Công văn 4960/TCT-PCCS

OFFICIAL LETTER

ON INVESTMENT PREFERENCES

To: The HANOI municipal Tax Department

In reply to Official Letter No. 9547CT/HTr dated August 30, 2005, of the Tax Department, inquiring about business income tax (BIT) preferences for expanded investment projects, the General Department of Taxation hereby gives the following opinion:

- Point 5.1.4 of the Finance Ministry’s Circular No. 88/2004/TT-BTC of September 1, 2004, providing guidance on BIT, stipulates: “For operating business establishments which have investment projects on building new production chains, expanding the scope of production, renewing technologies, improving the ecological environment and raising production capacity, the tax rate applicable to additional incomes brought about by the investment projects shall be as follows:

+ For investment projects in the same branches and domains and located in the same geographical areas where the business establishments are headquartered, the tax rate for additional incomes brought about by the investment projects shall comply with the tax rate currently applied to the business establishments.

+ For investment projects in different branches or domains or located in geographical areas other than where the business establishments are headquartered, if the above-stated branches, domains or geographical areas are eligible for investment promotion, the preferential tax rate applicable to additional incomes brought about by the investment projects shall be determined according to the extent of the projects’ satisfaction of conditions for investment preferences.”

- Point 3, Section III, Part E of the Finance Ministry’s Circular No. 128/2003/TT-BTC of December 22, 2003, guiding BIT, stipulates: “Business establishments which invest in building new production chains, expanding the scope of production, renewing technologies, improving the ecological environment and raising production capacity shall enjoy BIT exemption or reduction for additional incomes brought about by the investment as follows:

3.2. Enjoy tax exemption for one year and enjoy a 50% reduction of the payable tax amounts for four subsequent years, if investing in group-A branches or domains.”

According to the aforesaid guidance, where a company has an expanded investment project on building a truck-manufacturing and -assembling plant with a capacity of 2,000 trucks/year which is in the same domain and located in the same geographical area where the Company is headquartered, the additional income brought about by the investment project shall be eligible for the tax rate currently applied to the business establishment. This expanded investment project shall enjoy tax exemption for one year and a 50% reduction of the payable tax amounts for four subsequent years (car manufacture and assembly is specified at Point 6, Section VI of the list of branches and domains eligible for investment preferences).

Above is the General Department of Taxation’s answer to the inquiry of the Tax Department for the latter’s knowledge and compliance.