Circular No. 82/2006/TT-BTC guiding the tax incentives for corporate income tax applicable to the Guarantee Fund for Small and Medium Enterprises

CIRCULAR

Guidelines for Implementing Tax Incentives on Corporate Income Tax for the Credit Guarantee Fund for Small and Medium Enterprises

regarding the Guarantee Fund for Small and Medium Enterprises' Credit

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Pursuant to the Law on Corporate Income Tax dated June 17, 2003;

Pursuant to Decree No. 164/2003/NĐ-CP dated December 22, 2003 of the Government detailing the implementation of the Law on Corporate Income Tax and Decree No. 152/2004/NĐ-CP dated August 6, 2004 of the Government amending and supplementing certain articles of Decree No. 164/2003/NĐ-CP;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decision No. 193/2001/QĐ-TTg dated December 20, 2001 of the Prime Minister on the establishment, organization, and operation of the Credit Guarantee Fund for Small and Medium Enterprises and Decision No. 115/2004/QĐ-TTg dated June 25, 2004 of the Prime Minister amending and supplementing the regulations on the establishment, organization, and operation of the Credit Guarantee Fund for Small and Medium Enterprises issued together with Decision No. 193/2001/QĐ-TTg;

After receiving the guidance from the Prime Minister as stated in Circular No. 6592/VPCP-KTTH dated November 15, 2005 of the Government Office, the Ministry of Finance provides guidelines for tax incentives on corporate income tax for the Credit Guarantee Fund for Small and Medium Enterprises as follows:

I. APPLICABLE OBJECTS AND SCOPE OF REGULATION

1. The objects entitled to enjoy tax incentives on corporate income tax under these Guidelines include the Credit Guarantee Fund for Small and Medium Enterprises and local financial funds assigned by the Chairman of the Provincial People's Committee to undertake credit guarantee activities for small and medium enterprises (hereinafter referred to as the Credit Guarantee Fund) as stipulated in the Regulations on the Establishment, Organization, and Operation of the Credit Guarantee Fund for Small and Medium Enterprises issued together with Decision No. 193/2001/QĐ-TTg dated December 20, 2001 and Decision No. 115/2004/QĐ-TTg dated June 25, 2004 of the Prime Minister.

2. The tax incentives under these Guidelines shall only apply to the credit guarantee activities for small and medium enterprises conducted by the Credit Guarantee Fund.

II. TAX INCENTIVES ON CORPORATE INCOME TAX

1. Corporate Income Tax Rate

1.1. New Credit Guarantee Funds established in areas not included in List B or List C attached to Decree No. 164/2003/NĐ-CP dated December 22, 2003 of the Government detailing the implementation of the Law on Corporate Income Tax (hereinafter referred to as List B, List C) shall be subject to a tax rate of 20% for ten years, starting from the date of commencement of credit guarantee activities for small and medium enterprises.

1.2. New Credit Guarantee Funds established in areas included in List B shall be subject to a tax rate of 15% for twelve years, starting from the date of commencement of credit guarantee activities for small and medium enterprises.

1.3. New Credit Guarantee Funds established in areas included in List C shall be subject to a tax rate of 10% for fifteen years, starting from the date of commencement of credit guarantee activities for small and medium enterprises.

1.4. Existing Credit Guarantee Funds that have projects to expand their scale of credit guarantee activities shall be subject to the following tax rates on additional income generated from such expansion projects:

- In cases where the expansion project is located in the same area as the main office of the Credit Guarantee Fund, the current applicable tax rate shall be applied, starting from the date the project is completed and put into use;

- In cases where the expansion project is located in an area different from the location of the main office of the Credit Guarantee Fund and this area does not belong to List B or List C, a tax rate of 20% for ten years shall be applied, starting from the date the project is completed and put into use;

- In cases where the expansion project is located in an area different from the location of the main office of the Credit Guarantee Fund and this area belongs to List B, a tax rate of 15% for twelve years shall be applied, starting from the date the project is completed and put into use;

- In cases where the expansion project is located in an area different from the location of the main office of the Credit Guarantee Fund and this area belongs to List C, a tax rate of 10% for fifteen years shall be applied, starting from the date the project is completed and put into use.

2. Period of Exemption and Reduction of Tax

2.1. New Credit Guarantee Funds established in areas not included in List B or List C shall be exempted from corporate income tax for two years, starting from the date they generate taxable income, and shall have their tax reduced by 50% for the next three years; if they also meet the condition of employing many workers as stipulated in Clause 2, Article 33 of Decree No. 164/2003/NĐ-CP amended and supplemented at Clause 2, Article 1 of Decree No. 152/2004/NĐ-CP dated August 6, 2004 of the Government, then the period during which the tax is reduced by 50% will be extended to five years.

2.2. New Credit Guarantee Funds established in areas included in List B shall be exempted from corporate income tax for three years, starting from the date they generate taxable income, and shall have their tax reduced by 50% for the next seven years; if they also meet the condition of employing many workers as stipulated in Clause 2, Article 33 of Decree No. 164/2003/NĐ-CP amended and supplemented at Clause 2, Article 1 of Decree No. 152/2004/NĐ-CP, then the period during which the tax is reduced by 50% will be extended to eight years; if they also meet the condition of employing many workers, including more than 30% of the total number of workers being ethnic minority workers, then the period during which the tax is reduced by 50% will be extended to nine years.

2.3. New Credit Guarantee Funds established in areas included in List C shall be exempted from corporate income tax for four years, starting from the date they generate taxable income, and shall have their tax reduced by 50% for the next seven years; if they also meet the condition of employing many workers as stipulated in Clause 2, Article 33 of Decree No. 164/2003/NĐ-CP amended and supplemented at Clause 2, Article 1 of Decree No. 152/2004/NĐ-CP, then the period during which the tax is reduced by 50% will be extended to eight years; if they also meet the condition of employing many workers, including more than 30% of the total number of workers being ethnic minority workers, then the period during which the tax is reduced by 50% will be extended to nine years.

2.4. The credit guarantee fund implementing an investment project to expand the scale of credit guarantee services for small and medium-sized enterprises shall be exempted from corporate income tax or have their corporate income tax reduced for the additional income generated by the expanded investment project as follows:

a) Exempted from tax for one year and have 50% of the tax payable reduced for the next four years if the investment project is carried out in areas not included in Category B or Category C;

b) Exempted from tax for three years and have 50% of the tax payable reduced for the next five years if the investment project is carried out in areas included in Category B;

c) Exempted from tax for four years and have 50% of the tax payable reduced for the next seven years if the investment project is carried out in areas included in Category C.

The period of tax exemption and reduction shall be calculated from the year the investment project is completed and begins operations.

The credit guarantee fund must separately account for the additional income generated by the investment to determine the amount of corporate income tax that is exempted or reduced. In cases where the credit guarantee fund cannot separately account for the additional income generated by the investment, the additional income that is exempted from tax or has its tax reduced shall be determined as follows:

The total actual original cost of fixed assets used in the operations of the credit guarantee fund includes: the value of newly completed and handed over fixed assets for use in credit guarantee activities and the original cost of existing fixed assets currently used for production and business operations according to the end-of-year balance sheet.

3. For activities outside credit guarantee services for small and medium-sized enterprises, the credit guarantee fund must organize separate accounting for revenue, expenses, and income from those activities and fulfill corporate income tax obligations in accordance with the provisions of the law; in cases where separate accounting is not possible, the income from credit guarantee services for small and medium-sized enterprises eligible for tax benefits shall be determined based on the ratio between the revenue from credit guarantee services for small and medium-sized enterprises and the total revenue of the credit guarantee fund.

III. IMPLEMENTATION

1. The principles and procedures for enjoying corporate income tax benefits as stipulated in Section II of this Circular shall be implemented in accordance with the guidelines provided in Section IV, Part E, Circular No. 128/2003/TT-BTC dated December 22, 2003, issued by the Ministry of Finance to guide the implementation of Decree No. 164/2003/NĐ-CP dated December 22, 2003, of the Government detailing the implementation of the Law on Corporate Income Tax, and in accordance with the guidelines provided in Circular No. 88/2004/TT-BTC dated August 6, 2004, issued by the Ministry of Finance amending and supplementing Circular No. 128/2003/TT-BTC.

Other tax regulations shall be implemented in accordance with current laws.

2. This Circular shall take effect fifteen days after its publication in the Official Gazette. Credit guarantee funds established before this Circular takes effect shall enjoy corporate income tax benefits as stipulated in this Circular for the remaining benefit period. The remaining period of preferential tax rate shall be determined by subtracting the time from when the credit guarantee fund began operating until the date this Circular takes effect from the period during which the preferential tax rate was enjoyed according to the guidance in Clause 1, Section II of this Circular. The remaining period of tax exemption and reduction shall be determined by subtracting the time from when the credit guarantee fund had taxable income from credit guarantee services for small and medium-sized enterprises until the date this Circular takes effect from the period during which tax exemption and reduction were enjoyed according to the guidance in Clause 2, Section II of this Circular.

During the implementation process, if any difficulties arise, units are requested to report to the Ministry of Finance for research and resolution./.