VietNamNet Bridge – Industrial zones (IZs) may become more appealing if tax incentives are re-introduced. This is the thinking behind a draft law on Corporate Income Tax prepared by the Ministry of Finance.


Viet Nam - Singapore Industrial zones in Binh Duong.


According to the draft law, investors with new IZ projects will be exempted from corporate income taxes (CIT) in the first two years of operation.

They will also enjoy further reductions of 50 per cent in the following four years.

The Minister of Planning and Investment, Bui Quang Vinh, recently said the changes were part of Government plans to provide more investment incentives to investors.

If the draft law is approved, it is expected to attract investment in IZs, particularly during a time of economic difficulties.

According to a Ministry of Planning and Investment (MPI) report, the reduction in foreign direct investment in recent years is due to a change in tax incentives from January 1, 2009.

This is blamed for significantly reducing the number of IZ projects.

Before January 1, 2009, new investors to IZs enjoyed a corporate income tax reduction of 20 per cent for the first 10 years. For the first12 years, investors in production sectors were taxed only 15 per cent.

However, the country decided to remove the incentives when the revised Corporate Income Tax took effect on January 1, 2009.

According to MPI, the removal of the incentives made it difficult for IZs to attract investors as land lease in the zones was high due to high costs of land compensation and infrastructure construction.

It said if there were no incentives investors would be hard to find, hindering the development of the manufacturing industry and hindering Government plans.

However, the Ministry of Finance said incentives needed to be selective, adding that none were necessary for Ha Noi, Hai Phong, Da Nang, HCM City and Can Tho as these cities received many other incentives so that they could develop into service, financial and cultural centres.

The Committee on Finance and Budget also recommended that incentives for IZs be classified on industry and locality.

Source: VNS