Chapter IX
FINANCIAL MATTERS
Article 66
An enterprise with foreign owned capital and the foreign parties to business co-operation contracts shall be liable to pay profits tax at the rate of twenty-five (25) per cent of the profits earned, except in cases which are within the incentive category where foreign investment is encouraged as provided for in article 67 of this Decree.
In relation to the exploitation of oil and gas and a number of other rare and precious natural resources the profits tax rate applicable shall be determined on a case by case basis, taking into account the nature and activities of the project, but shall b e no less than twenty-five (25) per cent of the profits earned.
Article 67
The profits tax rates applicable to the incentive category shall be as follows:
1. A rate of twenty (20) per cent shall apply to investment projects which satisfy two of the following criteria:
- Five hundred (500) or more people are employed;
- Advanced technology is introduced;
- At least eighty (80) per cent of products are exported;
- The prescribed capital of the enterprise or the capital contributed to a contractual business co-operation is no less than ten (10) million US dollars.
2. A rate of fifteen (15) per cent shall apply to the following investment projects:
- Infrastructure construction projects;
- Exploitation of natural resources (except oil, gas, and a number of rare and precious resources);
- Heavy industries such as metallurgy, basic chemicals, machinery manufacturing and cement;
- Cultivation of perennial industrial crops;
- Investment projects which are located in mountainous regions, and other regions where natural, economic, and social conditions are unfavorable (including hotel projects but excluding projects for the exploitation of rare and precious minerals); and
- Projects where all assets are assigned to Vietnam after the expiration of duration of operation without payment of any compensation (including hotel projects).
3. A ten (10) per cent rate shall apply to enterprises with foreign owned capital involved in:
- Infrastructure construction projects which are located in mountainous regions, and other regions where natural, economic, and social conditions are unfavorable;
- Reforestation projects;
- Projects of special significance.
Article 68
The tax rates provided for in article 67 of this Decree shall not apply to hotel projects (except in cases where the investment is located in mountainous regions, and other regions where natural, economic, and social conditions are unfavorable, or in case s where all assets shall be assigned to Vietnam after the expiration of the duration of operations without any compensation), and projects in the fields of banking, finance and insurance and accounting, auditing and commercial services.
Article 69
Exemptions from and reductions of profits tax shall be granted to enterprises with foreign owned capital as follows:
1. In respect of the projects stated in article 66 of this Decree, an enterprise may be exempted from payment of profits tax for one year as from the time it starts to make profit and may be granted a fifty (50) per cent reduction of profits tax for a maximum period of the two subsequent years.
2. In respect of the projects stated in paragraph 1 of article 67, an enterprise may be exempted from payment of profits tax for two years commencing from the first profit-making year and may be granted a fifty (50) per cent reduction of profits tax for a maximum period of the three subsequent years.
3. In respect of the projects stated in paragraph 2 of article 67, an enterprise shall be exempted from payment of profits tax for two years commencing from the first profit-making year and shall be granted a fifty (50) per cent reduction of profits tax for the four successive years.
4. In respect of the projects stated to in paragraph 3 of article 67, an enterprise shall be exempted from payment of profits tax for four years commencing from the first profit-making year and shall be granted a fifty (50) per cent reduction of profits tax for the four successive years.
5. The provisions in relation to exemption from profits tax which are stipulated in this article shall not apply to hotel projects (except in cases where the investment is located in the mountainous regions, and other regions where natural, economic, and social conditions are unfavorable, or in cases where all assets shall be transferred to Vietnam after the expiration of the duration of the operations without any compensation), and projects in the fields of banking, finance and insurance and account ing, auditing and commercial services.
Article 70
A foreign economic organization or individual shall, on the transfer of profits abroad, pay a withholding tax at the following rates:
1. for a foreign economic organization or individual which has contributed no less than ten (10) million US dollars to the prescribed capital or capital of a business co-operation: five per cent of total profits transferred.
2. for a foreign economic organization or individual which has contributed no less than five million US dollars to the prescribed capital or capital of a business co-operation: seven per cent of total profits transferred.
3. for all other cases not described in clauses 1 and 2 of this article: ten (10) per cent of total profits transferred.
Article 71
The State Committee for Co-operation and Investment shall, after receipt of recommendations, in writing, of the Ministry of finance, decide on a case by case basis the specific tax rates to be applied, the time period during which the tax rates apply and the circumstances where exemptions from and reductions of tax are allowed in accordance with the provisions of articles 66, 67, 69 and 70 of this Decree.
Where an enterprise with foreign owned capital or a foreign party to a contractual business co-operation, during the period of implementation of the project, ceases to satisfy the conditions for encouragement of the investment, the State Committee for Co- operation and Investment shall adjust the tax rates and permission for exemptions from and reductions of tax stipulated in the license.
Article 72
A foreign economic organization which, or individual who, for a period of three years or more, reinvests any part of its or his or her share of the profits earned, shall be entitled to a refund from the tax office of the amount of profits tax paid on that part of those profits.
Article 73
The tax year applicable to an enterprise with foreign owned capital and to contracting parties shall commence on the first day of January and end on the thirty first day of December of each year.
Enterprises with foreign owned capital or contracting parties may, however, apply to the Ministry of finance for permission to adopt an alternative twelve (12) month period for accounting and tax payment purposes.
Article 74
The taxable profits of an enterprise with foreign owned capital shall be the difference between its revenue and expenditure plus other additional profit of the enterprise, in the tax year. The taxable profits of an enterprise shall include both those of its headquarters and any branch establishments.
(a) Revenue shall include revenue from sales of products, or provision of services and other revenue of the enterprise.
(b) Expenditure shall include:
- Costs of raw and other materials and fuel required for the manufacture of principal products and by-products or for the provision of services;
- Wages, salaries and allowances paid to employees;
- Depreciation of fixed assets used in production and business operations;
- Costs of acquisition of or fees paid for the right to use technical documents, patents, or technology and costs of technical services;
- Enterprise management expenses;
- Taxes paid and imposts in the nature of taxation;
- Interest payments on loans;
- Costs and expenses directly connected with the marketing of products or the provision of services;
- Payments to the social insurance fund;
- Costs of insurance of the assets of the enterprise;
- Any losses brought forward from previous years;
- Other expenditure not exceeding five per cent of the total amount of expenditure.
The taxation office has the power to consider the reasonableness of claimed revenue and expenditure.
Article 75
The method, by which profits earned from business co-operation contracts shall be calculated, shall be determined by the State Committee for Co-operation and Investment, taking into account the type of co-operation and the proposals of the contracting par ties.
In the case of production sharing contracts, all benefits enjoyed by the Vietnamese party, such as the right to use land, water surface, sea surface, and any royalty received, shall be aggregated with its share of the production for the purposes of calculation of profits tax to be paid.
Article 76
An enterprise with foreign owned capital and contracting parties shall be entitled to exemption from import duties in the following cases:
1. Where the imported equipment, machinery, spare parts, production and business facilities, (including transport vehicles), and other materials are utilized in capital construction to establish the enterprise, or are part of the fixed assets of contractual business co-operation.
2. Where the imported raw materials, components, spare parts and materials are utilized in the production of goods for export, import duties shall be temporarily levied on the imported goods and shall be refunded in proportion to the export of finish ed goods when the finished goods are exported.
3. Patents, technical know-how, technology processes and technical services to be used by the foreign party as a contribution to the prescribed capital of an enterprise with foreign owned capital or as initial capital in a contractual business co-operation, shall be exempt from any tax applicable to transfers of technology.
4. All the imported goods referred to in clauses 1 and 2 of this article shall, if sold or otherwise disposed of in Vietnam, be subject to the approval of the Ministry of Commerce, and the payment of import duties, turnover tax or special sales tax i n accordance with the provisions of the law of Vietnam.
Article 77
An enterprise with foreign owned capital or the foreign party to a contractual business co-operation shall pay other taxes in accordance with the law of Vietnam.
Article 78
Foreign and Vietnamese individuals who are employed by enterprises with foreign owned capital or in relation to a business co-operation contract shall pay personal income tax in accordance with the Ordinance on Income Tax of High Income Earners dated 27 December 1990.
Article 79
Enterprises with foreign owned capital and contracting parties shall pay royalties and rents for land, water surface, and sea surface in the event that such royalties and rents are not part of the capital contribution of the Vietnamese party as provided f or in article 7 of the foreign Investment Law.
Rents for land, water surface or sea surface shall be stipulated by the Ministry of finance.
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