Official Letter No. 72/CTLAN-TTHT on Corporate Income Tax Incentives

GENERAL DEPARTMENT OF TAXATION LONG AN PROVINCIAL TAX OFFICE No. 72/CTLAN-TTHT Regarding Corporate Income Tax (CIT) Preferences		SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness Long An, January 7, 20255
To:	Takeishi Alloytool Vietnam Co., Ltd. Tax Code: 1102034257 Address: B2-1c Factory, Pre-built Factory Area B, Long Hau-Hiep Phuoc Road, Long Hau Industrial Park, Long Hau Commune, Can Giuoc District, Long An Province.

Response to Document No. 12/2024/CV-TAT from Takeishi Alloytool Vietnam Co., Ltd. (hereinafter referred to as the Company) regarding the corporate income tax (CIT) incentive policy according to the location. The Tax Department has the following opinions:

• According to item 43, Appendix III of the List of Areas Eligible for Investment Incentives issued together with Decree No. 31/2021/ND-CP dated March 26, 2021, by the Government, which details and guides the implementation of several provisions of the Investment Law, Can Giuoc District in Long An Province is not considered an area with difficult or especially difficult socio-economic conditions.

• Based on Article 10 of Circular No. 96/2015/TT-BTC dated June 22, 2015, of the Ministry of Finance, which amends and supplements several contents in Article 18 of Circular No. 78/2014/TT-BTC (as amended and supplemented in Article 5 of Circular No. 151/2014/TT-BTC), the following provisions are specified:

• Clause 1 of Article 10 amends and supplements Clause 3 of Article 18 of Circular No. 78/2014/TT-BTC as follows:

“3. The CIT incentives and the 20% tax rate (including enterprises subject to the 20% tax rate under Clause 2, Article 11 of Circular No. 78/2014/TT-BTC) do not apply to the following income:

a) Income from capital transfer, transfer of capital contribution rights; income from the transfer of real estate (except for income from investment in social housing business as stipulated in point d, Clause 3, Article 19 of Circular No. 78/2014/TT-BTC); income from the transfer of investment projects, transfer of the right to participate in investment projects, transfer of exploration and mining rights; income received from production and business activities outside Vietnam.

b) Income from activities such as searching, exploring, and mining oil, gas, and other rare resources, as well as income from mining activities.

c) Income from business services subject to special consumption tax as stipulated in the Special Consumption Tax Law.”

• Clause 2 of Article 10 amends and supplements Clause 4 of Article 18 of Circular No. 78/2014/TT-BTC as follows:

“4. Enterprises with investment projects eligible for CIT incentives due to meeting the investment area or sector incentives are entitled to CIT incentives as follows:

…

b) Enterprises with investment projects eligible for CIT incentives due to meeting the investment area conditions (including industrial zones, economic zones, high-tech zones) are entitled to CIT incentives on all income arising from production and business activities in the incentivized area, except for income specified in items a, b, c of Clause 1 of this Article.

…

• Enterprises with investment projects eligible for CIT incentives due to meeting the investment area conditions and generating income outside the project location:

(i) If the income arises in an area that is not part of the incentivized investment area, it will not be eligible for CIT incentives under the investment area conditions.

(ii) If the income arises in an area within the incentivized investment area, it will be eligible for CIT incentives based on the location conditions. The determination of CIT incentives for this income will depend on the time and level of CIT incentives for the business in the area where the project is located.”

• Clause 3 of Article 10 amends and supplements Clause 5 of Article 18 of Circular No. 78/2014/TT-BTC as follows regarding new investment projects:

“5. Regarding new investment projects:

a) A new investment project eligible for CIT incentives as defined in Articles 15 and 16 of Decree No. 218/2013/ND-CP includes:

• A project that receives its first investment certificate on or after January 1, 2014, and generates revenue after being granted the investment certificate.

• A domestic investment project associated with establishing a new enterprise with an investment capital of less than 15 billion VND and not part of the list of conditional investment sectors, and where the business registration certificate is granted after January 1, 2014.

• An independent investment project with an investment certificate granted on or after January 1, 2014, and not related to any ongoing project of the business.

• Projects that are established in areas with difficult or extremely difficult socio-economic conditions.

The new investment project must receive approval from the relevant state authorities or be granted an investment certificate according to investment law to enjoy the CIT incentive.”

b) The new investment project does not include the following cases:

• Projects that arise from splitting, merging, restructuring, or changing the form of the enterprise according to law;

• Projects originating from a change in ownership (including those that continue activities using the assets, business locations, and business sectors of a previously existing enterprise).

Enterprises that are established or have investment projects originating from ownership changes, mergers, or restructuring will continue to enjoy CIT incentives from their previous projects as long as the conditions remain met.”

c) For enterprises that are benefiting from corporate income tax incentives under the new establishment category, the tax incentives apply only to income from business operations that meet the investment incentive conditions as stated in the enterprise registration certificate or the initial investment certificate of the enterprise. For enterprises that are actively conducting business, if there are changes in the enterprise registration certificate or investment certificate, but such changes do not affect the fulfillment of the tax incentive conditions of the project according to regulations, the enterprise will continue to enjoy tax incentives for the remaining period or receive incentives for expansion investments if they meet the required conditions.

d) For investment projects that are licensed, and in the initial investment registration dossier sent to the licensing authority, the registered investment capital and investment phases are included, if subsequent phases are actually implemented, they are considered as sub-projects of the initial licensed investment project, as long as they follow the schedule (except for cases of force majeure, difficulties due to objective reasons such as land clearance, administrative procedures with state agencies, natural disasters, fires, or other force majeure events). Therefore, sub-projects of the initial investment project will enjoy tax incentives for the remaining period of the initial project starting from the point at which the sub-project generates income eligible for tax incentives.

+ According to Clause 4 of Article 10, Amendment, and Supplementation of Certain Contents in Point a, Clause 6 of Article 18 of Circular No. 78/2014/TT-BTC (which was amended and supplemented in Article 5 of Circular No. 151/2014/TT-BTC) regarding expansion investments:

“6. Regarding expansion investments
a) Enterprises with development projects expanding existing investment projects, such as expanding production scale, increasing capacity, and renewing production technology (hereinafter referred to as expansion investment projects), in sectors or areas eligible for corporate income tax incentives according to Decree No. 218/2013/ND-CP (including economic zones, high-tech zones, industrial parks except for industrial parks in urban districts of special-class cities, type I urban areas under central government management, and industrial parks in type I urban areas under provincial management), if they meet one of the three criteria stated in this point, will have the option to enjoy tax incentives according to the ongoing project for the remaining period (including the preferential tax rate, tax exemption, or reduction period, if any) or receive tax exemption or reduction for additional income generated from the expansion (without enjoying the preferential tax rate) equivalent to the tax incentives applied to new investment projects in the same area or sector eligible for corporate income tax incentives. In case the enterprise chooses to continue enjoying tax incentives according to the ongoing project for the remaining time, the expansion project must belong to a sector or area eligible for tax incentives under the provisions of Decree No. 218/2013/ND-CP and also belong to the same sector or area as the ongoing project.

The expansion project referred to in this point must meet one of the following criteria:

• The additional value of fixed assets when the investment project is completed and operational must reach at least VND 20 billion for expansion projects in sectors eligible for corporate income tax incentives according to Decree No. 218/2013/ND-CP, or at least VND 10 billion for expansion projects in areas with difficult or especially difficult socio-economic conditions as defined in Decree No. 218/2013/ND-CP.

• The proportion of the additional fixed asset value must be at least 20% of the total fixed asset value before the investment.

• The design capacity of the expansion must increase by at least 20% compared to the design capacity under the initial technical and economic feasibility study before the original investment.

If the enterprise opts for tax incentives under the expansion investment category, the additional income generated from the expansion must be separately accounted for. If the enterprise cannot account for the additional income separately, the income from the expansion investment will be determined based on the ratio of the new fixed asset value used in production and business to the total fixed asset value of the enterprise.

The tax exemption and reduction period under this provision will be calculated from the year the expansion investment project is completed and operational with income; if there is no taxable income in the first three years, the exemption and reduction period will begin in the fourth year, starting from the year the expansion project generates revenue.

In case an enterprise is already operating and benefiting from tax incentives but upgrades, replaces, or renews the technology of its ongoing project in a sector or area eligible for tax incentives under Decree No. 218/2013/ND-CP without meeting the three criteria mentioned above, tax incentives will continue according to the ongoing project for the remaining period (if any).

If the enterprise invests in machinery and equipment regularly as part of its production and business process from 2009 to 2013, but this investment is not part of the expansion investment mentioned above, the additional income from these investments will also receive tax incentives according to the rate applied to the ongoing project for the remaining period starting from the 2014 tax period.

Tax incentives in this section do not apply to expansion investments resulting from mergers, demergers, ownership transformations (including cases where the investment project inherits assets, business locations, or industries of the previous company to continue business), acquisition of businesses, or acquisition of ongoing investment projects.

Enterprises undergoing ownership changes, mergers, demergers, or consolidations will inherit corporate income tax incentives from the original business or project if they continue to meet the tax incentive conditions for the remaining period.”

Recipients: As above; Leadership of the Tax Department; Department of IT & Statistics, TTKT1; Tax Department website; Archive: VT, TTHT, LS.

On behalf of the Director General, Deputy Director General     Tran Thi Thu Van

See details here.