State backtracks on IZ company tax rates

Newly established enterprises in industrial zones (IZs) also have reason to be cheerful, now subject to a 20 per cent corporate income tax (CIT), according to Decree 152, effective as of August 6.
Newly established enterprises inside export processing zones (EPZs), or new establishments involved in production inside IZs, would be subject to 15 per cent CIT while developers of IZs and EPZs will pay CIT of 10 per cent.
Previously, Decree 164 stipulated a common CIT level of 28 per cent for all subjects.
Nguyen Van Huyen, deputy head of the General Department of Taxation (GDT), said the return to former CIT levels indicated the government’s desire to boost and protect growth within IZs and EPZs.
He also said the government’s plan to attract enterprises to invest in newly established enterprises inside IZs and EPZs had been adversely affected by the common CIT level of 28 per cent.
Enterprises moved quickly to applaud the government’s move, believing consistent policies are the key to a healthy business environment in IZs and EPZs.
Bui Thi Bich Lien, senior lawyer and manager of the Vietnam International Law firm, also known as VILAF Hong Duc, said the change in CIT levels from Decree 164 earlier this year had caused widespread shock.
“Developers and newly established enterprises inside IZs and EPZs didn’t have time to prepare,” Lien said.
The government came under increasing pressure from enterprises, especially Japanese firms operating in IZs and EPZs, who claimed the government’s long-term commitments to stimulate growth inside IZs and EPZs were inconsistent.
A number of newly invested projects that had been granted licences to operate inside the IZs and EPZs suspended projects after the CIT levels changed, which also caused problems for IZ and EPZ developers.
Lien said several of her clients engaged in business in IZs or EPZs were also pleased with the government’s timely adjustments.
Huong Vu, senior manager, tax and corporate services of the KPMG auditing and accounting firm, said policies to attract newly invested enterprises inside IZs and EPZs would help urbanise the rural areas.
“Some IZs and EPZs such as Nomura, Tan Binh still lack customers,” he said.
Since 1994, the government has introduced policies to attract enterprises to IZs and EPZs by applying preferential CIT levels. However, many enterprises remain reluctant to open business establishments inside IZs and EPZs.
“The preferential policies for those inside IZs and EPZs remain to ensure fair treatment for enterprises in general,” Lien said, adding that places which need to attract enterprises still need preferential tax policies.
The new decree also stipulates that in case the CIT level inked in investment licences is lower than the preferential level in the decree, project owners would enjoy the more preferential rate in the decree for the remaining period of the project.
“As for investment projects which were established after January 1st, 2004 when the decree 164 came into effect, if applying in compliance with the decree 164, the investment owners find more preferential than the adjustments made in decree 152, they can enjoy stipulations in decree 164,” it stated.
There was also another decree concerning value added tax (VAT), to stimulate enterprises inside IZs and EPZs, stipulating nine types of services provided to EPZ enterprises would enjoy 0% VAT, including insurance, banking, telecommunication, consultancy, accounting, auditing, transportation, loading, office and leasing.