Circular No. 02/1999/TT-BTC guiding the financial regime to be piloted at the Mo Cay Border Economic Zone in Tay Ninh Province.

CIRCULAR

GUIDELINES ON THE FINANCIAL REGIME TO BE TRIED OUT

AT THE MOCH BA BORDER ECONOMIC ZONE IN TAY NINH PROVINCE

Pursuant to Decision No. 210/1998/QĐ-TTg dated October 27, 1998 of the Prime Minister on the application for trial of certain policies to develop the Moch Ba Border Economic Zone in Tay Ninh Province, the Ministry of Finance hereby guides the implementation of the financial regime to be tried out at the Moch Ba Border Economic Zone in Tay Ninh Province as follows:

I. OBJECTS AND SCOPE OF APPLICATION

b. The border gate area of Hung Quoc comprising the Hung Quoc border gate and the Hung Quoc commune, Tra Linh district;

According to Article 1 of Decision No. 210/1998/QĐ-TTg dated October 27, 1998 of the Prime Minister, the scope of application for the trial of certain financial policies stipulated in this Circular includes: Long Thuan, Tien Thuan, Loi Thuan, and An Thanh communes under Ben Cau District and Phuc Luu, Binh Thanh, and Phuc Chi communes under Trang Bang District, Tay Ninh Province.

The above area shall be referred to as the Moch Ba Border Economic Zone in this Circular.

2. ELIGIBLE ENTITIES FOR BENEFITS:

The entities eligible to enjoy the financial preferential policies stipulated in this Circular include domestic and foreign investors investing in production, business, and infrastructure construction in the Moch Ba Border Economic Zone in compliance with the Law on Domestic Investment Promotion and the Law on Foreign Investment in Vietnam, specifically as follows:

a. Domestic investors include enterprises established according to the provisions of: the State Enterprise Law, the Private Enterprise Law, the Company Law, the Cooperative Law...

b. Foreign investors include foreign-invested enterprises, foreign investors participating in joint business contracts, overseas Vietnamese investing in Vietnam under forms prescribed in the Law on Foreign Investment in Vietnam, and foreign investors conducting business without being subject to the Law on Foreign Investment in Vietnam.

Domestic enterprises and foreign-invested enterprises investing in the Moch Ba Border Economic Zone must maintain separate accounting records for their business activities within the zone if they do not form economic legal entities, in order to have grounds for determining preferential treatment.

Only production and business activities conducted in the Moch Ba Border Economic Zone are eligible to benefit from preferential treatment.

3. DOMESTIC AND FOREIGN INVESTORS WHO HAVE INVESTED IN THE MOCH BA BORDER ECONOMIC ZONE BEFORE THE EFFECTIVE DATE OF DECISION NO. 210/1998/QĐ-TTg DATED OCTOBER 27, 1998 OF THE PRIME MINISTER SHALL BE ELIGIBLE TO TRANSITION TO ENJOYING INVESTMENT PREFERENCES AS PROVIDED IN THIS CIRCULAR FROM THE EFFECTIVE DATE OF THIS CIRCULAR.

II. SPECIFIC GUIDELINES

A. PROVISIONS ON RAISING CAPITAL DOMESTICALLY AND ABROAD

Domestic enterprises and foreign-invested enterprises investing in developing production, business, and infrastructure construction in the Moch Ba Border Economic Zone may raise capital both domestically and abroad through appropriate means such as bank loans, borrowing from organizations and individuals, issuing corporate bonds... in accordance with current laws to create funds for business development.

The People's Committee of Tay Ninh Province, within its functions, duties, and powers, is permitted to apply appropriate means to raise capital to build infrastructure for the Moch Ba Border Economic Zone, such as issuing special lottery tickets, reporting to the Government for permission to issue project bonds, mobilizing public welfare labor... in accordance with current laws.

B. PROVISIONS ON MANAGEMENT OF CAPITAL INVESTED FROM THE STATE BUDGET FOR CONSTRUCTION AND DEVELOPMENT OF INFRASTRUCTURE IN THE MOCH BA BORDER ECONOMIC ZONE

1. ESTABLISHING AN ESTIMATE OF CAPITAL INVESTMENT FOR THE MOCH BA BORDER ECONOMIC ZONE:

Annually (during the period 1999-2002), based on the budget estimate of export tax and import tax revenue of the Moch Ba Border Economic Zone approved by the Tay Ninh Provincial People's Council and agreed upon by the Ministry of Finance in the annual provincial budget, the Tay Ninh Provincial People's Committee proposes the amount of state investment annually through the provincial budget for the Moch Ba Border Economic Zone (detailed for each investment project, classified by group and ranked in order of priority) to be sent to the Ministry of Planning and Investment and the Ministry of Finance for review.

Based on the budget estimate of export tax and import tax revenue of the Moch Ba Border Economic Zone and the proposal of the Tay Ninh Provincial People's Committee, the Ministry of Finance determines the total amount of state budget investment annually for the Moch Ba Border Economic Zone not less than 50% of the total annual tax revenue from export and import taxes in the Moch Ba Border Economic Zone. This investment fund will be allocated through the Tay Ninh Provincial Department of Finance and Price to invest in the Moch Ba Border Economic Zone.

The Ministry of Planning and Investment coordinates with the Ministry of Finance regarding the investment capital for each project, the total investment capital, and related issues before making a decision to approve the investment budget for the entire period 1999-2002 and the annual investment budget using the state budget capital allocated exclusively to Tay Ninh Province.

Based on the notification from the Ministry of Planning and Investment regarding the annual investment capital from the central budget for the Moch Ba Border Economic Zone, the Tay Ninh Provincial People's Committee is responsible for preparing the annual investment budget and quarterly investment budget proposals to be submitted to the Ministry of Finance (no later than the 20th day of the last month of each quarter).

Based on the annual investment budget, the quarterly investment budget prepared by the locality, and the capacity of the central budget at each point in time, the Ministry of Finance determines and announces the quarterly capital allocation budget for the Tay Ninh Provincial People's Committee.

The state investment capital for the Moch Ba Border Economic Zone through the provincial budget must be reviewed the following year based on the actual revenue of the previous year to adjust into the next year's investment budget. Any difference between the actual revenue surplus or deficit compared to the initial budget revenue forecast will be adjusted into the next year's investment budget. This investment capital is determined as targeted assistance from the central budget to the province, not included in the local budget expenditure responsibility.

2. METHODS OF ALLOCATION, REPORTING SYSTEM, FINAL ACCOUNTING, AND MANAGEMENT OF CAPITAL INVESTMENT FOR THE MOCH BA BORDER ECONOMIC ZONE:

Based on the approved annual and quarterly investment budget estimates, the Ministry of Finance (central budget) allocates capital for approved investment projects through the Tay Ninh provincial budget.

Each portion of the central budget capital allocated to the Mo Cay Border Economic Zone through the provincial budget shall be exclusively used for the purpose of constructing infrastructure facilities according to the overall planning of the Mo Cay Border Economic Zone approved by the competent authority and must be managed in accordance with current regulations on investment and construction management. During the implementation process, local authorities may proactively adjust the investment capital among projects within the total approved amount and report to the Ministry of Planning and Investment and the Ministry of Finance. If there is a change in the project list, a formal written agreement from the Ministry of Planning and Investment is required.

The investment capital for the Mo Cay Border Economic Zone through the provincial budget will be reflected collectively in the monthly budget reports and annual settlement statements of the locality, but a separate portion should be recorded for investment projects in the Mo Cay Border Economic Zone (including both the dedicated state budget capital and the capital mobilized by the province).

Quarterly, the province has the responsibility to report to the Ministry of Finance and the Ministry of Planning and Investment on the implementation of investment and construction, capital disbursement for each project, and at year-end, report to the Prime Minister (with copies sent to the Ministry of Finance and the Ministry of Planning and Investment) on the results of the entire year's implementation.

3. Management, disbursement, and settlement of investment capital for each project in the Mo Cay Border Economic Zone must be carried out in accordance with current State regulations on basic construction investment.

c. Preferential provisions regarding land and water rental fees; tax preferences

a.Taxes for transferring income abroad:

Foreign investors and domestic investors investing in production and business operations, and constructing infrastructure in the Mo Cay Border Economic Zone when leasing land and water from the State, in addition to enjoying existing State preferential policies on exemptions and reductions, also enjoy an additional 50% reduction in land and water rental fees compared to the current rental rates for land and water in the Mo Cay Border Economic Zone, consistent with current regulations on determining rental prices for land and water.

b.Other types of taxes:

a. Tax on repatriation of profits:

Profits obtained by foreign investors from their investment activities in the Mo Cay Border Economic Zone (including refunded income taxes and income from capital transfers) if transferred abroad or retained outside Vietnam must be subject to a tax on repatriation of profits with a minimum rate of 5%.

b. Other types of taxes:

Other types of taxes, fees, and charges shall be implemented in accordance with current regulations stipulated in the Tax Laws, the Domestic Investment Promotion Law (amended), the Foreign Investment Law in Vietnam, and other relevant legal documents.

- Domestic enterprises and foreign-invested enterprises investing in production, business, and infrastructure construction in the border economic zones of Cao Bang may raise capital both domestically and internationally through appropriate methods such as bank loans, borrowing from organizations and individuals, issuing corporate bonds, etc., in accordance with current laws to create sources of funds for business development.

The procedures for applying for investment incentives as prescribed in this Circular shall be carried out in accordance with current regulations on procedures for enjoying incentives on land rental fees and tax incentives as stipulated in current legal documents concerning land and water rental, tax regimes.

V. Implementation

This Circular takes effect from January 1, 1999. All previous financial regime regulations applied in the Mo Cay Border Economic Zone that conflict with this Circular are hereby abolished. Any feedback should be reported to the Ministry of Finance for study and resolution./.