Tax incentives back on the cards for industrial parks

The tax incentive resumption was discussed at a high-level meeting between the ministries of Planning and Investment (MPI) and Finance (MoF) last week.

“The lack of incentives for manufacturers inside industrial parks is a reason for foreign direct investment (FDI) declines in recent years. In tough economic times, incentives are an important factor for manufacturers looking to make investment decisions,” said Nguyen Thi Bich Ngoc, deputy director at MPI’s Foreign Investment Agency.

Since 1991, when the first industrial zone was established in Vietnam, industrial and export processing zones have played an important role in luring FDI to the country. MPI statistics show that Vietnam has more than 200 industrial and export processing zones, of which nearly 100 zones are operational, attracting one third of total foreign direct investment capital in Vietnam.

Tax incentives were a major factor luring foreign and domestic investors to the parks and zones. For example, manufacturing enterprises located in industrial zones were entitled to 15 per cent tax rate incentives for the first 12 years of operation with a three-year tax exemption.

But under Decree No.124/2008/ND-CP on December 11, 2008 guiding the implementation of the Corporate Income Tax Law issued last year, industrial zones and export processing zones no longer get special treatment.

This means newly established companies located in the zones since January 1, 2009 are no longer entitled to the corporate income tax incentives.

The MPI proposed that Vietnam reintroduce tax incentives for manufacturers investing into industrial park as was the case before 2009, according to a report sent to the MoF. The proposal received support from vice MoF minister Do Hoang Anh Tuan.

Tuan said incentives for investors inside industrial parks would be further discussed in next meeting between the two ministries. “The final proposal will be submitted to prime minister for approval at the end this year,” he added.

Registered FDI in the first seven months of 2011 fell 24.4 per cent year-on-year to $9 billion, according to the country’s Foreign Investment Agency.

In the year’s seven months, foreign investors committed to investing into 504 new projects and to raising investment capital at 147 projects, compared with 763 and 271 projects respectively in the same period last year.

Tran Duy Dong, deputy director at MPI’s Department for Economic Zones Management, said industrial park incentives would enhance Vietnam’s competitiveness against other regional countries like Thailand, China, Indonesia and Malaysia.