Hi SB Law! I am Chinese and I am going to have an investment project in Vietnam next year. Therefore, I would like to know the differences in tax incentives or benefits between IP and IZ?
Thank you for your inquiry. SB Law would like to answer your question as follows:
- Relating to enterprises in IZ:
Firstly, companies in this zone will get incentives on corporate income tax:
Pursuant to Clause 4, Article 19 of Circular 78/2014/TT-BTC, it shall be indicated that export processing enterprises are entitled to a tax rate of 17% from January 1, 2016, when the export processing enterprises implement new investment projects in difficult socio-economic regions in the Appendix II Decree 118/2015/ND-CP. And the export processing enterprise is also an enterprise in the difficult socio-economic area as defined in Section 55, Appendix II issued with Decree 118/2015/ND-CP.
At the same time, export processing enterprises are also exempted from tax for 2 years and a reduction of 50% of the payable tax amount for 4 subsequent years, for incomes from the implementation of new investment projects prescribed in Clause 4, Article 19 of Circular No. 78/2014/TT-BTC as above (Article 6 of Circular 151/2014 /TT-BTC).
Secondly, land use incentives
Export processing enterprises are exempt from land rent for 7 years (Point b, Clause 3, Article 19 of Decree 46/2014/ND-CP)
Thirdly, import-export tax incentives
Pursuant to Point c, Clause 4, Article 2 of the Law on Export and Import Tax 2016:
“Subjects liable to export tax and import tax shall not apply to the following cases:
Goods exported from a free trade zone to foreign countries; goods imported from abroad into non-tariff areas and only used in non-tariff areas; Goods transferred from one non-tariff area to another non-tariff area”
Export processing enterprises are located in the non-tariff area, so they will not be subject to import and export duties in the above cases.
Besides, enterprises in IZ get many different incentives from other companies in IP according to Article 30, Decree 82/2018/ND-CP:
– IZ shall apply the regulations to non-tariff areas, except for separate privileges for non-tariff areas in border-gate economic zones.
– IZ is separated from the outside territory by a fence system, with gates and doors, ensuring conditions for inspection, supervision and control by customs authorities and related agencies.
– IZ is allowed to buy construction materials, stationery, food, foodstuffs, and consumer goods from Vietnam for construction, serving the administration of office apparatus and activities of officials and workers.
– Sellers of IZ are allowed to choose whether or not to carry out export, import and customs procedures for construction materials, stationery, food, foodstuffs and consumer goods from inland Vietnam.
– Customs procedures, customs inspection and supervision of exported and imported goods of IZ comply with customs laws.
– Goods exchange relations between IZ and other areas in the territory of Vietnam which are not non-tariff areas, are export and import relations, except for a number of prescribed cases and cases of non-tariff Customs procedures prescribed by the Ministry of Finance.
– IZ is allowed to sell their liquidated assets and goods according to the provisions of law on investment and trade into the domestic market.
– Officials and workers working in IZ, when bringing forex from inland Vietnam into IZ and vice versa, do not have to declare customs.
- Relating to enterprises in IP:
Firstly, incentives on corporate income tax
2-year tax exemption and 50% reduction of payable tax amounts for 4 subsequent years, for incomes from the execution of new investment projects specified in Clause 4, Article 19 of Circular No.78/2014/TT-BTC and income of enterprises from the implementation of new investment projects in the Industrial Park (except for the Industrial Park located in an area with favorable socio-economic conditions).
Secondly, incentives on import tax and land tax
Depending on scale, area, imported goods and business lines following Appendix I, II Decree 118/2015/ND-CP, these companies will get import tax exemption or reduction.
We hope the above information is useful to you. If you have any further questions, please do not hesitate to contact us.
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