VietNamNet Bridge – Foreign-invested projects capitalized at billions of dollars with expected revenue in the billions may enjoy unprecedented investment incentives if the Ministry of Finance’s proposal is approved by the National Assembly.
“High-technology enterprises” is a designation that could be a “priority card” for enterprises to enjoy tax incentives. According to the Ministry of Science and Technology, only 80 enterprises are recognized as high-technology.
Under the Corporate Income Tax Law, large high-technology enterprises with investment capital over VND6 trillion can enjoy the highest investment incentives Vietnam can offer to foreign direct investors.
They can enjoy a preferential tax rate of 10 percent for 30 years after they begin to have taxable income.
Other high-technology enterprises can enjoy a preferential tax of 10 percent for 15 years, tax exemption for four years and a 50 percent tax cut for the next nine years.
However, MOF has pointed out that it is nearly impossible for foreign invested enterprises to satisfy requirements to enjoy tax incentives.
At the moment investment projects are licensed, the projects can be recognized as applying high technologies. But similar projects registered just a short time later will not be labeled as “high-technology”.
MOF also thinks that the requirements stipulated in the High Technology Law are overly high which are “unreasonable to current conditions”.
The law says that high-technology enterprises must have at least five percent of workers with university or higher degrees conducting research and development; and have turnover from high-technology products accounting for at least 60 percent of total revenue for three consecutive years and at least 70 percent for the fourth and subsequent years.
However, large enterprises with huge investment capital and turnover of $2-3 billion a year, and tens of thousands of workers cannot satisfy these requirements. The majority of them need at least 15 years to recoup the investment capital.
If the MOF’s suggested tax incentives are approved, the investment incentive package would be offered to investment projects capitalized at VND12 trillion or higher disbursed within five years, and those projects that use scientifically evaluated technologies.
As such, the criteria on “high technology” would be lowered to make it easier for enterprises to satisfy the requirements to be eligible for tax incentives.
Projects with advanced technologies used for the first time in Vietnam or in Southeast Asia; projects that make products with turnover of over VND20 trillion a year; and export processing enterprises employing more than 6,000 workers would enjoy the preferential tax rate of 10 percent for 30 years instead of 15 years, as offered to other projects.
Pham Huyen