Up to now, there have been 15,100 FDI projects in Vietnam, with a totalregistered capital of 220 billion USD, of which 50 percent (107 billionUSD) has been disbursed. This success is significantly attributed to taxincentives. The Vietnam Business Forum reports.
Many new features from the tax incentives
At the annual meeting of the Asia-Oceania Tax Consultants' Associationtaking place on October 17-18, 2013 in Hanoi, the speakers agreed withthe view that the tax policies for attracting more investment has becomeone of the priorities of the policy makers.
"Thefavourable tax regime applied in recent years has turned Vietnam into anattractive investment destination. In the context of the decliningworld economic growth from 2008, Vietnam remains its position as anattractive investment destination, promoting the economic growth.
"In recent years, Japan, Republic of Korea, and Singapore are the topcountries with largest investment in Vietnam," said Nguyen Van Nam,Representative from the Vietnam Tax Consultants’ Association (VTCA)said.
Specifically, Vietnam's National Assembly haspassed a law amending and supplementing a number of articles of the Lawon Corporate Tax (in effect from January 1, 2014), of which moreregulations are proposed to attract and encourage investment.
Accordingly, the corporate tax will be reduced; the ordinary tax ratewill be 22 percent from January 1, 2014 and 20 percent from January 1,2016.
Besides, there is extension of tax incentivesand adjustment of the level of tax reduction and tax incentives,especially for agriculture, farming, rural development, socialisation,non-profit purposes, the areas with tough socio-economy and the areaswith priorities for investment. The new regulations also provide taxincentives for investment expansion and industrial zones. The amendmentof the tax policies will target different groups to meet the actualdemands and be consistent with the Investment Law.
Besides, the Government approved a strategy to reform the tax systemin the 2011-2020 with the aims of simplifying the tax administrativeprocedures, facilitating the taxpayer, standardising the taxadministration on the basis of the application of information technologyto ensure the consistency, making punishment against the acts oftransfer pricing, tax fraud and encouraging the use of the tax servicesthrough tax agents.
Improving consensus among nations
One of the conference topics raising a lot of concerns is the transferpricing and the mechanism for the advance pricing agreement (APA).
According to Nguyen Thi Minh, Deputy Minister of Finance, theapplication of the APA is beneficial for businesses, tax authorities andthe country. Vietnam always encourages and creates favorable conditionsfor foreign investors to negotiate and sign an agreement based on theprinciples of determining APA. Currently, Vietnam has signed agreementswith 65 countries and territories, of which 58 agreements are in effectto avoid the double taxation and prevent the tax evasion.
In regards to the application of the APA, at the meeting,international and domestic speakers also shared that because of thedifferences on the conditions of each country and territory, investmentpolicies, different tax policies, the application of the APA needs theconsensus.
According to Marcellus Wong, SeniorAdviser of PricewaterhouseCoopers in Hong Kong, China, the applicationof the APA is very complicated and controversial, which requires a largeteam of consultants and takes 1-3 years or even 5 years to help thecountries to reach the agreement of implementing the APA. Some basicforms of the APA agreements have been undertaken among the taxpayers,the local tax collection offices (the unilateral APA) and the taxauthorities in other countries (bilateral agreements and multilateralAPA). To apply the APA, each country should build their own system basedon its legal system, geography, politics and economics. However, thesystem should comply with the principles of Organization for EconomicCo-operation and Development (OECD) and the recommendations of othercountries.
Mie Seyama, on behalf of the JapanInternational Cooperation Agency (JICA), shared that Japan has adoptedthe APA since as early as 1986 based on the handbook of the marketvaluation for the multinational companies and tax authorities (1985).However, the application of the APA always faces challenges indetermining the market price. The number of cases relating toexamination of the taxation on market pricing and implementation of theAPA in Japan remain very high. It is estimated there are over 100 casesper year. The forming of the APA and the agreements of the APA among thecountries should focus onthe general rules of the Treaty on the tax ofthe OECD, issued in 2007.
According to Huong Vu,representative from the Vietnam Tax Consultants’ Association, Vietnam isstrengthening the legal ability and learning the internationalexperiences in forming the APA consistent with the characteristics ofthe economy and the current business operations of Vietnamesebusinesses.
The APA is expectedly applied on 3levels. The simplified APA includes least procedures, which is leasttime consuming and expensive to the taxpayers. Second, the standard APAis aimed at the entities with least complicated transactions. Third, theAPA is offered for more complex transactions, linking to theinternational transactions.-VNA
Many new features from the tax incentives
At the annual meeting of the Asia-Oceania Tax Consultants' Associationtaking place on October 17-18, 2013 in Hanoi, the speakers agreed withthe view that the tax policies for attracting more investment has becomeone of the priorities of the policy makers.
"Thefavourable tax regime applied in recent years has turned Vietnam into anattractive investment destination. In the context of the decliningworld economic growth from 2008, Vietnam remains its position as anattractive investment destination, promoting the economic growth.
"In recent years, Japan, Republic of Korea, and Singapore are the topcountries with largest investment in Vietnam," said Nguyen Van Nam,Representative from the Vietnam Tax Consultants’ Association (VTCA)said.
Specifically, Vietnam's National Assembly haspassed a law amending and supplementing a number of articles of the Lawon Corporate Tax (in effect from January 1, 2014), of which moreregulations are proposed to attract and encourage investment.
Accordingly, the corporate tax will be reduced; the ordinary tax ratewill be 22 percent from January 1, 2014 and 20 percent from January 1,2016.
Besides, there is extension of tax incentivesand adjustment of the level of tax reduction and tax incentives,especially for agriculture, farming, rural development, socialisation,non-profit purposes, the areas with tough socio-economy and the areaswith priorities for investment. The new regulations also provide taxincentives for investment expansion and industrial zones. The amendmentof the tax policies will target different groups to meet the actualdemands and be consistent with the Investment Law.
Besides, the Government approved a strategy to reform the tax systemin the 2011-2020 with the aims of simplifying the tax administrativeprocedures, facilitating the taxpayer, standardising the taxadministration on the basis of the application of information technologyto ensure the consistency, making punishment against the acts oftransfer pricing, tax fraud and encouraging the use of the tax servicesthrough tax agents.
Improving consensus among nations
One of the conference topics raising a lot of concerns is the transferpricing and the mechanism for the advance pricing agreement (APA).
According to Nguyen Thi Minh, Deputy Minister of Finance, theapplication of the APA is beneficial for businesses, tax authorities andthe country. Vietnam always encourages and creates favorable conditionsfor foreign investors to negotiate and sign an agreement based on theprinciples of determining APA. Currently, Vietnam has signed agreementswith 65 countries and territories, of which 58 agreements are in effectto avoid the double taxation and prevent the tax evasion.
In regards to the application of the APA, at the meeting,international and domestic speakers also shared that because of thedifferences on the conditions of each country and territory, investmentpolicies, different tax policies, the application of the APA needs theconsensus.
According to Marcellus Wong, SeniorAdviser of PricewaterhouseCoopers in Hong Kong, China, the applicationof the APA is very complicated and controversial, which requires a largeteam of consultants and takes 1-3 years or even 5 years to help thecountries to reach the agreement of implementing the APA. Some basicforms of the APA agreements have been undertaken among the taxpayers,the local tax collection offices (the unilateral APA) and the taxauthorities in other countries (bilateral agreements and multilateralAPA). To apply the APA, each country should build their own system basedon its legal system, geography, politics and economics. However, thesystem should comply with the principles of Organization for EconomicCo-operation and Development (OECD) and the recommendations of othercountries.
Mie Seyama, on behalf of the JapanInternational Cooperation Agency (JICA), shared that Japan has adoptedthe APA since as early as 1986 based on the handbook of the marketvaluation for the multinational companies and tax authorities (1985).However, the application of the APA always faces challenges indetermining the market price. The number of cases relating toexamination of the taxation on market pricing and implementation of theAPA in Japan remain very high. It is estimated there are over 100 casesper year. The forming of the APA and the agreements of the APA among thecountries should focus onthe general rules of the Treaty on the tax ofthe OECD, issued in 2007.
According to Huong Vu,representative from the Vietnam Tax Consultants’ Association, Vietnam isstrengthening the legal ability and learning the internationalexperiences in forming the APA consistent with the characteristics ofthe economy and the current business operations of Vietnamesebusinesses.
The APA is expectedly applied on 3levels. The simplified APA includes least procedures, which is leasttime consuming and expensive to the taxpayers. Second, the standard APAis aimed at the entities with least complicated transactions. Third, theAPA is offered for more complex transactions, linking to theinternational transactions.-VNA
