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Vietnam Issues Resolution Expanding Corporate Tax Incentives for Investment and Certain Other Changes

The Vietnamese government issued Resolution 63/NQ-CP on 25 August 2014, which includes approved changes in foreign investment corporate tax incentives, certain deductions, VAT requirements, insufficient payment penalties and certain other changes that are yet to be approved.

Changes that are already approved by the government include:

  • For investment projects with multiple stages, each stage will now be entitled to tax incentives as provided for in the first stage (reduced rates of 10% or 20% depending on business types and location) - this applies from 1 January 2014 and has no retroactive effect
  • Companies that enjoyed tax incentives from 2009 to 2013, will be eligible for additional incentives for additional investment in machinery and equipment
  • The number of industrial zones in which tax incentives apply is expanded to apply to those located in all central cities and class 1 townships established from 1 January 2009
  • Costs incurred for staff welfare is deductible for corporate income tax purposes, but is capped at one month's average salary
  • If provisional payments amount to less than 80% of the final tax liability, the difference in excess of 20% will be subject to interest on overdue tax up to 25% per year counting from 31 December of the year of assessment
  • The threshold for filing VAT returns quarterly is increased to annual revenue of VND 50 billion or below, up from VND 20 billion - VAT returns are otherwise filed monthly

Changes in the Resolution that have not yet been approved include:

  • Qualifying new investment and expansion investment in manufacturing of products in a list of prioritized industrial products (to be issued) will be eligible for corporate income tax reductions or exemptions
  • Exemptions or reductions in tax on income of Vietnamese companies repatriated from overseas

The changes that are not yet approved are expected to be decided on in September, and further guidance on all changes is expected before the end of the year.

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