Proposal to impose 50% tax on electronic devices used for electronic cigarettes

The Ministry of Finance is seeking feedback on the draft Decree amending and supplementing several articles of Government Decree No. 26 on the Export Tariff Schedule, Preferential Import Tariff Schedule, List of Goods and Absolute Tax Rates, Mixed Taxes, and Import Taxes outside the Tariff Quota.

This includes preferential import tax rates for electronic devices used in e-cigarettes and similar personal vaporizers under tariff code 8543.40.00.

Through the review of preferential import tax rates stipulated in Decree No. 26, the Ministry of Finance found that it is necessary to apply a preferential import tax rate to code 8543.40.00 similar to the import tax rate for electronic cigarettes as stipulated in group 24.04 in order to limit the use of products harmful to health.

According to a report by the Ministry of Finance, the current policy regarding e-cigarettes is as follows: Tobacco products are highly sensitive and subject to specialized management. Therefore, since joining the WTO and throughout the negotiations of FTA agreements, Vietnam has consistently maintained the maximum committed tax rate, not reducing import tax rates, or if reductions are necessary, extending the reduction period for as long as possible. This is a product that affects human health, so its use needs to be restricted.

Finance - Banking - Proposal to impose 50% tax on electronic devices used for electronic cigarettes — Proposal to impose a 50% tax on electronic devices used for electronic cigarettes.

Regarding import tax, tobacco products have MFN tax rates (preferential export tax and import tax rates) from 30% to 135%. Of which, the tax rate of 135% applies to cigars and cigarettes in group 24.02.

The tax rate of 50% applies to goods in heading 24.03 "Manufactured tobacco leaves and other manufactured tobacco substitutes such as "homogenised" or "reconstituted" tobacco, tobacco extracts and essences".

Meanwhile, electronic cigarettes consist of two main parts: the solution (containing nicotine, or tobacco substitutes...) and the device used to burn and create smoke.

Electronic cigarettes currently include two forms: electronic devices used for electronic cigarettes with attached vaporizing solution, classified in group 24.04 (MFN import tax rate is 50%).

The second category consists of electronic devices for e-cigarettes and separate vaporizing solutions, in which the heating and vaporizing device is classified under HS code 8543.40.00 "Electronic devices for e-cigarettes and similar personal vaporizing devices"; the vaporizing solution is classified under heading 24.04.

In the Preferential Import Tariff issued with Decree No. 26, the vaporizing solution in electronic cigarettes has the same uses and nature as raw materials to replace tobacco leaves, tobacco leaf extracts and essences in group 24.03.

Therefore, the Government has agreed to regulate the MFN tax rate for electronic cigarettes (containing vaporizing solution) and vaporizing solution with an MFN tax rate of 50% similar to the tax rate for alternative tobacco products in group 24.03.

Regarding the tax rate of electronic devices used for electronic cigarettes and personal vaporizers, the Ministry of Finance proposes to apply the same HS code 8543.40.00 as the tax rate of electronic cigarettes in group 24.04 as prescribed in Decree 26.

Furthermore, there is currently no policy in place regarding e-cigarette products, so these items are not officially imported or circulated in Vietnam.

According to the Ministry of Finance, because electronic cigarettes have not been officially imported into Vietnam, the regulation of the MFN tax rate of 50% for this product does not affect the State Budget revenue.

On the other hand, setting the MFN tariff rate at 50% also aims to curb fraud when this product is allowed to be imported in the future, unify tax policies for tobacco products, and contribute to limiting consumption in Vietnam .

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