that are eligible for incentives when submitting documents to the Ministry of Industry and Trade, and many businesses also have problems not knowing whether their business meets the requirements to enjoy corporate income tax incentives or not? If you need advice, you can contact the experts of Tam Viet Tax!
We are confident with many years of experience helping dozens of Vietnamese and foreign businesses including Japan, Korea, Taiwan, China, etc. to successfully enjoy tax incentives and receive tax refunds in the shortest time. 100% of our customers are satisfied with Thue Tam Viet's services and are willing to recommend them to other partners.
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