VietNamNet Bridge – The expanded investment projects will also be able to enjoy the investment incentives like the ones given before to the initial projects, if the proposal of the Ministry of Finance (MOF) is ratified by the National Assembly.
MOF, which is drafting the amended Corporate Income Tax law, has decided to preserve the investment incentives for expanded projects. The draft law with the proposed provision would be put for discussion at the government’s meeting in January 2013.
If the proposal is approved, this would benefit foreign invested enterprises (FIEs) and put an end to the arguments whether to continue giving investment incentives to the investors who expand their investment in Vietnam.
In fact, the provision about the preservation of investment incentives had been valid until January 1, 2009. The regulations stipulated that the enterprises which had expanded investment activities, would be able to enjoy the incentives from the additional income to be brought by the investment expansion.
After that, since January 1, 2009, when the Corporate Income Tax Law took effect, there have been no incentives more for expanded investment
The new regulation then has raised controversy among the business community. Economists also pointed out that Vietnam should have offered investment incentives for expanded projects in order to attract more investment.
They said the government of Vietnam should have understood that once the operational investors want to expand their business in Vietnam, they would be able to bring obtain high gains, even higher than new projects, because they can take full advantage of the existing market shares and commercial advantages.
At present, since Vietnam does not offer investment incentives to expanded investment projects, investors have not been encouraged enough to make more investments in Vietnam, thus leading to the ineffective resource allocation.
MOF believes that it would be reasonable if Vietnam continues offering investment incentives to expanded projects, if the projects are in the fields Vietnam encourages to invest in.
What projects would be subject to investment incentives?
Under the draft law compiled by MOF, continued investment incentives would be applied only to the activities of installing new production lines, expanding the production scale, renovating technologies in the business fields and areas subject to preferences as stipulated in the corporate income tax law.
Tax exemptions and reductions would not be applied to the expanded projects in the fields of education, vocational training, healthcare, culture, sports, environment, and house development for the poor, because the projects now bear the preferential tax rate of 10 percent for their whole lives.
In case enterprises expand their operation by buying operational businesses and projects, they would not be able to enjoy tax incentives for the expanded investments, but they would only enjoy the tax incentives for the time left (if the businesses or projects to be bought are enjoying tax incentives).
However, the Ministry of Finance said that if the tax incentives are approved, this would lead to the reduction in the tax collection for the state budget. It is expected that this would diminish the corporate income tax collection by VND2,081 billion.
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