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Ministry urged to reconsider tax incentives for foreign projects
Under the current regulations, expanded investment projects are not subject to corporate income tax incentives. However, the regulations may be adjusted since ministries and experts have pointed out that this is an unreasonable policy.
After achieving certain successes with the mobile phone manufacturing factory with the investment capital of 670 million dollars in Bac Ninh Province, South Korean Samsung Group has decided to expand the project and develop a hi-tech complex which has the expected investment capital of 1.5 billion dollars.
When registering the expanded project, Samsung proposed management agencies to grant some investment incentives to the group. However, the proposal has not been accepted by the Government. It is simply because under the current laws, expanded investment projects cannot enjoy corporate income tax incentives.
Though Samsung has affirmed that it would still develop the project as planned, even though it cannot enjoy the proposed preferences, the investor still has complaints.
According to a senior executive of Samsung in Vietnam, it is really unfair that such a big expanded project like Samsung’s one which operates well, creates tens of thousands of jobs, and helps attract satellite investors, only gets the incentives smaller than the incentives granted to a small newly set up project.
“This will discourage existing investors to expand their projects,” he said.
In fact, the Ministry of Planning and Investment (MPI) advocated the proposal made by Samsung. It said that the expanded investment projects are usually the ones which operate well. It also pointed out that when expanding projects, investors enter a new investment period – the period of making in-depth investments, showing their plans of investing in Vietnam for long term. Therefore, MPI believes that expanded projects should be created most favorable conditions to run, which means that they should be given investment incentives.
“If Vietnam keeps insisting on the current policies, it will not be able to encourage foreign investors to do business in Vietnam for long term and expand business scope,” MPI said.
In the case of Samsung, MPI suggested applying a flexible policy which allows to grant some incentives at reasonable levels to both ensure the national benefits and the enterprise’s benefits. MPI suggested granting corporate income tax incentives to Samsung’s expanded project, equal to the incentives granted to newly established businesses.
However, as said above, the proposal has been rejected.
The problem is that Samsung is not the only case. Local authorities and investors have reported similar cases, in which big investors expand their investments and call on to grant incentives to them.
Therefore, the Foreign Investment Agency FIA under MPI has proposed the Ministry of Finance (MOF) to reconsider the unreasonable regulations relating to the investment incentive policies applied to expanded projects. It believes that it is necessary to add the expanded projects in hi-tech sector into the list of enterprises, subject to investment incentives. This means that not all expanded projects would get preferences.
Experts have also pointed out that unreasonable regulations can be found not only in expanded projects, but in newly invested projects as well. There exists the difference in the Investment Law and Corporate Income Tax Law about the subjects to investment incentives.
The former stipulates that the subjects to investment incentives are investment projects, while the latter gives incentives to the establishments newly set up to serve investment projects.
If only newly established businesses can enjoy incentives, many enterprises which need incentives, will not get incentives. For example, the investors, who have many projects in Vietnam, will not be able to enjoy incentives for the newly established projects, because they are not “new”, even though the new projects are in hi-tech sector and very important to Vietnam’s national economy.
vietnamnet
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