Name of recommendations: Recommendations on the application of investment incentives for projects of industrial products manufacturing supporting development priority
Recommended by units: The Vietnam Denso Co., Ltd
Official letter: No 0742/PTM - VP, dated: 2019-11-04
The Denso Vietnam Co., Ltd. (hereinafter referred to as "DMVN" or "Company" or "We"), address: Lot E1, Thang Long Industrial Park, Dong Anh District, Hanoi City, we are pleased to send to VCCI the most respectful greetings and would like to thank VCCI for your interest in supporting the businesses community investing and operating in Vietnam, including DMVN in the past.
Currently, we are facing difficulties in applying investment incentive policies for the development of supporting industrial products ("Supporting Industry") with priority for development. Therefore, in this document, we would like VCCI, as a representative of the business community to promote and protect the relevant and legitimate interests of businesses doing business and investment in Vietnam., we have a petition to the Government’s Prime Minister of Vietnam to consider and remove for the Company. Concretely is as follows:
1. PREFERENTIAL POLICIES IN THE FIELD OF CNHT ON SUPPORTING PRIORITY FOR DEVELOPMENT
Our company was established under the Investment License No. 27 / GP-KCN-HN issued by Hanoi Industrial and Export Processing Zones Authority on October 4, 2001, then re-registered by the investment Certificate No. 012023000119 issued by Hanoi Industrial and Export Processing Zones Authority on June 17, 2008.
DMVN's principal activities are to manufacture, trade and design all kinds of auto parts; processing, assembling and packing all kinds of automobile components and spare parts. The products produced by the company are prioritized supporting industry products of auto assembly industry and supporting industry products for high-tech industry. All products manufactured by the Company are 100% exported by the mode of export production (export processing enterprises).
We know that, in order to promote and encourage domestic and foreign investors to participate in supporting industries of development priority, the Government of Vietnam has issued many preferential policies to support projects for real estate projects. The production of supporting industry products is prioritized for development with various incentive forms, in which the preferential CIT is the most important form, which is interested by many investors.
Specifically, the preferential CIT for the field of production of supporting products of priority industrial development is specified in the Law No. 71/2014 / QH13 amending and supplementing a number of articles of the Tax Laws (Law No. 71) (effective from January 1, 2015) with the highest preferential rate: 10% tax rate for 15 years; 4-year tax exemption, 50% reduction of payable tax amount for 9 subsequent years. In addition, the Law No. 71 also provides regulations on transition of tax incentives to ensure investment incentives for enterprises with investment projects on manufacturing supporting products of development priority given before January 1, 2015. enjoy preferences under the provisions of the Law No. 71 for the remaining time.
We studied and discussed carefully the preferential policies, ensuring investment of Vietnam for supporting industry and found that these incentives have encouraged DMVN as well as the business community actively invest in supporting industry production prioritized for development in Vietnam in accordance with the guidelines and goals set by the Party, National Assembly and Government of Vietnam.
1. DENSO'S PROBLEMS AND RECOMMENDATIONS
With the above preferential policies, our company, as well as many other businesses, has been increasing investment in production and business activities to promote the development of supporting industry in accordance with the Government's policies and objectives that Vietnam Government has set forth.
Accordingly, by 2013, the Company had an investment project to expand production of products on the list of prioritized supporting industries in accordance with the Decree 111/2015 / ND-CP of the Vietnam Government (" EIA Project 2013 ”). In 2017, this Company's EIAR Project was certified by the Ministry of Industry and Trade in the preferential certificate No. 883 / GXN-BCT dated February 8, 2017 for the project of development of supporting industrial products with priority. The Ministry of Industry and Trade issuedanIncentives Certificate, we understand that the EIA Project 2013 will be fully entitled to the incentives that the National Assembly and the Vietnam Government has stipulated in the Law No. 71and the Decree 111 stated as above. The Ministry of Justice has also issued a written response to our business confirming this benefit of Denso.
However, recently, when applying this preferential policy in practice, we are facing barriers from the tax authorities when issuing guidelines for our company in the direction of the EIA Project 2013 of the Company are not entitled to CIT incentives for production of supporting products as prescribed in the Law No. 71/2014 / QH13 because the project was established before January 1, 2015. (Official Dispatch No. 1010 / TCT-CS dated March 26, 2018 of the General Department of Taxation; the Official Letter No. 16701 / CT-TTHT dated April 10, 2018 of Hanoi Tax Department; the Official Letter 896 / TCT-CS dated March 18, 2019 of the General Department of Taxation).
Through research and analysis, we have found that this guiding viewpoint is completely inconsistent with the current regulations, both from the perspective of tax law, investment law and industry development policy, development priority of the Party, the National Assembly and Vietnam Government. Specifically:
- It does not in accordance with the provisions of Investment No. 67/2014 / QH13 on ensuring investment incentives for investors in case of law changes (Article 13 - Investors are entitled to investment incentives under the provisions of new legislation for the remaining incentive period of the project);
- it doesnot in accordance with the provisions of the Law 71 on transfer of CIT incentives (Clause 9, Article 1 - In case of changes in the law on corporate income tax, enterprises meet the conditions for tax incentives prescribed by law. If they are newly amended or supplemented, enterprises may choose to enjoy preferential tax rates and tax exemption and reduction periods under the amended and supplemented law provisions for the remaining time);
- It does not in line with the development policy of supporting industry and its priority in overcoming current shortcomings, ensuring the consistency of the industry incentive policy and synchronizing with the provisions of the Government's Investment Law submitted to the National Assembly at the Report 423 / TTr-CP dated October 17, 2014 (Paragraph b and Item e, Point 1, Part III) of the Government on Proposition No. 71;
- It does not in line with the commitment to implement the Action Plan "Vietnam-Japan Joint Initiative Phase VII" to contribute to improving the investment and business environment of Vietnam, towards development and prosperity goals of common prosperity of the business community of the two countries.
- It is contrary to the opinion of the Ministry of Industry and Trade (the Ministry of Industry and Trade granted the Certificate of Incentive No. 883 / GXN-BCT dated February 8, 2017 for the DMVN's EIAR Project 2013, which is the first implemented investment project. 01/01/2015);
- It is contrary to the opinion of the Ministry of Justice (the Ministry of Justice answered our company in the Official Letter No. 406 / KTrVB-KT of July 19, 2018);
- It is contrary to the opinion of the Ministry of Planning and Investment (in agreement with the opinion of the Ministry of Justice at a meeting with the Ministry of Justice, the Ministry of Industry and Trade, the Ministry of Finance and the General Department of Taxation at the Ministry of Justice's head office) The Ministry of Justice issuedan Official Letter No. 406 / KTrVB-KT above).
This viewpoint also leads to some negative effects such as:
- It seriously affects the legitimate interests of enterprises in enjoying the Government's preferences;
- It negatively impacts on the investment environment in Vietnam, undermining investors' confidence in the State's policies, be contrary to the viewpoint of the Government creating, can lead to the decline of direct and indirect investment sources in Vietnam;
- It is not consistent with the goals of the Party and Government of Vietnam in the Resolution No. 23-NQ / TW dated March 22, 2018 and the Resolution No. 35 / NQ-CP dated May 16, 2016 on creating the investmentenvironment in smoothly, stably, transparently, healthily industrial business and ensuring equal rights for all businesses.
In this regard, we also know that not only our company, but many other businesses operating in the field of manufacturing supporting industry products prioritize development in the Japanese business community as well as businesses in Vietnam, Hoan. Quoc, Taiwan, China, ... are also facing similar problems with the Ministry of Finance and tax authorities (some reference documents attached). Many organizations and business associations such as Korea Trade and Industry Association (Kocham), European Business Association (Eurocham), Japan Business Association (JCCI) have also identified this problem and will make recommendations to the VietnamGovernment. To date, Eurocham has updated this problem and recommended the Vietnamese Government to consider and resolve it in Eurocham's White Paper 2019 soon. We also presented this concern to the Embassy of Japan and the Japan Business Association (JCCI) in Vietnam and believed that the Japanese Embassy, JCCI will soon have a recommendation to the Vietnam Government..
Considering that this is an urgent and influential issue for DMVN and the community of enterprises investing and manufacturing in the field of supporting industries prioritizing development in Vietnam, we respectfully request the VCCI to consider and have the recommendations to the Government’s Prime Minister and the Vietnam Government to studyand has timely and appropriate conclusions to solve the above problems, ensure the legal rights of us and the community of supporting industry enterprises. developed in Vietnam.