Circular 16/2002/TT-BTC

CIRCULAR No. 16/2002/TT-BTC OF FEBRUARY 8, 2002 GUIDING THE FINANCIAL REGIME APPLICABLE TO LAO BAO TRADE ZONE, QUANG TRI PROVINCE

In furtherance of the Prime Minister�s Decision No.219/1998/QD-TTg of November 12, 1998 promulgating the Regulation on Lao Bao zone of Quang Tri province, where economic and trade development is promoted, and Decision No.08/2002/QD-TTg of January 11, 2002 amending and supplementing a number of articles of the Regulation on Lao Bao Trade Zone, Quang Tri province, promulgated together with Decision No.219/1998/QD-TTg of November 12, 1998, the Ministry of Finance hereby guides the financial regime applicable to Lao Bao Trade Zone, Quang Tri province, as follows:

I. SCOPE AND OBJECTS OF APPLICATION

1. Scope of application:

According to provisions in Article 2 of the Prime Minister�s Decision No.219/1998/QD-TTg of November 12, 1998, the scope of application of a number of financial policies provided for in this Circular covers the geographical areas of Lao Bao district town, Khe Sanh district town and communes of Tan Thanh, Tan Long, Tan Lien, Tan Lap and Tan Hop of Huong Hoa district, Quang Tri province.

The above-said geographical areas shall be collectively referred to as Lao Bao Trade Zone.

2. Subjects eligible for preferences:

Eligible for the financial preferences provided for in this Circular are Vietnamese and foreign organizations and individuals that conduct production and/or business activities in Lao Bao Trade Zone, including:

a/ Domestic investors of all economic sectors, being enterprises established under provisions of the Law on State Enterprises, the Law on Enterprises, the Law on Cooperatives, and private business households, individuals practicing professions independently, etc.

b/ Foreign organizations and individuals, including foreign-invested enterprises, foreign investors entering into business cooperation contracts, overseas Vietnamese who invest in the country in forms prescribed in the Law on Foreign Investment in Vietnam and foreign investors conducting business not under the Law on Foreign Investment in Vietnam.

Only business activities conducted in the geographical area of Lao Bao Trade Zone are eligible for the preferences provided for in this Circular. Where organizations and/or individuals, conduct business activities in both Lao Bao Trade Zone and inland Vietnam, they shall have to separately account their business activities conducted in the geographical area of Lao Bao Trade Zone to serve as basis for determining the preferential regime.

For enterprises which were granted operation licenses before the date of promulgation of Decision No.219/1998/QD-TTg of November 12, 1998 but have not enjoyed all the preferences, they shall request the investment licensing agency, the agency that has granted certificates of investment preferences or business registration certificates to make supplements thereto, which shall serve as basis for them to enjoy the preferential policies provided for in this Circular.

II. SPECIFIC GUIDANCE

Organizations and individuals that invest in Lao Bao Trade Zone shall enjoy the preferences at the maximum levels applicable to investment projects in geographical areas with particularly difficult socio-economic conditions as specified in the November 12, 1996 Law on Foreign Investment in Vietnam, the June 9, 2000 Law Amending and Supplementing a Number of Articles of the Law on Foreign Investment in Vietnam and the May 20, 1998 Law on Domestic Investment Promotion (amended), as well as the preferences under the international treaties which Vietnam has signed or acceded to.

A. TAX, LAND RENT AND INVESTMENT LOAN PREFERENCES

1. Tax preferences:

1.1. Enterprise income tax:

- Projects for investment in Lao Bao Trade Zone by foreign-invested enterprises and foreign parties to business cooperation contracts shall be exempt from enterprise income tax for a period of 8 years after their taxable incomes are generated and enjoy the enterprise income tax rate of 10% for the subsequent years.

- Projects for investment in Lao Bao Trade Zone by domestic organizations and individuals shall be exempt from enterprise income tax for a period of 4 years after their taxable incomes are generated; enjoy the 50% reduction of the payable enterprise income tax amounts for 9 subsequent years; and enjoy the enterprise income tax rate of 15% for the subsequent years.

The concerned units shall have to produce to the direct tax management agencies their investment licenses, certificates of investment preferences and/or business registration certificates granted by the competent agencies, in which the tax exemption or reduction durations are clearly specified, for enjoyment of preferences.

- Foreign-invested enterprises and foreign parties to business cooperation contracts that use their earned incomes for reinvestment in Lao Bao Trade Zone shall be reimbursed by the tax agencies 100% of the enterprise income tax amounts already paid for the income amounts used for reinvestment, if they meet both the following conditions:

+ Their reinvestment capital is used for three years or more.

+ They have fully contributed the legal capital prescribed in the investment license.

Enterprise income tax amount to be reimbursed for the reinvested income shall be determined as follows:

L
Th = ����� x S
100 - S

In which:

Th: is the enterprise income tax amount to be reimbursed.

L: is the income amount divided after the payment of enterprise income tax used for reinvestment in Lao Bao Trade Zone.

S: is the enterprise income tax rate inscribed in the investment license.

The procedures for reimbursing enterprise income tax for reinvested profits shall be carried out according to the provisions in Item c, Clause 6, Section I, Part II of the Finance Ministry�s Circular No.13/2001/TT-BTC of March 8, 2001 guiding the implementation of regulations on taxes applicable to the investment forms under the Law on Foreign Investment in Vietnam.

- Organizations and individuals engaged in goods production and/or trading or service provision, foreign-invested enterprises and foreign parties to business cooperation contracts conducting business activities in Lao Bao Trade Zone, that, after making settlement of their incomes in a year with the tax agencies, suffer losses, may carry forward such losses to the subsequent years so that such losses can be cleared against their taxable incomes. The loss-carrying duration shall not exceed 5 years.

1.2. Export tax and import tax:

- All goods and service transactions between Lao Bao Trade Zone and the inland localities shall be regarded as export and import relations, and have to comply with all provisions of the current legislation on export and import.

- Goods on cross-border transportation or transit through the border-gate of Lao Bao Trade Zone on the basis of the agreement signed between the two governments or between the two countries� branches or localities under the Prime Minister�s permission shall not be subject to export tax and import tax.

- Goods originating from inland Vietnam and goods imported into Lao Bao Trade Zone from foreign countries shall be exempt from import tax.

- Goods produced, processed, recycled and/or assembled in Lao Bao Trade Zone, when being exported to foreign countries, shall be exempt from export tax.

- Goods subject to export tax brought into Lao Bao Trade Zone from inland Vietnam for export to foreign countries shall be subject to export tax payment according to the current regulations.

- Import tax on goods of various kinds brought from Lao Bao Trade Zone into inland Vietnam shall comply with the following regulations:

+ For goods originating from foreign countries (other than Laos), the import tax shall be paid according to the current regulations.

+ Goods of Lao origin shall enjoy import tax reduction as provided for in the Prime Minister�s Decision No.181/1998/QD-TTg of September 21, 1998 or under agreements reached between the two governments.

+ Goods produced, processed, recycled and/or assembled in Lao Bao Trade Zone without using raw materials and/or components imported from foreign countries, when being imported into inland Vietnam, shall not be subject to import tax.

+ For goods produced, processed, recycled and/or assembled in Lao Bao Trade Zone with the use of raw materials and components imported from foreign countries, when they are imported into inland Vietnam, the import tax shall be paid only for part of imported raw materials or components making up such goods.

Bases for determining payable import tax on part of raw materials or components imported from foreign countries and making up the goods imported into inland Vietnam include:

(a) Value of each category of raw materials or components making up each goods unit (calculated equal to CIF import price or domestic market price of raw materials or components of the same category (in VND) multiplied by wastage norm of each category of imported raw materials or components in each goods unit formulated by the concerned unit itself, which shall be held responsible before law for the truthfulness of such wastage norm);

(b) Quantity of goods imported into inland Vietnam;

(c) Import tax rate applicable to each category of raw materials or components.

+ The procedures for registering and declaring goods imported into inland Vietnam and paying taxes therefor shall comply with the provisions in Section C of the Finance Ministry�s Circular No.172/1998/TT-BTC of December 22, 1998 guiding the implementation of the Government�s Decrees No.54/CP of August 28, 1993 and No.94/1998/ND-CP of November 17, 1998 detailing the implementation of the Law on Export Tax and Import Tax and the Laws Amending and Supplementing a Number of Articles of the Law on Export Tax and Import Tax.

1.3. Special consumption tax:

- Goods and services subject to special consumption tax but consumed in Lao Bao Trade Zone shall be free from special consumption tax, including:

+ Goods and services subject to special consumption tax, which are produced, supplied and consumed in Lao Bao Trade Zone;

+ Goods and services subject to special consumption tax, which are imported from foreign countries into Lao Bao Trade Zone or domestically produced and exported directly into Lao Bao Trade Zone.

- Goods and services subject to special consumption tax, which are exported from Lao Bao Trade Zone to foreign countries, shall be free from special consumption tax.

- Goods and services subject to special consumption tax, which are imported from Lao Bao Trade Zone into inland Vietnam, shall be liable to special consumption tax payment according to the current regulations.

- Goods and services subject to special consumption tax, if being on cross-border transportation or transit through border-gates within Lao Bao Trade Zone on the basis of agreement already signed between the two governments or the two countries� branches or localities under the Prime Minister�s permission, shall be free from special consumption tax.

1.4. Value added tax:

- Goods and services produced, provided and consumed in Lao Bao Trade Zone shall not be liable to value added tax;

- Goods and services imported into Lao Bao Trade Zone from foreign countries shall not be subject to value added tax;

- Goods and services imported from inland Vietnam into Lao Bao Trade Zone shall enjoy the value added tax rate of 0%.

- Goods and services imported from Lao Bao Trade Zone into inland Vietnam shall be liable to value added tax according to the current regulations on value added tax on imported goods.

1.5. Other taxes, charges and fees:

Other taxes, charges and fees shall comply with the current provisions in the tax laws, the Law on Domestic Investment Promotion (amended), the Law on Foreign Investment in Vietnam and other legal documents.

2. Land rent preference:

Organizations and individuals that have projects on investment in Lao Bao Trade Zone shall be exempt from land rents for the first 11 years counting from the dates the land lease contracts are signed and enjoy the land rent rate equal to 30% of the rate applicable to the mountainous districts of Quang Tri province as from the 12th year.

Organizations and individuals shall have to produce to the direct tax management agencies their investment licenses or certificates of investment preferences and business registration certificates granted by the competent agencies, which clearly state the land rent exemption or reduction, for enjoyment of the preference.

3. Investment loan preference:

Vietnamese enterprises of all economic sectors, which invest in the production and/or business in Lao Bao Trade Zone, shall be considered by the Development Assistance Fund for borrowing of the State�s credit capital according to the provisions of the Government�s Decree No.43/1999/ND-CP of June 29, 1999 on the State�s development investment credit, and other current regulations on borrowing of the State�s credit capital. In cases where the Prime Minister decides to readjust the State credit lending interest rates, they shall enjoy the new lending interest rates under the Prime Minister�s decisions.

B. COMMENDATION AND REWARDS TO ORGANIZATIONS AND INDIVIDUALS THAT HAVE MADE MERITS IN CALLING FOR NON-REFUNDABLE INVESTMENT CAPITAL (OUTSIDE THE STATE BUDGET SOURCE)

1. Basing themselves on their respective provinces� budgetary capabilities, the presidents of the provincial People�s Committees shall decide to reward the organizations and individuals that have made merits in calling for non-refundable investment capital (outside the State budget source), such as non-refundable aids directly provided by organizations and individuals at home and overseas (other than supports from the State budget) for investment in economic and social infrastructure projects in Lao Bao Trade Zone, a sum of money at most equal to 1% of the total value of non-refundable aid capital and not exceeding USD 50,000. Those aids, when being effected, must be mutually ceased through the local budget of Quang Tri province according to the regulations.

2. Funds used for rewarding organizations and individuals that have made merits in calling for non-refundable investment capital (capital outside the State budget source) for investment in economic and social projects in Lao Bao Trade Zone shall be deducted from the rewarding source of the local budget and accounted into the item of irregular rewards.

C. MANAGEMENT OF CAPITAL REINVESTED FROM THE STATE BUDGET IN CONSTRUCTING THE INFRASTRUCTURE IN LAO BAO TRADE ZONE

Basing itself on the actual State budget revenues collected in Lao Bao Trade Zone (excluding value added tax on imports, mutual ceasing, revenues not involved in local budget balance such as confiscated smuggled goods, contributions by people, schooling fee, hospital fee, aids, etc.), the State shall make reinvestment in constructing the infrastructure of Lao Bao Trade Zone at the following levels: 100% of the annual State budget revenue actually collected in Lao Bao Trade Zone if it is below VND 50 billion/year; VND 50 billion and 50% of the remainder of the actually collected State budget revenue if it reaches VND 50 billion/year or more.

The management and use of capital reinvested by the central budget in constructing infrastructure of Lao Bao Trade Zone shall comply with the provisions in Part III of the Finance Ministry�s Circular No.59/2001/TT-BTC of July 17, 2001 guiding the financial policies applicable to border-gate economic zones.

D. FINANCIAL REGIME APPLICABLE TO THE MANAGEMENT BOARD OF LAO BAO TRADE ZONE

1. The Management Board of Lao Bao Trade Zone is a State budget drafting unit. All the funds for operation of the Management Board of Lao Bao Trade Zone shall be provided by the State budget, while all revenues collected by it according to the regulations shall be remitted into the State budget according to the current State budget management decentralization.

2. The Management Board of Lao Bao Trade Zone shall be allowed to collect various charges and fees upon performing its tasks authorized by the State management agencies according to the current regulations. When authorized by the competent agencies to perform such tasks, the Management Board of Lao Bao Trade Zone shall have to notify and register with the tax agency of the locality where the Management Board is located for carrying out the procedures for remitting charge and fee amounts collected due to the performance of authorized tasks.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect after its signing. Any problems arising in the course of implementation should be reported to the Finance Ministry for study and solution.

For the Minister of Finance
Vice Minister
TRAN VAN TA