Though foreign investors in Vietnam have been offered very attractive tax and land policies, MOF still believes that more incentives should be given to help Vietnam become more competitive with Indonesia, Thailand, Myanmar and India in luring foreign direct investment (FDI).
The ministry has suggested offering higher tax incentives to projects with a high level of investment capital.
It has suggested that a preferential corporate income tax rate of 10 percent be offered to projects with modern technologies that are being used for the first time in Vietnam or in Southeast Asia; to projects that make products with turnover of over VND20 trillion a year; and to export-processing enterprises employing more than 6,000 workers.
The low tax rate of 10 percent instead of 25 percent would be applied for the first 30 years, once the projects begin to have taxable incomes, which means 15 years longer than stipulated in current regulations.
An analyst commented that MOF’s suggestions show a new policy pursued by Vietnam in attracting FDI. It now targets big investors which will commit to large-scale projects and high-technology projects.
A report by the Ministry of Planning and Investment (MPI) showed there are 123 licensed FDI projects with registered investment capital of over VND6 trillion (the threshold for one enterprise to be listed as a major investment project).
The 123 projects have total registered capital of $139 billion, accounting for 57 percent of the total FDI capital in Vietnam. Of these, 63 FDI projects have investment capital of VND12 trillion and higher. They have total capital of $116.3 billion, or 48 percent of the FDI capital in the country.
MPI noted that most of the huge projects are in the infrastructure sector – power, telecommunications, petrochemistry and steel.
In addition, there are 15 foreign-invested thermopower projects under the mode of BOT (build-operate-transfer) capitalized at over VND12 trillion which are waiting approval from local authorities, or are still under negotiation.
All of the projects that satisfy the criteria are from major investors who have asked the government for the highest possible incentives.
An analyst said these companies always try to haggle with the government of Vietnam about investment incentives since they know the country lusts after huge investment projects.
Formosa, the Taiwanese investor, for example, has made several requests to the government recently, including a plan to establish a special economic zone specifically designed for the company’s project.
MOF predicted that tax incentives offered to investors would lead to a loss of VND1.8 trillion of taxes to the state coffers.
If the tax incentives proposed for companies in the support industry were approved, the state budget would suffer another tax loss of VND400 billion.
However, MOF said the loss would be offset by higher income generated by luxury taxes imposed on tobacco, beer, alcoholic drinks and casinos.
