VietNamNet Bridge – The amended Corporate Income Tax Law reintroduces tax incentives for investment expansion, which is expected to encourage foreign-invested enterprises (FIEs) to raise their investment capital in the near future.

Applause from FIEs

It is not until May that the Ministry of Finance will submit the draft amended law to the National Assembly (NA), but many entrepreneurs have expressed their joy at the news that tax incentives for investment expansion may be available again.

Hong Han Thanh, general director of Pepperl + Fuchs Vietnam with a transmitter factory in Tan Thuan Export Processing Zone, said his company intended to pour an additional US$30 million to set up a second factory. However, the company has postponed this plan because investors have no longer enjoyed tax incentives for investment expansion since 2009.

He hoped incentives would soon be offered again for his company to realize the plan for development of a new factory.

Similarly, Robert Bosch Vietnam wants to increase its investment in the push-belt manufacturing factory in Dong Nai from 110 million euros to 230 million euros, or around US$300 million, by 2015.

Robert Bosch investment in Dong Nai meets all the criteria of being a hi-tech project and the German manufacturer has proposed incentives for investment expansion.

Vo Quang Hue, managing director of Robert Bosch Vietnam, is glad that the amended Corporate Income Tax Law reintroduces tax incentives for investment expansion.

Hue, who is also a member of the Executive Board of the European Chamber of Commerce (Eurocham), hoped the NA would soon allow foreign investors to enjoy such incentives. This is a positive policy that foreign companies, especially European companies, proposed in a White Book 2013 issued by Eurocham, he said.

“Vietnam should not only encourage new investment, but also encourage foreign investors to expand existing projects, particularly in the manufacturing industry. In the hi-tech sector, if expansion projects obtain tax incentives, then I believe the new tax policy, once it takes effect, will enhance Vietnam’s competitiveness of being an attractive destination for manufacturing investment,” said Hue.

Unilever Vietnam also needs to expand its investment in Vietnam after pouring US$200 million into the factory in HCMC. However, the multinational is having trouble increasing its investment.

Without tax incentives, the new project will have limited competitiveness. In addition, it is unreasonable that two projects of the same company located at the same location are charged two different tax rates, said a representative of Unilever.

Meanwhile, Kumho Asiana is seeking incentives for expansion of its Kumho tire plant in Binh Duong.

Support from ministries

The Ministry of Planning and Investment along with foreign investment management agencies has constantly raised its voice against the current tax mechanism.

The projects that need expansion are those operating efficiently. Besides, investment expansion is a commitment for long-term investment of investors, so it should be encouraged and facilitated, said the planning ministry.

HCMC Vice Chairman Le Manh Ha at recent meetings has expressed his disagreement with the fact tax incentives are now offered to new investors only. “Why does the policy favor new investors, while those attached to Vietnam for many years are denied such incentives?” he wondered.

The finance ministry said that tax incentives should be given to operational enterprises if they continue to invest in the areas encouraged by the State.

Investment expansion in certain cases proves more effective than establishment of new projects, especially when the costs of market access and management are reduced.

Therefore, the finance ministry has proposed tax exemptions and reductions for investment expansion, including establishment of new production lines, production scale increase and technological innovation.

Source: SGT