Samsung seeks about $15.5 million tax exemption

Samsung Electronics CE Complex JSC has proposed for tax preferential treatment for its project in Saigon Hi-tech Park. - Photo vtv.vn

As Dat Viet newspaper reports, the South Korean business giant's member company has sought to be exempted from paying taxes on imported construction material. It also requested for tax exemption for imported materials, components in five years since it started manufacturing products or since taxes were erased in Viet Nam following the signing of the ASEAN Trade in Good Agreement (ATIGA).

In addition, it has also asked to be given preference during the customs procedure.

The Saigon Hi-tech Park-based project was granted an investment certificate on October 1, 2014, and has a total area of 70 hectares (ha). It will break ground in January 2015 and is expected to become operational during the second quarter of 2016.

Samsung CE Complex will manufacture high-technology home appliances, such as TVs, printing machines, air conditioners, and refrigerators. Its revenue is expected to touch $6 billion per year.

The total tax amount imposed on imported components and materials for the domestic market is expected to be approximately $25 million ($5 million during the first five years).

The total amount of tax exemption for imported construction materials is projected to be about $8 million. Tax exemptions under the regulations of ATIGA will come into effect in 2018 in Viet Nam. The number of years on which the tax exemption will be applicable are about 1.5, which means that the tax exemption will be equal to $7.5 million. Therefore, the total amount of tax exemption is estimated to be about US$15.5 million.

Samsung said the raw material available domestically has not met its requirements, and that attached in the proposal is a list of construction materials that needs to be imported and should be given tax preferential treatment.

The corporation further pointed out that the factory in the hi-tech park will be built based on global standards, including good manufacturing practices (GMP). It therefore needs considerable time to check and assess providers and the quality of materials, Samsung added.

The South Korean group also noted that the project involves large-scale investment, which will see fast disbursement within five years. The project has faced difficulties, especially since its first depreciation of fixed assets may reach approximately $700 million.

During the first five years of manufacturing, the project will also lack the capacity to compete on cost prices. Tax exemption for imported components and materials in the first year will resolve the difficulties, boosting the development of the project.

However, as per a decree issued on August 13, 2010, some products included in the list for gaining tax exemption for imported materials and components by Samsung CE Complex have been removed. These products were said to be household appliances and high technology does not apply to their manufacturing process.

Samsung said it will apply high and cutting-edge technology to produce these products. Therefore, there should be an appropriate preferential policy formulated for household appliances.

Earlier, Samsung Electronics Vietnam's second phase in the northern province of Thai Nguyen had gotten approval from the People's Committee to receive incentives and investment assistance. It was offered 50 per cent exemption in its corporate income tax payments for three years, and only needed to pay a 50 per cent land rental fee for the 70ha of area.

According to economic experts, the preferential treatment extended to these companies is inevitable due to fierce competition for on investment among provinces. However, excessive preferential treatment will not attract big investors, but only draw investment from ineffective companies who survive, solely based on such preferential treatment.

Nguyen Mai, chairman of the Vietnam Association of FDI Enterprises, said that Viet Nam will attract FDI in the long-term through such preferential treatment, but firms only use some of the unskilled workers and pay them cheap wages. "Vietnamese enterprises do not receive similar incentives. Until now, they have only seen foreign firms manufacturing in the country and gaining benefits," he stated.