MOF to restore tax incentives to encourage FDI to IZs

Not only having suggested offering continued tax incentives to expanded investment projects, MOF has also decided to restore the investment incentives for IZ developers and IZ enterprises in an effort to attract more investors to the zones.

“It’s really good news,” said Vo Van Hai, Head of the Dong Nam Nghe An Economic Zone when hearing that MOF submitted the draft law with the provisions on tax incentives for the enterprises in IZs, to the National Assembly’s Steering Committee on March 28.

In the past, corporate income tax incentives were once offered to the enterprises in IZs and IZ development companies. However, since the day the 2008 Corporate Income Tax took effects on January 1, 2009, the tax incentives have been removed.

Hai said that the tax incentive removal has made it very difficult to call for the investment in IZs. “Sometimes we could not attract any investor,” Hai said.

The situation was seen not only in the central province of Nghe An, but in all other localities as well. The Ministry of Planning and Investment (MPI) has many times proposed to restore the tax incentives for the subjects in order to attract investments in IZs.

A report of MPI showed that most of the IZs are located in economic areas (80 percent of existing Izs), not in the areas with difficult socio-economic conditions. The IZ developers, though enjoying the advantageous positions, have to pay high for site clearance, infrastructure development. This explains why they have to set up land leasing fees at high price levels.

Therefore, investors would not set up their production bases in IZs to have to pay high land leasing fees and enjoy no tax preferences.

Fred Burke from Baker & McKenzie law firm also repeated many times that the removal of tax incentives has resulted in the loss of many good projects.

An MPI’s official revealed that the latest draft law submitted by MOF comprises a provision saying that the investors who implement new projects in IZs, not including the central IZs, would enjoy the corporate income tax exemption for two years and the 50 percent tax reduction in the next four years.

MOF has stated that it does not intend to grant incentives to all investors. “We have to be selective in offering incentives. No need to encourage the development of the IZs in the central cities including Hanoi, HCM City, Da Nang, Hai Phong and Can Tho, which have been decided to develop into service, finance and cultural centers of the country,” said Vu Thi Mai, Deputy Minister of Finance.

However, the viewpoint on offering tax incentives to investors by the Ministry of Planning and Investment, and the Ministry of Finance has not been shared by the National Assembly’s Finance & Budget Committee.

Phung Quoc Hien, Chair of the committee, has pointed out that Vietnam has offered tax incentives to too many subjects and in a too large scale.

“The fact that the majority of investors set up their production factories in the IZs of the localities with advantageous infrastructure conditions has made the efforts to attract investments into difficult areas vain,” Hien said.