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An Overview of Vietnam’s Environmental Protection Tax
On the books since 2010, Vietnam’s Environmental Protection Tax has been a key pillar of Vietnam’s transition to a cleaner, greener economy. In this article, we break down the key details foreign investors should know.
Like most countries around the world, Vietnam is trying to restructure its economy to be greener and more environmentally friendly. The rapidly developing Southeast Asian nation even committed to reaching net-zero emissions by 2050 at the 26th Conference of Parties (CoP26) in Glasgow in 2021.
To do this, Vietnam is looking toward greater investment in cleaner, greener power-generating technologies. Furthermore, it is also looking to utilize financial and market mechanisms to encourage firms to make their businesses more environmentally friendly.
Whereas a carbon market is still being developed, there has, for over a decade now, been an environmental protection tax (EPT) enshrined in Vietnamese law. This tax has brought in billions of dong in recent years and is a key piece to Vietnam’s net-zero puzzle.
Foreign firms that intend to do business in Vietnam should familiarise themselves with the tax and what it applies to in order to ensure they can adequately assess the cost of doing business in the country. In this light, in this article, we break down Vietnam’s Environmental Protection Tax, including what it applies to and the tax rates for the specific items covered.
What is subject to the Environmental Protection Tax?
Vietnam’s EPT applies to a number of goods that can potentially be hazardous to the environment if used in excess or improperly disposed of. This includes:
- Fossil fuels including gasoline, aviation fuel, diesel, kerosene, fuel oil, lubricants, and grease. In the event of mixed fuels comprised of both biofuel and fossil-fuel-based fuels, the EPT only applies to the fossil-fuel-based portion.
- Coal including brown coal, anthracite coal, and other coal.
- Hydro-chloro-fluoro-carbon (HCFC) solutions.
- Plastic bags made from single plastic film HDPE (high-density polyethylene resin), LDPE (Low-density polyethylene), or LLDPE (Linear low-density polyethylene resin), excluding pre-packaged goods.
- Restricted use herbicides.
- Restricted use termite pesticides.
- Restricted use forest product preservatives.
- Restricted use warehouse disinfectants.
Environmental protection tax rates in Vietnam
| Goods | Unit | VND | US$ |
| Gasoline, oil, grease | |||
| Gasoline, except ethanol | liter | 4,000 | $0.16 |
| Flight fuel | liter | 3,000 | $0.12 |
| Diesel oil | liter | 2,000 | $0.08 |
| Fuel | liter | 1,000 | $0.04 |
| Fuel oil | liter | 2,000 | $0.08 |
| Lubricant | liter | 2,000 | $0.08 |
| Grease | kg | 2,000 | $0.08 |
| Coal | |||
| Brown coal | ton | 15,000 | $0.62 |
| Anthracite coal (anthracite) | ton | 30,000 | $1.23 |
| Coal fat | ton | 15,000 | $0.62 |
| Other coal | ton | 15,000 | $0.62 |
| Hydro-chloro-fluoro-carbon (HCFC) solution | kg | 5,000 | $0.21 |
| Plastic bags | kg | 50,000 | $2.05 |
| Restricted use herbicides | kg | 500 | $0.02 |
| Restricted use termite pesticides | kg | 1,000 | $0.04 |
| Restricted use forest product preservatives | kg | 1,000 | $0.04 |
| Restricted use warehouse disinfectants | kg | 1,000 | $0.04 |
Proposed changes to the EPT
An increase to the tax on packaging: In August of this year the Ministry of Justice proposed increasing non-biodegradable packaging materials in a further effort to reduce their prevalence in Vietnam. According to the ministry, the average Vietnamese household uses one kilogram of plastic bags each month.
The proposal was to increase the tax to be more in line with other parts of the world. Currently, the rate of tax collected is VND 50,000 (US$2.05).
Extending the reduction of the EPT on petrol. In April of this year, the EPT on petrol was cut in an attempt to stimulate the economy. This cut is set to carry through until the end of this year. That said, the Ministry of Finance has proposed extending the cut into 2024. If approved it’s estimated that EPT revenue will decrease by about VND 42,822 billion (US$1.76 billion).
Vietnam’s Environmental Protection Tax moving forward
Vietnam’s Environmental Protection Tax is a key pillar of its approach to reducing the impact of its economic development on the natural environment. Foreign firms that are looking to engage in business in Vietnam should be aware of the implications of this tax on their business. Vietnamese tax law, however, can sometimes be difficult to navigate and firms looking for support ensuring they are compliant with Vietnam’s EPT should consult local tax professionals like the tax experts at Dezan Shira and Associates.
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Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, Russia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at vietnam@dezshira.com or visit us at www.dezshira.com
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