Circular No. 08/1998/TT-BTC guiding the financial regime applied on a trial basis for certain border gate areas in Lang Son Province.

CIRCULAR

Guidelines on Financial Regime to be Applied on a Trial Basis for Certain Areas

 at the Lang Son Province Border Gate.

Implementing Decision No. 748/TTg dated September 11, 1997 of the Prime Minister regarding the application of certain policies on a trial basis in some border gate areas in Lang Son Province, the Ministry of Finance guides the implementation of financial regimes to be applied on a trial basis for some border gate areas in Lang Son Province as follows:

I. GENERAL PROVISIONS

1. Scope of Application:

According to Article 1 of Decision No. 748/TTg, the scope of application of the pilot policies on finance stipulated in this Circular includes:

a) The border gate area of Huu Nghi (road) and the border gate area of Dong Dang (railway) including the town of Dong Dang and the commune of Bao Lam in Cao Loc district, Lang Son province;

b) The border gate area of Tan Than including the communes of Tan Than and Tan My in Van Lang district, Lang Son province.

The areas mentioned in Clause a and Clause b above shall hereinafter be referred to as the border gate area of Lang Son.

2. Beneficiaries of Preferential Treatment:

The subjects entitled to enjoy the preferential financial policies stipulated in this Circular are investors implementing investment in business activities in the border gate area of Lang Son, as follows:

a) Domestic investors belonging to all economic sectors and foreign investors conducting business not under the Law on Foreign Investment in Vietnam, hereinafter collectively referred to as domestic enterprises;

Domestic enterprises investing in the border gate area of Lang Son, if they do not form economic entities, must separately account for their business activities in the preferential area to have a basis for determining preferential treatment.

Only production and business activities carried out within the border gate area of Lang Son are eligible to benefit from preferential treatment.

b) Foreign investors and foreign parties participating in Joint Ventures under the Law on Foreign Investment in Vietnam, hereinafter collectively referred to as foreign-invested enterprises.

3/ Investors both domestic and foreign who have invested in the border gate area of Lang Son before the effective date of Decision No. 748/TTg dated September 26, 1997 of the Prime Minister, if currently enjoying investment incentives according to current regulations, shall upon the effectiveness of this Circular, be entitled to enjoy the investment incentives stipulated in this Circular during the remaining period.

II/ FINANCIAL INCENTIVES ON LAND RENT AND WATER SURFACE RENT; TAX INCENTIVES

1/ Incentives on land rent and water surface rent:

According to Clause 1, Article 3 of Decision No. 748/TTg dated September 11, 1997 of the Prime Minister, when leasing land and water surfaces, enterprises shall have their land and water surface rents reduced by 50% compared to the current rates applicable in the border gate area of Lang Son, specifically as follows:

a) For foreign-invested enterprises:

Foreign-invested enterprises established and operating in the border gate area of Lang Son, when leasing land and water surfaces from the State, shall have their land and water surface rents reduced by 50% compared to the rental rates for land and water surfaces currently applicable in the border gate area of Lang Son in accordance with the current regulations on determining rental rates for land and water surfaces (Decision No. 1417 TC/TCĐN dated December 31, 1994 of the Minister of Finance). The aforementioned rate serves as the basis for the Ministry of Planning and Investment to determine the amount of land and water surface rent that foreign-invested enterprises must pay and record in their investment permits.

All other incentives on exemption and reduction of land and water surface rents shall still follow the current regulations (Decision No. 1417 TC/TCĐN dated December 31, 1994 of the Minister of Finance), but shall be calculated based on the determined amount of land and water surface rent payable.

b) For domestic enterprises:

Domestic enterprises belonging to all economic sectors established and operating in the border gate area of Lang Son, when leasing land and water surfaces from the State, shall have their land and water surface rents reduced by 50% compared to the rental rates for land and water surfaces currently applicable in the border gate area of Lang Son in accordance with the current regulations (Decision No. 1357 TC/QĐ/TCT dated December 30, 1995 of the Minister of Finance).

All other incentives on exemption and reduction of land and water surface rents shall still follow the current regulations (Decision No. 1357 TC/QĐ/TCT dated December 30, 1995 of the Minister of Finance), but shall be calculated based on the determined amount of land and water surface rent payable.

2/ Incentives on corporate income tax, tax on repatriation of profits, and other taxes:

a) Corporate Income Tax:

Foreign-invested enterprises shall pay corporate income tax at the tax rate specified in their investment permit; domestic enterprises shall apply the corporate income tax rate prescribed for each industry according to the Corporate Income Tax Law and the Law on Encouraging Domestic Investment during the operation period of the enterprise.

Domestic enterprises and foreign-invested enterprises investing in the following fields shall enjoy preferential corporate income tax rates (corporate income tax) as follows:

- For domestic enterprises:

+ Investing in fields belonging to Group A of Appendix 1 issued together with this Circular shall apply a tax rate of 15%;

+ Investing in fields belonging to Group B of Appendix 1 issued together with this Circular shall apply a tax rate of 20%;

- For foreign-invested enterprises:

+ Investing in fields belonging to Group A of Appendix 1 issued together with this Circular shall apply a tax rate of 10%;

+ Investing in fields belonging to Group B of Appendix 1 issued together with this Circular shall apply a tax rate of 15%;

- Domestic enterprises and foreign-invested enterprises which generate export revenue from goods and services exceeding 80% of total annual business revenue shall apply a tax rate of 10%;

- Domestic enterprises and foreign-invested enterprises which generate export revenue from goods and services between 50% and 80% of total annual business revenue shall apply a tax rate of 15%;

The regimes of tax exemption, tax reduction, and loss carryforward shall still follow the current regulations for each type of enterprise. The starting year of profitable operations for determining the tax exemption and reduction regime (corporate income tax) according to the provisions is the first year of profitable operations subject to taxation (taxable income) prior to implementing loss carryforward as prescribed.

In the case where an investment project simultaneously meets multiple preferential criteria set out in this Circular or other preferential regimes stipulated in different legal documents (different from the preferential regime in this Circular), the highest preferential regime shall be applied at the discretion of the enterprise.

b) Tax on profit repatriation abroad:

Pursuant to Clause 4, Article 3, Decision No. 748/TTg dated September 11, 1997 of the Government, foreign investors when establishing enterprises and conducting business in the Lang Son border gate area, if they repatriate profits abroad (including both the amount transferred out and the amount left outside Vietnam) must pay tax on profit repatriation abroad at the rate prescribed in the Law on Foreign Investment in Vietnam. Additionally, foreign investors who ensure compliance with the industry specified in their investment license, strictly adhere to invoice and receipt regulations, and comply with budget revenue collection procedures will be eligible for a reduction in tax on profit repatriation abroad as follows:

- For projects investing in fields listed under Group A of Appendix 1, when repatriating profits abroad, they will be granted a 50% reduction in the tax payable.

- For projects investing in fields listed under Group B of Appendix 1, when repatriating profits abroad, they will be granted a 25% reduction in the tax payable.

The authority issuing the investment permit shall record the provisions regarding tax rates and reductions in tax on profit repatriation abroad as mentioned above in the investment license.

c) Other types of taxes:

All provisions concerning other types of taxes, fees, and charges still follow the current regulations stipulated in the Tax Laws, Law on Domestic Investment Promotion, Law on Foreign Investment in Vietnam, and other relevant legal documents.

3/ Duration of investment incentives:

Investment projects shall enjoy the tax incentive regime as provided in points a and b of Clause 2 above throughout the operational period of the investment project.

4/ Procedures and formalities for applying for investment incentives as stipulated in this Circular shall be implemented in accordance with the current regulations on procedures and formalities for applying for land rent incentives and tax incentives as prescribed in existing legal documents on land rental, water surface rental, and tax regimes.

III/ PROVISIONS ON DOMESTIC AND FOREIGN CAPITAL RAISING

Pursuant to Article 4, Decision No. 748/TTg dated September 11, 1997 of the Government, capital raising shall be carried out as follows:

- Enterprises of all economic sectors investing in production, business, and infrastructure construction in the Lang Son border gate area may raise capital from domestic and foreign sources through appropriate forms such as bank loans, borrowing from organizations and individuals, issuing corporate bonds... in accordance with current laws to create development funds.

The People's Committee of Lang Son Province, within its functions, tasks, and powers, is permitted to apply appropriate forms of capital raising such as issuing construction bonds, issuing special lottery tickets for capital raising to invest in projects in the Lang Son border gate area (after obtaining written approval from the Ministry of Finance), mobilizing public labor... to build infrastructure in the Lang Son border gate area in accordance with current legal regulations and must ensure the following conditions:

- Capital raising measures must be approved by the People's Council of Lang Son Province regarding methods of raising capital, the amount of capital raised...

- The raised capital can only be used to invest in building infrastructure in the Lang Son border gate area;

- Raised capital must be managed in accordance with the regulations on managing basic construction investment capital;

- Separate settlement of the raised capital for building infrastructure in the Lang Son border gate area must be conducted within the overall settlement of state budget revenue on the territory of Lang Son Province.

IV/ PROVISIONS ON FINANCIAL REGIME FOR THE CONSTRUCTION AND DEVELOPMENT INFRASTRUCTURE COMPANY IN THE LANG SON BORDER GATE AREA

1/ The Construction and Development Infrastructure Company operating in the Lang Son border gate area is allowed to lease land in the Lang Son border gate area to build infrastructure and sublease it to domestic and foreign investors at agreed prices after the infrastructure has been built (if permitted by the competent state agency).

The Construction and Development Infrastructure Company is permitted to collect once the lease fee for subleasing land that has been developed over many years but not exceeding the maximum duration of operation specified in the company's business license.

2/ In the case where the Construction and Development Infrastructure Company collects once the lease fee for subleasing land that has been developed over many years, it must fulfill the following tax obligations:

- Business income tax: Pay business income tax on the entire business income generated from subleasing land at the time of income generation according to the Law on Business Income Tax.

- Profit tax: Annually, the tax authority will determine the actual business income from subleasing land, corresponding reasonable and legitimate expenses incurred in the year (wages, depreciation of fixed assets, transaction costs, land lease payments... ) in accordance with the Law on Profit Tax to determine the tax payable.

3/ The Construction and Development Infrastructure Company shall enjoy all incentives on land and water surface rents, tax incentives, and other incentives (if any) as stipulated in this Circular and other current regulations.

V/ PROVISIONS ON MANAGEMENT OF STATE BUDGET CAPITAL INVESTMENT FOR CONSTRUCTION AND DEVELOPMENT OF INFRASTRUCTURE IN THE LANG SON BORDER GATE AREA

Pursuant to Clause 2, Article 5, Decision No. 748/TTg dated September 11, 1997 of the Government, during the period of 1997-2000, the State's separate investment in the Lang Son border gate area each year shall be carried out as follows:

1/ Formulating the investment capital plan for the Lang Son border gate area:

BASED ON THE STATE BUDGET REVENUE PROJECTIONS FROM THE LANG SON BORDER GATE AREA APPROVED BY THE LANG SON PROVINCE PEOPLE'S COUNCIL AND ENDORSED BY THE MINISTRY OF FINANCE IN THE ANNUAL PROVINCIAL BUDGET, THE LANG SON PROVINCE PEOPLE'S COMMITTEE PROPOSES THE AMOUNT OF STATE CAPITAL TO BE INVESTED ANNUALLY THROUGH THE PROVINCIAL BUDGET FOR THE LANG SON BORDER GATE AREA (DETAILS FOR EACH PROJECT AND PRIORITIZED ORDER) TO BE SUBMITTED TO THE MINISTRY OF PLANNING AND INVESTMENT AND THE MINISTRY OF FINANCE FOR REVIEW.

BASED ON THE STATE BUDGET REVENUE PROJECTIONS FROM THE LANG SON BORDER GATE AREA AND THE PROPOSAL OF THE LANG SON PROVINCE PEOPLE'S COMMITTEE, THE MINISTRY OF FINANCE DETERMINES THE TOTAL AMOUNT OF STATE CAPITAL TO BE INVESTED ANNUALLY FOR THE LANG SON BORDER GATE AREA, BUT NOT LESS THAN 50% OF THE ANNUAL STATE BUDGET REVENUE IN THE LANG SON BORDER GATE AREA. THIS INVESTMENT CAPITAL WILL BE FUNDED THROUGH THE LANG SON PROVINCE DEPARTMENT OF FINANCE AND PRICES TO BE USED FOR THE LANG SON BORDER GATE AREA.

THE MINISTRY OF FINANCE AGREES WITH THE MINISTRY OF PLANNING AND INVESTMENT ON THE CAPITAL FOR EACH PROJECT, THE TOTAL CAPITAL INVESTMENT, AND RELATED ISSUES BEFORE THE MINISTRY OF PLANNING AND INVESTMENT ISSUES A DECISION TO APPROVE THE INVESTMENT PLAN FOR THE PERIOD 1997-2000 AND THE ANNUAL INVESTMENT PLAN USING THE SPECIFICALLY ALLOCATED STATE BUDGET CAPITAL FOR LANG SON PROVINCE.

BASED ON THE ANNOUNCEMENT BY THE MINISTRY OF PLANNING AND INVESTMENT REGARDING THE ANNUAL CAPITAL INVESTMENT FROM THE CENTRAL BUDGET FOR THE LANG SON BORDER GATE AREA, THE LANG SON PROVINCE PEOPLE'S COMMITTEE IS RESPONSIBLE FOR PREPARING THE CAPITAL USE PLAN QUARTERLY AND SUBMITTING IT TO THE MINISTRY OF FINANCE (NO LATER THAN THE 20TH DAY OF THE LAST MONTH OF THE PREVIOUS QUARTER).

BASED ON THE ANNUAL CAPITAL INVESTMENT PLAN, THE QUARTERLY CAPITAL USE PLAN PREPARED BY THE LOCALITY, AND THE ABILITY OF THE CENTRAL BUDGET AT EACH POINT IN TIME, THE MINISTRY OF FINANCE DETERMINES AND ANNOUNCES THE QUARTERLY CAPITAL ALLOCATION PLAN FOR THE LANG SON PROVINCE PEOPLE'S COMMITTEE.

THE STATE CAPITAL INVESTED IN THE LANG SON BORDER GATE AREA THROUGH THE PROVINCIAL BUDGET IS DETERMINED BASED ON THE ANNUAL STATE BUDGET REVENUE PROJECTIONS FROM THE LANG SON BORDER GATE AREA (EXCLUDING NON-TRANSFERABLE REVENUES SUCH AS SCHOOL FEES, MEDICAL FEES, FOREIGN AID, CITIZEN CONTRIBUTIONS, ETC.) AND WILL BE REVISED THE FOLLOWING YEAR BASED ON THE ACTUAL REVENUE OF THE PREVIOUS YEAR TO ADJUST THE CAPITAL INVESTMENT PLAN FOR THE NEXT YEAR. IF THE ACTUAL REVENUE DIFFERS FROM THE INITIAL BUDGET, THE DIFFERENCE WILL BE ADJUSTED INTO THE CAPITAL INVESTMENT PLAN FOR THE NEXT YEAR. THIS CAPITAL IS CONSIDERED A TARGETED SUBSIDY FROM THE CENTRAL BUDGET TO THE PROVINCE AND DOES NOT COUNT TOWARDS THE LOCAL BUDGET EXPENDITURE OBLIGATIONS.

FOR THE 1997 CAPITAL INVESTMENT FROM THE CENTRAL BUDGET FOR THE LANG SON BORDER GATE AREA THROUGH THE PROVINCIAL BUDGET, THE LANG SON PROVINCE PEOPLE'S COMMITTEE WILL WORK SPECIFICALLY WITH THE MINISTRY OF FINANCE AND THE MINISTRY OF PLANNING AND INVESTMENT ON THE AMOUNT AND PURPOSE OF THIS CAPITAL SO THAT THE MINISTRY OF FINANCE CAN ISSUE A DECISION.

2/ PROCEDURES, METHODS, ISSUANCE PROCEDURES, REPORTING REQUIREMENTS, AND FINAL ACCOUNTING FOR CAPITAL INVESTMENT IN THE LANG SON BORDER GATE AREA:

ACCORDING TO THE APPROVED ANNUAL AND QUARTERLY CAPITAL USE PLANS, THE MINISTRY OF FINANCE (CENTRAL BUDGET) ALLOWS THE LANG SON PROVINCE PEOPLE'S COMMITTEE (LOCAL BUDGET), WHO THEN TRANSFERS THE CAPITAL TO THE PROJECTS (STATE CAPITAL INVESTED IN THE LANG SON BORDER GATE AREA THROUGH THE PROVINCIAL BUDGET).

ALL CAPITAL FROM THE CENTRAL BUDGET ALLOCATED TO THE LANG SON PROVINCE PEOPLE'S COMMITTEE MUST BE USED FOR THE PURPOSE OF BUILDING INFRASTRUCTURE PROJECTS LISTED IN THE APPROVAL OF THE MINISTRY OF PLANNING AND INVESTMENT AND MUST BE MANAGED IN ACCORDANCE WITH CURRENT REGULATIONS ON CAPITAL MANAGEMENT FOR BASIC CONSTRUCTION PROJECTS.

THE CAPITAL INVESTED IN THE LANG SON BORDER GATE AREA THROUGH THE PROVINCIAL BUDGET IS REFLECTED IN THE MONTHLY AND ANNUAL LOCAL BUDGET REPORTS, BUT SEPARATELY FOR THE INFRASTRUCTURE PROJECTS IN THE LANG SON BORDER GATE AREA (INCLUDING BOTH THE SPECIFICALLY ALLOCATED CAPITAL AND THE CAPITAL RAISED BY THE PROVINCE).

EVERY QUARTER, THE PROVINCE IS RESPONSIBLE FOR REPORTING TO THE MINISTRY OF FINANCE AND THE MINISTRY OF PLANNING AND INVESTMENT ON THE IMPLEMENTATION OF THE CONSTRUCTION AND CAPITAL DISTRIBUTION FOR EACH PROJECT, AND AT THE END OF THE YEAR, REPORT TO THE PRIME MINISTER (COPIES TO THE MINISTRY OF FINANCE AND THE MINISTRY OF PLANNING AND INVESTMENT) ON THE YEARLY IMPLEMENTATION RESULTS.

3/ THE PREPARATION OF THE BUDGET PROJECTIONS, MANAGEMENT, DISTRIBUTION, AND FINAL ACCOUNTING OF THE CAPITAL FUNDS FROM THE STATE BUDGET FOR THE CONSTRUCTION AND DEVELOPMENT OF INFRASTRUCTURE IN THE LANG SON BORDER GATE AREA MUST COMPLY WITH THE REGULATIONS OF THE STATE BUDGET LAW, DECREE 87/CP OF THE GOVERNMENT ON DECEMBER 19, 1996, AND CIRCULAR 09 TC/NSNN OF THE MINISTRY OF FINANCE ON MARCH 18, 1997.

VI/ IMPLEMENTATION

THIS CIRCULAR SHALL TAKE EFFECT FROM SEPTEMBER 26, 1997, AND ANY PROVISIONS CONTRARY TO THIS CIRCULAR SHALL BE ABROGATED.

During the implementation process, if there are any difficulties, please reflect them to the Ministry of Finance for research and resolution./.

 

ANNEX 1

LIST OF AREAS ELIGIBLE FOR CORPORATE INCOME TAX INCENTIVES
(ISSUED ACCOMPANYING CIRCULAR NO. 08/1998/TT-BTC OF THE MINISTRY OF FINANCE ON JANUARY 15, 1998)

1/ GROUP A: URBAN INFRASTRUCTURE CONSTRUCTION, INCLUDING:

- NEW CONSTRUCTION, RENOVATION, AND EXPANSION OF POWER PLANTS, DEVELOPMENT OF ELECTRICITY NETWORKS, CONSTRUCTION OF SOLAR ENERGY, WIND ENERGY, AND BIOGAS UTILIZATION FACILITIES.

- NEW CONSTRUCTION, UPGRADE OF ROADS, INCLUDING BRIDGES; NEW CONSTRUCTION, UPGRADE, AND MODERNIZATION OF AIRPORTS; NEW CONSTRUCTION, UPGRADE OF PORTS AND HARBOURS.

- Upgrading and developing telecommunications networks;

- CONSTRUCTION OF WATER SUPPLY PLANTS AND SYSTEMS FOR INDUSTRIAL AND DOMESTIC USE, SEWERAGE SYSTEMS; ENVIRONMENTAL PROTECTION; WASTE MANAGEMENT (INCLUDING SOLID, LIQUID, AND GASEOUS WASTES).

- NEW CONSTRUCTION, EXPANSION, AND UPGRADE OF HOUSING FOR RENT.

- INFRASTRUCTURE CONSTRUCTION AND OPERATION IN MARKETS; CONSTRUCTION AND LEASING OF RETAIL STALLS.

2/ GROUP B: INVESTMENT IN RAW MATERIALS, MATERIALS, AND OTHER INPUTS FOR PRODUCTION; PRODUCTION, PROCESSING, AND EXTRACTION OF FOREST PRODUCTS, AGROFORESTRY PRODUCTS, AND EXPORT GOODS:

- PRODUCTION OF CEMENT, TILES, STONE, SAND, GRAVEL, LIME, CONCRETE (DRY AND WET).

- PRODUCTION OF IRON AND STEEL.

- PRODUCTION OF OTHER INPUT MATERIALS FOR PRODUCTION.

- FOOD PRODUCTION AND PROCESSING; RECYCLING FOR EXPORT.

- FOREST PRODUCT EXTRACTION AND PROCESSING.

- FRUIT TREE AND SHORT-TERM AND LONG-TERM AGROFORESTRY CROP PLANTATION AND HARVESTING.