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.
US$1=VND21,000
Nghe Nhan
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