Question about Tax incentives, business activities, investment and foreign contractor tax
Our company currently enjoys tax incentives and plans to relocate. Will we still be able to receive tax incentives after this relocation?
Circular No. 78 on Corporate Income Tax (CIT) is silent on tax incentives applicable when an enterprise relocates. However, according to Official Letter No. 5636/TCT-CS dated December 17, 2014 from the General Department of Taxation (GDT), when an enterprise currently enjoying CIT incentives relocates, the enterprise will continue to enjoy CIT incentives for the remaining period if it continues to satisfy the CIT incentive conditions.
Our company is entitled to tax incentives based on location. Can we apply tax incentives on other income?
Where an enterprise is enjoying CIT incentives on a “location basis” under the regulations applicable prior to 2014, other income (except for income from capital and project transfer, income from the exploration and exploitation of oil and gas and natural resources, and income from the provision of services subject to Special Consumption Tax) of the enterprise will also enjoy CIT incentives.
In fiscal year July 1, 2013 to June 30, 2014, we incurred losses from real estate transfer activities. Can we offset these losses against income from our business activities?
The loss from real estate transfers incurred from July 1, 2013 to December 31, 2013 can only be offset against income from real estate transfers in 2014. The company is not allowed to offset this loss against income from business activities (including other income under the regulations) earned from July 1, 2013 to December 31, 2013, and the loss from real estate transfers incurred from January 1, 2014 to June 30, 2014 can only be offset against income from business activities (including other income under the regulations) earned from January 1, 2014 to June 30, 2014.
Our company recently amended the Investment Certificate to increase our investment capital and production capacity. Will it be treated as a regular addition of machinery and equipment or an expansion investment project for the purposes of applying CIT incentives?
Pursuant to Official Letter No. 5928/TCT-CS dated December 31, 2014 from the GDT, where a company amends its Investment Certificate to increase its investment capital and the capacity of its investment project, this is considered to be a business expansion project instead of a regular addition of machinery and equipment. Different packages of CIT incentives for business expansion projects and income from the regular addition of machinery and equipment are set out in Circular No. 78 on CIT.
Our foreign supplier imports goods to store in a bonded warehouse then sells the goods to our company. Will this arrangement be subject to foreign contractor tax (FCT) in Vietnam?
The GDT stipulated in Official Letter No. 5722/TCT-CS dated December 19, 2014 that where a foreign entity imports goods from overseas and stores them in a bonded warehouse to sell directly to a Vietnamese enterprise located in a non-tariff zone, the foreign entity shall be treated as performing business activities, trading goods in Vietnam territory, and shall be subject to FCT in Vietnam.
Moreover, the tax authority is also of the view that the bonded warehouse establishes Permanent Establishment status of the foreign entity, who is therefore subject to CIT.
This column is prepared in collaboration with KPMG Vietnam