Burden eased on enterprises manufacturing supporting industry products

Vu Thu Nga, tax partner of Deloitte Vietnam

What advantages would Decree 57 bring to enterprises working in the supporting industry (SI)?

Decree 57 brings positive government action to remove the existing obstacles in CIT incentive regulations, which has been requested by enterprises since Law No.71/2014/QH13 was promulgated. This would play a crucial part in developing supporting industries and the government’s strategy to attract more high-quality foreign investment capital into Vietnam.

Beneficiaries of the decree are enterprises with new and expanded investment projects which produce SI products implemented before 2015 and have been granted with certificates of manufacturing prioritised SI products (SI certificate). Accordingly, eligible enterprises will be entitled to CIT exemption for four years, 50 per cent CIT reduction for nine years, and 10 per cent preferential tax rate for the first 15 years on income arising from the SI project for the remaining time of the SI certificate. Some of Deloitte’s clients, including foreign-invested enterprises (FIEs) which are long-time investors in large SI projects, shared that this policy is highly meaningful for them as they could upgrade their existing incentive scheme to the highest level.

Another breakthrough guidance in this Decree is that, upon re-assessment and transitioning to fully apply the incentive scheme, the enterprises can retroactively calculate and identify their overpaid CIT amount previously declared or settled due to tax audit. In this situation, they would have the right to request the local tax authorities to offset their outstanding tax liability or those arising in the following tax periods.

Could you share your opinion on the impact of Decree 57 on SI enterprises at this stage? Moreover, what is the role of the government and ministries in the issuance of this decree?

The introduction of Decree 57 is very meaningful for SI enterprises.

First, the tax savings from the application of the decree will provide businesses with more financial resources for their regular business activities to overcome the economic impact of the COVID-19 pandemic.

In addition, I believe Decree 57 is the necessary "mental vaccine" to investors and help them feel relieved, gain more trust to the government, and continue growing their business, hence limiting the disruption of production and supply chains.

The timely amendments on policies in Decree 57 will strengthen not only SI enterprises’ confidence but also the whole business community’s faith in the government's commitment to innovation. This would create effective changes through focusing on solving difficulties for businesses, towards creating a new favourable environment for production and business to develop.

The government, ministries, and government agencies have clearly shown a willingness to listen and actively acknowledge the recommendations of the business community, associations, and diplomatic agencies. Since then, under the close direction of the government, the Ministry of Finance and other Government Agencies have rolled out urgent and drastic plans and policy amendments to thoroughly remove obstacles for SI enterprises.

It is also a motivation for SI enterprises and the business community to show responsibility and accompany the government in the fight against pandemic and promote economic development, with donations and other support.

As an active follower and policy advisor for the government during the promulgation of Decree 57, how did Deloitte Vietnam contribute to the development of the new decree?

SI has been determined by the government as one of the priority sectors for the development and investment incentives. Developing SI is one of the most important solutions for Vietnam to improve the quality of economic flows and develop sustainably, help increase foreign direct investment, step up technology transfer, and promote the development of small- and medium-sized enterprises in the country. The issuance of Decree No.111/2015/ND-CP, Resolution No.115/2020/NQ-CP, and others were expected to create a boost for the economy. However, the policies to develop the SI have not closely achieved the desired results, that is, the implementation of a number of incentives and support policies still has many obstacles and inconsistencies.

In fact, during the process of recommending and developing Decree 57, Deloitte Vietnam has had various articles, interviews, and speeches to share expert opinions on tax incentives for SI enterprises and accompanied with business associations to submit proposals, recommendation to ministries and agencies via multiple channels, including the participation in direct dialogues in conferences and seminars on this topic. During the appraisal of the decree, Deloitte Vietnam was also invited to join the National Law Appraisal Council as an independent consultant.

To put the policy into practice, do you have any recommendations for government agencies and enterprises?

To promote the SI environment, aside from policy development, both government agencies and enterprises would need to make efforts to put the policy into practice.

From the government agencies’ perspective, it is necessary to urgently propagate and guide the contents of the decree so that businesses can promptly grasp them. At the same time, it is necessary to ensure the consistency and synchronisation between the local tax authorities in the process of implementing the provisions of the decree.

On the other hand, enterprises should actively research or seek a professional tax consultant to assist in assessing the ability to meet the conditions prescribed by the decree in order to promptly implement the necessary procedures to apply the tax incentives.