Pursuant to the current tax laws and ordinances

Pursuant to the Government�s Decree No.51/1999/ND-CP of July 8, 1999/ND-CP of July 8, 1999 detailing the implementation of the Domestic Investment Promotion Law (amended) No.03/1998/QH10 (hereinafter referred to as Decree No.51/1999/ND-CP for short) and Decree No.35/2002/ND-CP of March 29, 2002 amending and supplementing Lists A, B and C, promulgated in the Appendix to Decree No.51/1999/ND-CP (hereinafter referred to as Decree No.35/2002/ND-CP for short);

Pursuant to the Government�s Decree No.64/2002/ND-CP of June 19, 2002, transforming State enterprises into joint-stock companies (in replacement of the Government�s Decree No.44/1998/ND-CP of June 29, 1998 on transformation of State enterprises into joint-stock companies);

Pursuant to the Government�s Decree No.103/1999/ND-CP of September 10, 1999 on assignment, sale, business contracting, lease of State enterprises;

The Finance Ministry hereby guides the implementation of tax preferences for subjects entitled to investment preferences under the Law on Domestic Investment Promotion as follows:

A. GENERAL PROVISIONS

I. This Circular shall apply to subjects entitled to tax preferences under the Law on Domestic Investment Promotion, including:

1. State enterprises;

2. State enterprises transformed into joint-stock companies under the provisions in the Government�s Decree No.64/2002/ND-CP (replacing the Government�s Decree No.44/1998/ND-CP of June 29, 1998 on transformation of State enterprises into joint-stock companies);

3. State enterprises assigned to labor collectives, or sold to collectives, individuals or legal persons under the provisions in the Government�s Decree No.103/1999/ND-CP of September 10, 1999;

4. Joint-stock companies, limited liability companies, partnerships;

5. Private enterprises;

6. Cooperatives, unions of cooperatives;

7. Private, people-founded, semi-public education and training institutions; private and people-founded medical establishments; national culture establishments set up and operating according to the provisions of law;

8. Enterprises of political organizations, socio-political organizations, professional societies with business registration according to law provisions;

9. Individuals, business groups operating under Decree No.66-HDBT of March 2, 1992 of the Council of Ministers (now the Government) and individual business households with business registration under the provisions in the Government�s Decree No.02/2000/ND-CP of February 3, 2000 on business registration;

10. Vietnamese citizens, overseas Vietnamese, foreigners permanently residing in Vietnam, who buy shares, contribute capital to Vietnamese enterprises.

II. The subjects mentioned at Points 1, 2, 3, 4, 5, 6, 7, 8 and 9 of Section I above (referred collectively to production and/or business establishments), that have investment projects (for State enterprises conducting equitization, assignment or sale, the investment projects shall be plans on equitization, assignment or sale of the enterprises, approved by competent authorities), and meet the conditions on labor, production and business lines entitled to investment preferences, geographical areas of investment preferences under the provisions in Articles 15 and 16 of Decree 51/1999/ND-CP, or investment projects in form of BOT, BTO, shall be entitled to tax, land use levy and land rent preferences (referred collectively to as tax preferences) under the guidance in Section B of this Circular when:

- They operate strictly according to production/business lines already registered for business;

- They have registered the tax payment with the tax offices;

- They fully abide by the provisions of legislation on accountancy, statistics.

For production and/or business establishments which have not yet implemented the regimes of accounting, invoice, dossiers, tax amounts to be paid annually and calculated according to the regime of turnover and taxable income portion package shall not be qualified to enjoy tax preferences under the guidance in this Circular.

B. TAX PREFERENCES

I. REGARDING THE ENTERPRISE INCOME TAX RATES

The enterprise income tax rate preferences under the provisions in Article 20 of Decree No.51/1999/ND-CP shall be effected as follows:

1. The application objects shall include production and/or business establishments with projects of investment in production and/or business lines belonging to domains entitled to investment preferences defined in List A or investment projects executed in geographical areas entitled to investment preferences according to the provisions in List B or List C in Appendix issued together with Decree No.35/2002/ND-CP.

2. The specific preferential enterprise income tax rates shall be as follows:

2.1. The tax rate of 25% for projects of investment in production and/or business lines defined in List A in the Appendix issued together with Decree No.35/2002/ND-CP;

2.2. The tax rate of 25% for investment projects executed in geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP;

2.3. The tax rate of 20% for projects of investment in production and/or business lines prescribed in List A, which are executed in geographical areas defined in List B in the Appendix issued together with Decree No.35/2002/ND-CP;

2.4. The tax rate of 20% for investment projects executed in geographical areas defined in List C in the Appendix issued together with Decree No.35/2002/ND-CP;

2.5. The tax rate of 15% for projects of investment in production and/or business lines and crafts prescribed on List A, which are executed in geographical areas defined in List C in the Appendix issued together with Decree No.35/2002/ND-CP.

Production and/or business establishments which, apart from their investment projects in production/business lines or geographical areas entitled to investment preferences, conduct business activities in other production/business lines or geographical areas, shall have to monitor and account the taxable incomes of the investment preference-eligible production and/or business lines or geographical areas separately from the taxable incomes of business activities in other production/business lines or geographical areas in order to declare and pay separate enterprise income tax strictly at the tax rate prescribed for each production/business line or geographical area they are involved in. Where the production and/or business establishments are unable to separately monitor and account the taxable income of production/business lines or business locations with different enterprise income tax rates, the total taxable income of the production/business lines or business locations, which cannot be accounted separately, must be declared by the establishments at the highest enterprise income tax rate prescribed for the production/business lines or business locations, which they cannot account separately.

The preferential enterprise income tax rates guided in Section I, Part B of this Circular, shall apply only in the duration the investment projects are entitled to enterprise income tax exemption or reduction. Upon the expiry of the duration of enterprise income tax exemption or reduction enjoyed by the investment projects, the production and/or business establishments must declare and pay tax at different tax rates prescribed in the Law on Enterprise Income Tax. Particularly for projects of extensive or intensive investment, they shall apply only to the additional incomes earned from the investment, which can be determined by the production and/or business establishments under the guidance at Point 1.3.2, Section II, Part B of this Circular.

II. ON THE DURATION AND LEVELS OF EXEMPTION FROM AND REDUCTION OF ASSORTED TAXES

1. Regarding enterprise income tax

1.1. The enterprise income tax exemption or reduction preferences for investors with investment projects on setting up production and/or business establishments under the provisions in Article 21 of Decree No.51/1999/ND-CP shall be effected as follows:

1.1.1. The application objects shall be newly set-up production and/or business establishments (including State enterprises transformed into joint-stock companies according to Decree No.64/2002/ND-CP and State enterprises assigned to labor collectives or sold to collectives, individuals or legal persons under Decree No.103/1999/ND-CP), which satisfy the conditions on labor, production/business lines in domains entitled to investment preferences, geographical areas entitled to investment preferences as provided for in Articles 15 and 16 of Decree No.51/1999/ND-CP.

1.1.2. Tax exemption or reduction duration and levels

a/ Exemption for two years as from the time the taxable income is generated and 50% reduction of the payable tax amounts for two subsequent years for projects which satisfy one condition prescribed in Article 15 of Decree No.51/1999/ND-CP;

b/ Exemption for two years as from the time the taxable income is generated and 50% reduction of the payable tax amount for four subsequent years for projects which satisfy both conditions prescribed in Article 15 of Decree No. 51/1999/ND-CP;

c/ Exemption for three years as from the time the taxable income is generated and 50% reduction of the payable tax amount for five subsequent years for projects of investment in production and/or business lines prescribed in List A, which are executed in geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP;

d/ Exemption for three years as from the time the taxable income is generated and 50% reduction of the payable tax amount for seven subsequent years for investment projects which satisfy both conditions prescribed in Article 15 of Decree No.51/1999/ND-CP and are executed in geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP;

e/ Exemption for four years as from the time the taxable income is generated and 50% reduction of the payable tax amount for seven subsequent years for projects of investment in production and/or business lines prescribed in List A, which are executed in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/ND-CP;

f/ Exemption for four years as from the time the taxable income is generated and 50% reduction of the payable tax amount for nine subsequent years for investment projects which satisfy both conditions prescribed in Article 15 of Decree No.51/1999/ND-CP and are executed in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/ND-CP.

For operating production and/or business establishments with investment projects on setting up new production and/or business establishments entitled to investment preferences, the enterprise income tax preferences shall be effected as follows:

- If the newly set-up production and/or business establishments are units which are granted business registration certificates, account their business results and register, declare and pay enterprise income tax with the tax offices, they shall be entitled to the enterprise income tax exemption, reduction duration and levels guided at Point 1.1, Section II, Part B of this Circular.

- If the newly set-up production and/or business establishments are units which conduct dependent-accounting and register, declare and pay enterprise income tax at the principal production and/or business establishments, the enterprise income tax exemption, reduction duration and levels applicable to the principal production and/or business establishments shall comply the guidance at Point 1.3, Section II, Part B of this Circular. For this case, the taxable income entitled to tax exemption or reduction preferences shall be correspondingly determined in percentage of the turnover of the dependent-accounting units against the total turnover of the principal production and/or business establishments.

Production and/or business establishments set up in the following cases are not qualified to enjoy the enterprise income tax preferences under the guidance in Section I and at Point 1.1, Section II, Part B of this Circular:

- Production and/or business establishments are set up as a result of division, separation, merger or consolidation under the provisions of the Enterprise Law;

- Production and/or business establishments are set up due to ownership conversion (excluding State enterprises equitized under Decree No.64/2002/ND-CP and State enterprises assigned or sold under Decree No.103/1999/ND-CP), renaming of former operational production and/or business establishments, including the following cases: Individual business household owners set up private enterprises with the production and/or business lines being the same as before and the business locations stationing at the former business locations; the private enterprise owners dissolve their enterprises to set up new private enterprises or join in the setting up of limited liability companies within the same provinces or centrally-run cities in their capacity as chairmen of the members� councils or as the persons with the largest contributed capital amount in the charter capital of the companies.

If the production and/or business establishments which are set up in the above-mentioned cases, invest in the expansion thereof or make intensive investment and satisfy the conditions for enjoying the investment preferences prescribed in Articles 15 and 16 of Decree No.51/1999/ND-CP, they shall be considered for the enjoyment of enterprise income tax preferences under the guidance in Section I and Point 1.3, Section II, Part B of this Circular.

1.2. Enterprise income tax preferences for capital-mobilizing and -lending activities of people�s credit funds:

As from January 1, 2001, the capital-mobilizing and -lending activities of the people�s credit funds shall be entitled to enterprise income tax preferences under the provisions in Article 21 of Decree No.51/1999/ND-CP of July 8, 1999 of the Government. The specific enterprise income tax preference levels shall be determined as follows:

1.2.1. The capital-mobilizing and -lending activities of the people�s credit funds set up as from January 1, 2001 onward shall be entitled to enterprise income tax exemption and reduction as from the time the taxable income is generated as follows:

a/ Exemption for two years and 50% reduction of the payable tax amount for two subsequent years for the people�s credit funds which fail to meet the preference conditions on average labor employment in the year as provided for in Article 15 of Decree No.51/1999/ND-CP;

b/ Exemption for two years and 50% reduction of the payable tax amount for four subsequent years for the people�s credit funds which meet the preference conditions on average labor employment in the year but fail to meet the conditions on geographical areas entitled to investment preferences under the provisions in Article 16 of Decree No.51/1999/ND-CP;

c/ Exemption for three years and 50% reduction of the payable tax amount for five subsequent years for the people�s credit funds which are headquartered in the geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP, but fail to satisfy the preference conditions on average labor employment in the year as provided for in Article 15 of Decree No.51/1999/ND-CP;

d/ Exemption for three years and 50% reduction of the payable tax amount for seven subsequent years for the people�s credit funds which are headquartered in geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP and satisfy the preference conditions on average labor employment in the year as provided for in Article 15 of Decree No.51/1999/ND-CP;

e/ Exemption for four years and 50% reduction of the payable tax amount for seven subsequent years for the people�s credit funds which are headquartered in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/ND-CP, but fail to satisfy the preference conditions on average labor employment in the year as provided for in Article 15 of Decree No.51/1999/ND-CP;

f/ Exemption for four years and 50% reduction of the payable tax amount for nine subsequent years for the people�s credit funds which are headquartered in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/ND-CP and satisfy the preference conditions on average labor employment in the year;

1.2.2. The capital-mobilizing and-lending activities of the people�s credit funds set up before January 1, 2001, if the investment preference duration has not yet expired, shall be entitled to the enterprise income tax preferences for the remaining preference duration, as from January 1, 2001. The remaining preference duration shall be determined as equal to the tax exemption or reduction duration enjoyed by the people�s credit funds under the conditions stated at Point 1.2.1, Section II of this Circular minus (-) the duration from the time the people�s credit funds have the taxable income to the end of 2000. In cases where the people�s credit funds earn their taxable income after January 1, 2001, the tax exemption or reduction duration shall be calculated from the year the people�s credit funds start having their taxable income.

To enjoy the enterprise income tax preference levels under the guidance at Point 1.2, Section II, Part B of this Circular, the people�s credit funds must carry out the procedures to apply for investment preference certificates according to regulations. Annually, basing themselves on the practical conditions for investment preferences, the people�s credit funds shall determine by themselves the enterprise income tax preference levels and proceed with the tax declaration and payment into the State budget according to each period as well as the tax settlement for the whole year with the tax offices as provided for.

1.3. The enterprise income tax exemption and reduction preferences for investment projects on extensive or intensive investment under the provisions in Article 23 of Decree No.51/1999/ND-CP shall be effected as follows:

1.3.1. Application objects shall be the production and/or business establishments which carry out projects for extensive or intensive investment in production and/or business activities in the production and/or business lines prescribed in List A in the Appendix issued together with Decree No.35/2002/ND-CP; the production establishments which carry out investment projects on their relocation from inner cities, inner towns or into industrial parks, export processing zones, hi-tech parks, industrial clusters.

1.3.2. The duration and levels of tax exemption or reduction for the increased income amounts brought about by the extensive or intensive investment projects shall be as follows:

a/ Exemption for one year and 50% reduction of the payable tax amount for four subsequent years;

b/ Exemption for three years and 50% reduction of the payable tax amount for five subsequent years for investment projects executed in geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP;

c/ Exemption for four years and 50% reduction of the payable tax amount for seven subsequent years for investment projects executed in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/Nd-CP.

The tax exemption and reduction duration for extensive or intensive investment projects shall be determined by either of the following two methods:

- It is calculated from the year the investment projects are completed and put into production and/or business;

- It is calculated from the year following the year when the investment projects are completed and put into production and/or business.

For investment projects with the implementation duration of over one year, which are divided into many investment items, the production and/or business establishments shall be entitled to the application of enterprise income tax exemption and/or reduction duration when the projects are completed and put into production and/or business; where investment items are completed and put into production and/or business one after another, the tax exemption and/or reduction duration shall be calculated according to each investment item completed and put into production and/or business.

Basing themselves on the situation of investment project execution and the above-calculated tax exemption and/or reduction duration, the production and/or business establishments shall register with the tax offices the specific tax exemption and/or reduction duration for their units. The written registration of tax exemption and/or reduction duration shall be made and sent to the tax offices together with the copies of investment preference certificates or the ownership conversion decisions of competent agencies (for State enterprises transformed into joint-stock companies under Decree No.64/2002/ND-CP and State enterprises assigned to labor collectives or sold to collectives, individuals or legal persons under Decree No.103/1999/ND-CP).

The production and/or business establishments must account separately the increased income amounts brought about by investment in order to determine the enterprise income tax amounts to be exempt or reduced. Where the production and/or business establishments cannot account separately the income amounts increased due to investment, the increased income amounts entitled to tax exemption or reduction shall be determined corresponding to the ratio between the value of fixed assets which are newly invested, completed, handed over and put to use and the total historical cost of the fixed assets actually used for production and/or business during the tax exemption or reduction period.

The increased The
enterprise income total taxable The value of newly invested fixed assets
entitled to tax = enterprise x �������������������
exemption income The total historical cost of fixed assets actually
and/or reduction in the year used for production and/or business

In which:

+ The total taxable enterprise income in the year is determined strictly according to the prescribed regime on settlement of enterprise income tax.

1. The application objects are production and/or business establishments which satisfy the conditions on labor, production and/or business lines in the domains entitled to investment preferences, geographical areas entitled to investment preferences as provided for in Articles 15 and 16 of Decree No.51/1999/ND-CP, and are assigned land by the State for the execution of projects of investment in production and/or business activities subject to the payment of land use levy.

Production and/or business establishments which satisfy conditions for enjoyment of investment preferences but execute their investment projects on the land areas in the following cases shall not be qualified for land use levy exemption or reduction as provided for in Article 17 of Decree No.51/1999/ND-CP:

- They execute their investment projects on the land areas not assigned by the State for the execution of investment projects (Example: Production and/or business establishments execute their investment projects on land areas received from other persons with the land use right, then legalized�).

- They execute their investment projects on the land areas assigned to them by the State but not for the purpose of executing the investment projects (Example: Production and/or business establishments execute their investment projects on scale expansion on the land areas already assigned to them by the State before the time of executing the investment projects�).

2. Land use levy exemption, reduction levels:

2.1. 50% reduction of the land use levy, if the investment projects belong to the production and/or business lines prescribed in List A, the Appendix issued together with Decree No.35/2002/ND-CP;

2.2. 75% reduction of the land use levy, if the investment projects are executed in geographical areas prescribed in List B, the Appendix issued together with Decree No.35/2002/ND-CP;

2.3. The land use levy shall be exempt in the following cases:

a/ The investment projects belong to production and/or business lines prescribed in List A and are executed in geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP;

b/ The investment projects are executed in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/ND-CP.

The above-mentioned land use level exemption and reduction levels shall be determined once at the time when the production and/or business establishments are assigned land for execution of investment projects and the land use levy amounts to be paid into the State budget must be calculated according to regulations. Where the production and/or business establishments are, at the time of land assignment, not qualified to enjoy the land use levy exemption or reduction preference, but are allowed by the State to defer the payment thereof and in the delayed payment duration they satisfy the conditions for enjoyment of investment preferences, the production and/or business establishments, in this case, still have to fully pay the determined payable land use levy amounts according to the prescribed time limits and are not entitled to enjoy the land use levy exemption or reduction as guided in Section III, Part B of this Circular.

IV. LAND RENT EXEMPTION, REDUCTION

The land rent exemption and reduction preferences as provided for in Article 18 of Decree No.51/1999/ND-CP shall be effected as follows:

1. The application objects are production and/or business establishments which satisfy the conditions on labor, production and/or business lines in domains entitled to investment preferences, in geographical areas entitled to investment preferences as provided for in Articles 15 and 16 of Decree No.51/1999/ND-CP, and are leased land by the State for execution of investment projects on production/business activities.

Production and/or business establishments, which execute their investment projects without renting land from the State or execute their investment projects on the land areas previously rented from the State, including the land areas where the investment projects are executed, and have not yet signed the land-renting contracts but actually used such land before the time of project execution and the tax offices have managed the collection of land rent, shall not be qualified for land rent exemption as provided for in Article 18 of Decree No.51/1999/ND-CP and the guidance in this Circular.

For State enterprises having been converted into joint-stock companies under the provisions in Decree No.64/2002/ND-CP and State enterprises assigned to labor collectives or sold to collectives, individuals or legal persons as provided for in Decree No.103/1999/ND-CP, while the newly set-up enterprises still carry out production and/or business activities on the land areas previously rented from the State by such State enterprises, the land rent exemption as prescribed in Article 18 of Decree 51/1999/ND-CP and the guidance in this Circular shall not apply. In cases where the ownership form is converted and the newly set-up enterprises rent more land from the State to expand their production and/or business, they shall be exempt from the land rent under the guidance in this Circular only for the newly rented land areas for production and/or business expansion.

2. Land rent preference duration and levels:

2.1. Production and/or business establishments, which are leased land by the State for execution of investment projects on production and/or business activities and if their investment projects meet the conditions prescribed in Article 15 of Decree No.51/1999/ND-CP, shall be exempt from land rent as from the time of signing the land-renting contracts to execute the investment projects as follows:

a/ Exemption for three years for investment projects which fully satisfy one condition prescribed in Article 15 of Decree No.51/1999/ND-CP;

b/ Exemption for six years for investment projects which satisfy two conditions prescribed in Article 15 of Decree No.51/1999/ND-CP;

2.2. Production and/or business establishments leased land by the State for the execution of investment projects on production and/or business activities, if the investment projects are executed in the geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP shall be exempt from land rent as from the time the land- renting contracts are signed to execute the investment projects as follows:

a/ Exemption for seven years for projects in geographical areas prescribed in Section II, List B in the Appendix issued together with Decree No.35/2002/ND-CP.

b/ Exemption for ten years for projects in geographical areas prescribed in Section I, List B in the Appendix issued together with Decree No.35/2002/ND-CP.

2.3. Production and/or business establishments, which are leased land by the State for execution of investment projects on production and/or business activities, if the investment projects are executed in geographical areas prescribed in List B in the Appendix issued together with Decree No.35/2002/ND-CP, and simultaneously satisfy the conditions prescribed in Article 15 of Decree No.51/1999/ND-CP, shall be exempt from land rent as from the time the land-renting contracts are signed to execute the investment projects as follows:

a/ Exemption for eleven years for investment projects belonging to production and/or business lines prescribed in List A, in the Appendix issued together with Decree No.35/2002/ND-CP;

b/ Exemption for thirteen years for investment projects which simultaneously satisfy both conditions prescribed in Clauses 1 and 2 of Article 15 of Decree No.51/1999/ND-CP.

2.4. Production and/or business establishments leased land by the State for the execution of investment projects on production and/or business activities, if the investment projects are executed in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/ND-CP, shall be exempt from land rent as from the time the land-renting contracts are signed to execute the investment projects as follows:

a/ Exemption for eleven years for investment projects executed in geographical areas prescribed in Section II, List C, the Appendix issued together with Decree No.35/2002/ND-CP;

b/ Exemption for fifteen years for investment projects executed in geographical areas prescribed in Section I, List C, the Appendix issued together with Decree No.35/2002/ND-CP.

c/ Land rent exemption for the whole project-executing duration for investment projects belonging to production and/or business lines prescribed in List A and being executed in geographical areas prescribed in List C in the Appendix issued together with Decree No.35/2002/ND-CP.

Annually, within the land rent preference time limits, production and/or business establishments must themselves determine and account into their production and/or business costs the land rent amounts payable into the State budget after subtracting the land rent amounts entitled to exemption and reduction preferences according to levels as guided at Point 2, Section IV, Part B of this Circular.

C. IMPLEMENTATION ORGANIZATION

I. FOR PRODUCTION AND/OR BUSINESS ESTABLISHMENTS

1. After being granted the investment preference certificates, production and/or business establishments which implement investment projects entitled to tax preferences under the guidance in this Circular must send the valid copies of their investment preference certificates to the tax offices directly managing the tax collection within 10 working days as from the date they are granted the investment preference certificates for use as basis for effecting tax preferences for them strictly according to the provisions in Article 37 of Decree No.51/1999/ND-CP.

Annually, based on the granted investment preference certificates, production and/or business establishments shall determine by themselves the amounts entitled to tax preferences as well as the amounts payable into the State budget, and declare and make declaration and payment into the State budget according to each period as well as the annual settlement with the tax offices according to the prescribed regime. The year for determining tax preference amounts under the guidance in this Circular shall be calculated according to the tax settlement year.

2. Particularly for the following cases, the tax preference order and procedures shall be as follows:

2.1. State enterprises converted into joint-stock companies under the provisions in Decree No.64/2002/ND-CP and State enterprises assigned to labor collectives or sold to collectives, individuals or legal persons under the provisions in Decree No.103/1999/ND-CP, if satisfying the conditions on production and/or business lines, labor and geographical areas for investment preferences, shall be entitled to enjoy tax preferences under the guidance in this Circular without having to fill in the procedures of application for investment preference certificates.

In order to enjoy tax preferences under the provisions in Decree No.51/1999/ND-CP of July 8, 1999 of the Government, the State enterprises converted into joint-stock companies and the State enterprises assigned to labor collectives or sold to collectives, individuals or legal persons must send to the tax offices directly managing the enterprises (including the tax offices, the customs offices) the copies of the decisions on conversion of the ownership form of the competent bodies (affixed with the enterprises� stamps certifying as true copies of the originals) and their own written certification of the conditions for enjoying tax preferences, the tax preference levels to be enjoyed by the enterprises.

Annually, based on the actual conditions for enjoyment of investment preferences, the enterprises shall determine by themselves and take responsibility for the accuracy of their determination of, the amounts of tax, State budget remittances, to be paid, exempt or reduced under the guidance in this Circular. The enterprises shall have to declare and pay tax as well as State budget remittances and make annual settlement with the tax offices according to the prescribed regime.

2.2. For production and/or business establishments entitled to tax preferences under the guidance at Point 3, Section II, Part B of this Circular, they must send their applications therefor and the copies of their investment preference certificates (or copies of the decisions on conversion of ownership form of competent bodies), with the establishments� stamps certifying as true copies of the originals, enclosed with the economic and technical exposition on the lists of machinery, equipment, special-use transport means (included in the technological chains), transport means used exclusively for conveyance of workers to the border-gate customs offices where the importation is actually conducted. The border-gate customs offices where the establishments import assorted machinery, equipment, transport means shall effect single import tax exemption for the establishments according to their actual importation (in case of entrusted import, the establishments undertaking the entrusted import shall submit the above dossiers enclosed with entrusted import contracts to the customs offices).

2.3. For production and/or business establishments entitled to tax preferences under the guidance in Section III, Part B of this Circular, the dossiers and competence for consideration of land use levy exemption or reduction shall comply with the guidance in Circular No.115/2000/TT-BTC of December 12, 2000 of the Finance Ministry guiding the implementation of the Government�s Decree No.38/2000/ND-CP of August 23, 2000 on land use levy collection.

3. In the course of executing their projects, production and/or business establishments which fail to fully meet the conditions for enjoyment of tax preferences at registered levels due to objective or subjective reasons shall have to notify such in writing to the agencies which have granted the investment preferences within 30 days as from the time the projects are not qualified to enjoy investment preferences as prescribed. Within 7 days after receiving the notification of the production and/or business establishments, the agencies which have decided on the granting of investment preferences shall consider and decide on the partial adjustment or full withdrawal of the accepted investment preferences.

4. Production and/or business establishments which commit acts of dishonesty in order to enjoy tax preferences under the Law on Domestic Investment Promotion or fail to notify in time as prescribed the tax offices of changes in investment conditions which lead to the reduction of tax preference levels against the registered levels for adjustment of tax preference levels, shall have to compensate for damage and refund the tax preference amounts they have enjoyed in the period when the projects are no longer qualified for investment preferences. Besides, the production and/or business establishments shall, depending on the seriousness of their violations, be administratively sanctioned or examined for penal liability according to law provisions.

5. If production and/or business establishments simultaneously enjoy tax preferences under the Domestic Investment Promotion Law and tax preferences under other law provisions, they shall be entitled to only enjoy the tax preferences under one of the above-mentioned provisions chosen by the enterprises themselves and have to register the application of the tax preference regimes with the direct managing tax offices.

If production and/or business establishments execute many tax preference-eligible investment projects simultaneously, they must monitor and separately account the taxable income of each investment project for application of enterprise income tax preference level prescribed for each project. Where the establishments cannot account separately the taxable income of each project, they may only apply the lowest enterprise income tax preference levels they are enjoying for the taxable income which cannot be accounted separately.

Example: In 2001, Company X was executing 3 investment projects entitled to tax preferences. Of the above three investment projects, two were in the period of enterprise income tax exemption while the third project was in the period of 50% reduction of payable enterprise income tax.

For 2001 final settlement, Company X could only account separately the taxable income of an investment project entitled to enterprise income tax exemption. Under the above guidance, the above-mentioned separately accountable income portions shall be exempt from enterprise income tax and the income portions which cannot be accounted separately of the two remaining investment projects shall only be entitled to the application of 50% reduction of the payable income tax amount.

II. FOR TAX-COLLECTING AGENCIES

1. The tax-collecting agencies (including tax offices and customs offices, which are hereinafter referred collectively to as tax offices) shall base themselves on the tax preference amounts clearly inscribed in the investment preference certificates (for State enterprises converted into joint-stock companies and State enterprises assigned to labor collectives or sold to collectives, individuals or legal persons, it is their own written determinations) to determine the exempt or reduced tax amounts when the production and/or business establishments have fulfilled their obligations and send to the tax offices all necessary papers as guided in this Circular.

2. In cases where they detect that the investment preference levels inscribed in the investment preference certificates already granted to production and/or business establishments (for State enterprises converted into joint-stock companies and State enterprises assigned to labor collectives or sold to collectives, individuals or legal persons, it is their self-determination) are not compatible to the conditions for actual enjoyment of investment preferences, the tax offices shall temporarily apply the tax preference levels according to the actual conditions and at the same time notify such to the establishments and request the agencies which have granted the investment preference certificates to partly adjust or fully withdraw the investment preferences as provided for in Article 34 of Decree 51/1999/ND-CP.

Annually, when settling tax, the tax offices shall have to officially determine the tax preference amounts enjoyed by production and/or business establishments, the amounts to be paid into the State budget by production and/or business establishments and notify the latter thereof so that they fully pay the deficits within the prescribed time limits, or the overpaid amounts as compared to the payable amounts inscribed in the notices of the tax offices in order to deduct them from the payable amounts of the subsequent period.

3. If in the course of inspecting the tax settlement, the tax offices detect that production and/or business establishments, which are in the period of enjoying investment preferences, commit acts of settling the enterprise income tax falsely against the production and/or business realities or commit acts of making false declarations, they shall consider and handle as follows:

- If the investment projects are being in the period of enterprise income tax exemption, the production and/or business establishments may still enjoy the enterprise income exemption according to the prescribed regimes. Depending on the faults committed by production and/or business establishments, the tax offices shall apply different administrative sanctioning levels to acts of untruthfully settling or falsely declaring the enterprise income tax by production and/or business establishments.

- If the investment projects are being in the period of enterprise income tax reduction, the taxable income amounts untruthfully or falsely declared by production and/or business establishments shall not be considered for tax reduction. Depending on the faults committed by the production and/or business establishments, the tax offices shall apply various administrative sanctioning levels to or transfer the cases to agencies competent to examine the penal liability for, acts of untruthfully settling or falsely declaring enterprise income tax by production and/or business establishments.

In all circumstances, the tax offices must retrospectively collect fully the tax deficit amounts from production and/or business establishments which commit acts of falsely declaring tax or evading tax and apply sanctioning measures according to law provisions.

4. The tax offices at all levels must open dossiers, monitoring books, archive fully documents related to projects entitled to tax preferences as guided in this Circular. Annually, the provincial/municipal Tax Departments shall report to the Finance Ministry (the General Tax Department- the Planning Section) on the subjects entitled to investment preferences under the Domestic Investment Promotion Law, the tax amounts and other State budget remittances, which are already exempt or reduced, together with the reports on results of State budget collection in areas under their respective management.

5. Tax and customs officials, individuals, who abuse their positions and powers to deliberately act in contravention of the provisions in Decree No.51/1999/ND-CP and the guidance in this Circular, thus causing losses to the State budget, shall, depending on the seriousness of their violations, be disciplined, administratively sanctioned or examined for penal liability according to law provisions.

III. IMPLEMENTATION EFFECT

1. For investment projects already granted the investment preference certificates under the provisions of the Domestic Investment Promotion Law and now not on Lists A, B or C, in the Appendix issued together with Decree No.35/2002/ND-CP, they shall continue enjoying the tax preferences according to the granted investment preference certificates.

2. For investment projects already granted the investment preference certificates, if also additionally satisfying the conditions prescribed in Decree No.35/2002/ND-CP and already granted by competent bodies the adjusted investment preference certificates, supplemented the investment preference certificates, they shall only enjoy the tax preferences for the remaining preference duration (if any) as from the date Decree No.35/2002/ND-CP takes implementation effect.

3. For investment projects already executed but previously not registered for enjoyment of investment preferences under the provisions of Decree No.51/1999/ND-CP, if satisfying the conditions prescribed in Decree No.35/2002/ND-CP and the project owners have the dossiers of investment preference registration and have been already granted the investment preference certificates by competent bodies, they shall only enjoy tax preferences for the remaining tax preference duration (if any), as from the date Decree No.35/2002/ND-CP takes implementation effect.

4. In case of change of investors for investment projects which are being in the period of enjoying tax preferences under the guidance in this Circular, the new investors, if satisfying conditions for investment preferences as provided for, shall continue enjoying the tax preferences for the remaining preference duration of each specific tax preference amount inscribed in the investment preference certificates already granted to the former investors of the investment projects. The new investors shall have the responsibility to fulfill all obligations which the former investors committed with the State to fulfill.

5. This Circular takes effect 15 days after its signing and replaces Circular No.22/2001/TT-BTC of April 3, 2001 of the Finance Ministry guiding the tax exemption or reduction for subjects entitled to investment preferences under Decree No.51/1999/ND-CP of July 8, 1999 of the Government, detailing the implementation of the Domestic Investment Promotion Law (amended).

For investment projects and cases of tax exemption or reduction at different preference levels under the documents guiding the implementation of tax exemption or reduction for subjects entitled to investment preferences of the Finance Ministry before this Circular takes effect, if the investors have already settled tax according to the prescribed regimes, the retrospective collection or refund of tax amounts overpaid or underpaid by investors as compared to the tax preference levels guided in this Circular shall not be effected.

For the Finance Minister
Vive Minister
TRUONG CHI TRUNG