Decision No. 33/2009/QD-TTg Issuing financial mechanisms and policies for border economic zones

Pursuant to …;

Issuing financial mechanisms and policies for border economic zones

________________________

PRIME MINISTER

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to Decree No. 108/2006/NĐ-CP dated September 22, 2006, of the Government detailing and guiding certain provisions of the Investment Law;

Pursuant to Decree No. 29/2008/NĐ-CP dated March 14, 2008 of the Government on industrial zones, export processing zones, and economic zones;

Considering the proposal of the Minister of Finance,

DECISION:

Chapter 1.

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decision stipulates the financial mechanisms and policies for border economic zones and duty-free zones within border economic zones established by the Prime Minister's Decision.

Article 2. Applicability

1. The Management Board of the border economic zone under the provincial People's Committee, established by the Prime Minister's decision, shall have functions, tasks, powers, and be organized and operated according to the provisions of Decree No. 29/2008/NĐ-CP dated March 14, 2008, of the Government on industrial parks, export processing zones, and economic zones (hereinafter referred to as Decree No. 29/2008/NĐ-CP).

2. Enterprises of various economic sectors invest in and operate technical infrastructure and social infrastructure in the border economic zone.

3. Investors with projects in accordance with the Investment Law, enterprises established in accordance with the Enterprise Law, and cooperatives established in accordance with the Cooperative Law in the border economic zone.

Article 3. Conditions for Application

Border economic zones and duty-free zones within border economic zones shall apply the financial mechanisms and policies as prescribed in this Decision if they meet the following conditions:

1. For border economic zones:

a) Established by the Prime Minister's decision;

b) Having a Management Board of the border economic zone as prescribed in Decree No. 29/2008/NĐ-CP.

2. For duty-free zones within border economic zones:

a) Having a Customs office to monitor and inspect goods and means of transport entering and exiting the duty-free zone.

b) Being separated from foreign territory by a fence system, with gates and entrances ensuring conditions for Customs and related authorities' control.

Article 4. Definitions

1. Border economic zone is an economic zone formed in border areas with international border gates or main border gates and established according to the conditions, procedures, and formalities prescribed in Decree No. 29/2008/NĐ-CP.

2. Duty-free zone within border economic zone includes: export processing zones, export processing enterprises, bonded warehouses, bonded areas, customs warehouses, special economic trade zones, industrial trading zones, and other economic zones established by the Prime Minister's Decision, having trade relations with outside areas as export and import transactions and meeting the conditions stipulated in Clause 2, Article 3 of this Decision.

Chapter 2.

SPECIFIC PROVISIONS

PART I. CREDIT AND INVESTMENT POLICIES

Article 5. Sources of investment capital for infrastructure from the state budget

1. Projects for constructing technical infrastructure and social infrastructure in border economic zones shall be allocated funds from local development budgets.

2. The central government will support important infrastructure construction and social infrastructure projects. Conditions, principles, and types of works supported from the central budget shall be implemented according to the Prime Minister's Decision.

3. The management, use, and settlement of funds supported by the central government for the construction of border economic zone infrastructure shall be carried out in accordance with the laws on basic construction investment management, the State Budget Law, and other relevant laws.

Article 6. Raised Capital

1. Large-scale infrastructure technical and social infrastructure projects with key roles shall issue project bonds in accordance with Decree No. 141/2003/NĐ-CP dated November 20, 2003 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds.

2. The entire amount of money raised from issuing bonds shall be used to invest in projects that have been approved in accordance with the provisions of the law.

3. Foreign organizations and individuals, overseas Vietnamese are allowed to directly invest in border economic zones, including the application of build-operate-transfer (BOT), build-transfer (BT), and build-transfer-operate (BTO) forms.

4. Infrastructure technical construction projects, social infrastructure projects, and service utility and public construction projects necessary for border economic zones shall be included in the list of projects calling for official development assistance (ODA) capital support. The management and use of ODA capital support shall be carried out in accordance with the current legal regulations.

5. Investment projects within border economic zones may borrow funds from credit institutions and raise capital from domestic and foreign organizations and individuals in accordance with the provisions of the law.

6. For international border economic zones such as Lào Cai International Border Economic Zone (Lào Cai Province), Cầu Treo International Border Economic Zone (Hà Tĩnh Province), Lao Bảo Special Economic Trade Zone (Quảng Trị Province), An Giang Border Economic Zone (An Giang Province), Mộc Bài Border Economic Zone (Tây Ninh Province), Bờ Y International Border Economic Zone (Kon Tum Province), Đồng Đăng – Lạng Sơn Border Economic Zone (Lạng Sơn Province), Móng Cái International Border Economic Zone (Quảng Ninh Province), and Đồng Tháp Border Economic Zone (Đồng Tháp Province), in addition to the raised capital as stipulated in Clauses 1, 2, 3, 4, and 5 of this Article, they also can raise direct investment capital from domestic and foreign organizations and individuals, advance capital from entities requiring infrastructure usage, capital from enterprises with functions of constructing and operating technical infrastructure in border economic zones; apply state credit syndication form of credit institutions and mobilize all sources of investment capital under other forms in accordance with the provisions of the law.

Article 7. Capital from land fund of border economic zone

Provincial People's Committees shall use land use fee revenues and land lease fees in border economic zones to invest in building technical infrastructure and social infrastructure projects, service and utility projects necessary for common use in border economic zones or create capital for land clearance for the development of border economic zones in accordance with the provisions of the law.

Article 8. State Credit Capital

Investment projects within border economic zones shall enjoy state investment credit policies and export credit policies as stipulated in Decree No. 151/2006/NĐ-CP dated December 20, 2006 of the Government on state investment credit and export credit and Decree No. 106/2008/NĐ-CP dated September 19, 2008 of the Government amending and supplementing certain articles of Decree No. 151/2006/NĐ-CP dated December 20, 2006.

PART II. TAX, FEES, AND OTHER FINANCIAL POLICIES INCLUDING LAND RENT

Article 9. Corporate Income Tax Incentives

New enterprises established from investment projects in border economic zones shall enjoy corporate income tax incentives as specified in Decree No. 124/2008/NĐ-CP dated December 11, 2008, of the Government detailing and guiding the implementation of certain provisions of the Law on Corporate Income Tax, specifically as follows:

1. They shall be subject to a preferential tax rate of 10% for a period of 15 years. In cases where new enterprises are established from investment projects in fields specified in point b, Clause 1, Article 15 of Decree No. 124/2008/NĐ-CP dated December 11, 2008, of the Government, the duration of application of the preferential tax rate may be extended but the total duration of application of the 10% tax rate shall not exceed 30 years. The Prime Minister decides on extending the application period of the 10% preferential tax rate under this clause based on the proposal of the Minister of Finance.

2. They shall be exempted from corporate income tax for four years and have their corporate income tax reduced by 50% for the next nine years. The tax exemption and reduction period shall be calculated continuously from the first year the enterprise has taxable income from the investment project; if the enterprise does not have taxable income in the first three years from the first year it generates revenue from the investment project, the tax exemption and reduction period shall be calculated from the fourth year.

Article 10. Personal Income Tax Incentives

1. Vietnamese and foreign individuals working in border economic zones, with income derived from work in these zones, shall be subject to personal income tax according to the Law on Personal Income Tax and shall have their tax payable reduced by 50%.

2. Procedures for declaration, payment, and settlement of personal income tax shall be carried out in accordance with the provisions of the law.

Article 11. Value Added Tax Incentives

1. Goods and services produced and consumed within non-tariff zones in border economic zones, goods and services imported from abroad into non-tariff zones in border economic zones, and goods and services exported from non-tariff zones in border economic zones to abroad shall be exempt from value added tax.

2. Goods and services from other functional zones within border economic zones and goods and services brought into non-tariff zones in border economic zones from domestic areas of Vietnam shall be subject to a zero percent value added tax rate. The Ministry of Finance shall issue a list of goods to be inspected before refunding value added tax applicable to goods and services specified in this clause based on the proposal of the People's Committees of provinces with border economic zones.

3. Goods and services from non-tariff zones in border economic zones brought into consumption in other functional zones within border economic zones or brought into consumption in domestic areas of Vietnam shall be subject to value added tax as prescribed by law.

Article 12. Special Consumption Tax Incentives

1. Goods subject to special consumption tax produced and consumed within non-tariff zones in border economic zones or imported from abroad and from domestic areas of Vietnam into non-tariff zones in border economic zones shall be exempt from special consumption tax; however, passenger cars with fewer than 24 seats must pay special consumption tax as prescribed.

2. Goods subject to special consumption tax from non-tariff zones in border economic zones exported to abroad shall be exempt from special consumption tax.

3. Goods subject to special consumption tax from non-tariff zones in border economic zones brought into consumption in other functional zones within border economic zones or brought into consumption in domestic areas of Vietnam shall be subject to special consumption tax as prescribed.

Article 13. Tax Exemptions for Export and Import Taxes

1. Goods from duty-free zones within border economic zones that are exported to foreign countries or imported from foreign countries into duty-free zones within border economic zones and only used within such duty-free zones, goods transferred from one duty-free zone to another duty-free zone shall not be subject to export tax or import tax.

2. Goods produced, processed, recycled, or assembled in duty-free zones within border economic zones when exported to foreign countries shall be exempt from export tax.

3. Raw materials and supplies imported to serve production of investment projects within border economic zones shall be exempt from import tax for a period of five (5) years, starting from the date of commencement of production. The detailed classification of raw materials and supplies serving as the basis for tax exemption shall be carried out according to the guidelines of the Ministry of Industry and Trade.

Semi-finished products not yet produced domestically, imported to serve production of investment projects within border economic zones shall be exempt from import tax for a period of five (5) years, starting from the date of commencement of production. The determination of semi-finished products not yet produced domestically serving as the basis for tax exemption shall be carried out according to the list issued by the Ministry of Planning and Investment.

4. Goods produced, processed, recycled, or assembled in duty-free zones that do not use imported raw materials, supplies, spare parts, or semi-finished products from abroad when imported into Vietnam’s domestic market shall be exempt from import tax; in cases where imported raw materials, supplies, spare parts, or semi-finished products from abroad are used, then upon importing into Vietnam’s domestic market, import tax must be paid on the portion of imported raw materials, supplies, spare parts, or semi-finished products constituting the goods. The determination of the import tax payable on the portion of imported raw materials, supplies, spare parts, or semi-finished products from abroad constituting the goods imported into Vietnam’s domestic market shall be carried out as follows:

a) In cases where organizations or individuals have registered with customs authorities regarding the list of goods imported for use as raw materials, supplies, spare parts, or semi-finished products to produce imported goods into the domestic market and the quota of raw materials, supplies, spare parts, or semi-finished products used to produce imported goods before they enter Vietnam’s domestic market, the determination of the import tax payable shall be based on the quantity, tariff rate, and taxable value of the imported raw materials, supplies, spare parts, or semi-finished products from abroad constituting the goods.

b) In cases where it is not possible to determine the import tax according to the provisions of point a of this clause, the import tax shall be calculated based on the tariff rate and taxable value of the produced, processed, recycled, or assembled goods imported into Vietnam’s domestic market at the time of declaration of customs clearance.

5. Imported goods into duty-free zones within border economic zones for production that remain unused and retain commercial value may be sold into Vietnam’s domestic market and must pay import tax as prescribed.

6. For goods produced, processed, recycled, or assembled in duty-free zones within border economic zones if they meet the conditions for applying preferential import tax rates or special preferential import tax rates, they shall be subject to those tax rates according to the laws on export and import taxes.

Article 14. Preferential treatment for land rent and water surface rent

1. Investment projects in border economic zones shall be exempted from land rent and water surface rent in accordance with the provisions of Government Decree No. 142/2005/NĐ-CP dated November 14, 2005 on land rent and water surface rent, specifically as follows:

a) Exemption from land rent and water surface rent for investment projects in special fields encouraged for investment.

b) Exemption from land rent for 15 years starting from the date of completion and putting into operation for investment projects in fields encouraged for investment.

c) Exemption from land rent for 11 years starting from the date of completion and putting into operation for investment projects not covered by points a and b of this clause.

d) The list of special fields encouraged for investment and fields encouraged for investment as prescribed by laws on investment.

2. Domestic and foreign investors investing in the International Border Economic Zone of Lào Cai (Lào Cai Province), International Border Economic Zone of Cầu Treo (Hà Tĩnh Province), Special Economic Trade Zone of Lao Bảo (Quảng Trị Province), Border Economic Zone of An Giang (An Giang Province), Border Economic Zone of Mộc Bài (Tây Ninh Province), International Border Economic Zone of Bờ Y (Kon Tum Province), Border Economic Zone of Đồng Đăng – Lạng Sơn (Lạng Sơn Province), Border Economic Zone of Móng Cái (Quảng Ninh Province) and Border Economic Zone of Đồng Tháp (Đồng Tháp Province) when leasing land and water surfaces outside the scope of the preferential treatment prescribed in Clause 1 of this Article shall also apply a rental price equal to 30% of the rental price applicable at the lowest-priced district within the province according to the regulations of the provincial People's Committee, starting from the year the investor ceases to enjoy the preferential treatment prescribed in Clause 1 of this Article.

Article 15. Preferential treatment for land use fee

Investors who need to use land in border economic zones for production and business purposes and choose the form of transferring land with payment of land use fee shall be granted land with payment of land use fee by the State; they shall be exempted or reduced from land use fees in accordance with the provisions of Government Decrees No. 198/2004/NĐ-CP dated December 3, 2004 and No. 44/2008/NĐ-CP dated April 9, 2008 on land use fee collection.

Article 16. Policies on fees and charges

1. The Management Board of border economic zones shall be authorized to collect certain types of fees and charges related to the management activities of the Board in accordance with the regulations, including:

a) Fees for investment appraisal and registration fees for business registration certificates, information provision fees for business registration for investment projects within its jurisdiction.

b) Fees and charges related to issuing, reissuing, amending, supplementing and extending representative office establishment permits for foreign organizations and traders located in border economic zones; issuing business licenses for goods trading activities and other activities directly related to goods trading for foreign-invested enterprises and foreign investors making their first investment in border economic zones after receiving written approval from the Ministry of Industry and Trade.

c) Fees and charges related to issuing work permits for foreigners and overseas Vietnamese residing abroad working in border economic zones; issuing labor books for Vietnamese workers working in border economic zones.

d) Fees and charges related to issuing various certificates of origin for goods produced in border economic zones and other permits, certificates, and certifications related in border economic zones.

đ) Fees and charges related to confirming contracts and real estate documents in border economic zones for relevant organizations.

e) Fees and charges related to environmental impact assessment reports for investment projects within the jurisdiction of the provincial People's Committee in border economic zones.

2. The Management Board of border economic zones shall establish fee and charge levels applicable in border economic zones and submit them to competent authorities for promulgation in accordance with the law on fees and charges.

3. The fees and charges collected directly by the Management Board of border economic zones shall be partially returned to the state budget to offset organizational collection costs and supplementary operating expenses in accordance with the law.

Article 17. Policy on exploitation and utilization of infrastructure works in border economic zones

1. Investors with projects for production and business operations within border economic zones that use technical and social infrastructure works within such zones shall pay for the use of such infrastructure.

2. Enterprises investing in technical and social infrastructure within border economic zones shall organize management, exploitation, and collect fees from investors within the border economic zone for the use of infrastructure works they have invested in constructing; they may also organize the collection of fees for the use of other infrastructure construction works, service facilities, and public utilities within the border economic zone in accordance with the provisions of the law.

3. For common technical and social infrastructure works within border economic zones not covered by Clause 2 of this Article, the Border Economic Zone Management Board shall be responsible for organizing management, exploitation, maintenance, and collection of fees from investors within the zone to fund the maintenance and upkeep of these infrastructure works and ensure their operational conditions, in compliance with relevant laws.

Chapter 3.

IMPLEMENTATION

Article 18. Responsibilities of the Border Economic Zone Management Board

The Border Economic Zone Management Board has the authority and responsibility to manage state activities within the border economic zone in accordance with Chapter V of Decree No. 29/2008/ND-CP and the provisions of this Decision.

Article 19. Responsibilities of the People's Committee of provinces with border economic zones

1. Direct the preparation and approval of detailed construction planning for border economic zones and functional areas within such zones; direct the review and approval of basic design plans for investment projects developing infrastructure in functional areas within border economic zones.

2. Direct the implementation of land area recovery, water surface, compensation, clearance, resettlement, and the execution of procedures for leasing or allocating land within border economic zones in accordance with the laws on land and related laws.

3. Take the lead in preparing plans and reporting to the People's Council at the same level to decide on the use of local budget funds to invest in technical and social infrastructure systems within border economic zones in accordance with the laws on investment, state budget, and other relevant laws.

4. Carry out other state management tasks and powers over border economic zones as prescribed by law.

Article 20. Responsibilities of Ministries and Sectors

1. The Ministry of Planning and Investment, the Ministry of Finance, and the Ministry of Industry and Trade shall be responsible for managing and guiding localities with border economic zones in implementing policies stipulated in this Decision.

2. Other ministries and sectors within their respective functions shall be responsible for guiding localities with border economic zones in implementing the provisions of this Decision.

Article 21. Implementation clause

1. This Decision takes effect from May 1, 2009.

2. Investment projects already granted Investment License or Investment Certificate and currently enjoying more favorable incentives than those stipulated in this Decision, if they meet the conditions for preferential treatment, shall continue to enjoy the incentives specified in their Investment License or Investment Certificate for the remaining period. In cases where the incentives specified in the Investment License or Investment Certificate are lower than those stipulated in this Decision, they shall enjoy the incentives provided under this Decision for the remaining period.

3. Industrial trade zones located within border economic zones established by the Prime Minister before the effective date of this Decision, if they meet the conditions for duty-free zones, shall be subject to the preferential mechanisms and policies for duty-free zones as stipulated in this Decision.

4. Preferential tax regulations for tourists visiting duty-free zones within border economic zones promulgated before the effective date of this Decision shall continue to be implemented until June 30, 2009, and thereafter shall be implemented according to the Regulations on Duty-Free Sales issued together with Decision No. 24/2009/QĐ-TTg dated February 17, 2009, of the Prime Minister.

5. Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, Chairmen of People's Committees of provinces with border economic zones, and related organizations and individuals are responsible for enforcing this Decision./.