Business
Vietnam’s FDI attraction policies may harm state budget
  • | VietNamNet, dtinews.vn | November 03, 2014 03:13 PM
A proposal from the Ministry of Finance to attract large FDI projects could result in a loss of VND2 trillion to the state budget.

According to the recent announcement from the Ministry of Science and Technology, Vietnam now has only 80 recognised high-tech firms. As a result, the ministry has proposed tax incentives to high-tech companies that may result in less for the state budget. 

 

Large-scale FDI projects could benefit from major tax incentives

High-tech companies are commonly offered a preferential corporate tax rate of 10% for 15 years, tax exemption for four years and a 50% reduction of taxes for for the following nine years.

Large-scale companies, with registered capital of over VND6 trillion, can benefit from a 10% corporate tax policies for 30 years.

However, studies by the Ministry of Finance showed that these regulations may not be working, as rapidly-changing technology outpaces the tax code, which recognises companies using outdated technology as high-tech. 

In order to be recognised as high-tech, a company's labour force must also consist of at least 5% university graduates, along with various revenue requirements, which disqualify many firms. 

The Ministry of Finance has stated that these requirements are too strict and unfeasible for enterprises in Vietnam. So, the ministry proposed that they should only be applied to large companies that have a registered capital of at least VND12 trillion.

 

Major incentives for certain selected FDI projects

Enterprises that use pioneering technologies, have an annual revenue of over VND20 trillion or employ more than 6,000 workers would benefit from a corporate tax rate of 10% for 30 years instead of 15, the ministry proposed.

According to the latest estimates, Vietnam now has 123 FDI projects with a combined registered capital of over VND6 trillion and 63 FDI projects with a registered capital of VND12 trillion.

It is also estimated that, if the Ministry of Finance’s proposal is approved, it would mean that the state budget would lose around VND18 trillion in tax revenues. 

The proposal will be submitted to the National Assembly on November 3. 

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