Proposals submitted by MPI rejected by MoF.
The Ministry of Finance (MoF) has rejected a Ministry of Planning and Investment (MPI) proposal for tax incentives at an engineering industrial support park at the Chu Lai Open Economic Zone in central Quang Nam province.
MPI proposed corporate tax exemptions for the first four years, a 5 per cent tax rate for the following five years and a 10 per cent rate for the subsequent six years. The proposal also called for a 10 per cent tax rate for ten years after enterprises began producing finished goods in the automobile sector and machinery for the agriculture, forestry and fisheries sector, when they have capital of more than $93 million or more than 4,000 employees.
However, MoF leaders believe that the incentive policy is inconsistent with the provisions of the current Law on Enterprise Income Tax and also goes beyond the jurisdiction of the government.
Under current regulations, enterprises with new investment projects at Chu Lai or with projects on the list of prioritized industrial products will receive tax exemptions for four years and receive a 50 per cent reduction for the next nine years. Enterprises with minimum capital of $558 million and earning revenue exceeding $930 million per year no later than five years after the first year of earning revenue or having more than 6,000 workers will be considered for tax incentives for no more than 15 years.
MoF said that the idea of cutting personal income tax rates by 70 per cent for the first five years and 50 per cent for subsequent years for employees at Chu Lai was inappropriate. It believes that tax reductions should be applied only to taxpayers facing difficulties caused by natural disasters, fire, or dangerous diseases.
Similar comments were made on the idea of exempting value added tax payments for automobile products and for agriculture, forestry and fisheries enterprises when buying industrial support products. Such products, like welding rods, bolts, screws, and bearings, currently have a value added tax rate of 10 per cent under regulations from the National Assembly.
Besides tax incentives, MoF also considered the proposal’s content on customs to be inappropriate. Enterprises at the economic zone were to be exempted from customs records inspections and goods inspections, would not have to register with customs authorities when buying raw materials, and would not have to submit liquidity reports to authorities. MoF said that these policies would only be applied to prioritized enterprises recognized by the General Department of Customs.
- Chu Lai Open Economic Zone