Circular No. 08/2005/TT-BTC dated January 26, 2005 of the Ministry of Finance guiding the financial regime applicable to the commercial and industrial zone in Moc Bai border-gate economic zone, Tay Ninh province

CIRCULAR

GUIDING THE FINANCIAL REGIME APPLICABLE TO THE COMMERCIAL AND INDUSTRIAL ZONE IN MOC BAI BORDER-GATE ECONOMIC ZONE, TAY NINH PROVINCE

Pursuant the December 16, 2002 State Budget Law; the May 20, 1998 Law Amending and Supplementing a Number of Articles of the Domestic Investment Promotion Law; the November 12, 1996 Law on Foreign Investment; the June 9, 2000 Law on Foreign Investment (amended); the June 17, 2003 Laws on Enterprise Income Tax, Value Added Tax, and Special Consumption Tax; and June 29, 2001 Customs Law No. 29/2001/QH10; 

Pursuant to the Prime Minister’s Decision No. 144/2004/QD-TTg of August 12, 2004 adding a number of preferential policies for Moc Bai border-gate economic zone, Tay Ninh province,
The Finance Ministry hereby guides the financial regime applicable to the Commercial and Industrial Zone in Moc Bai border-gate economic zone, Tay Ninh province as follows:

I. GENERAL PROVISIONS

1. Scope of application:

The financial regime prescribed in this Circular applies within the Commercial and Industrial Zone in Moc Bai border-gate economic zone (hereinafter abbreviated to CIZ), established under Decision No. 1595/2002/QD-UB of September 30, 2002 of the People’s Committee of Tay Ninh province approving the detailed planning on the commercial and urban zone of Moc Bai border-gate, Tay Ninh province;

In this Circular, the phrase “Vietnam’s inland” is construed to be the rest of Moc Bai border-gate economic zone not including the CIZ and the Vietnamese territory outside Moc Bai border-gate economic zone. 

2. Subjects of application:

Subjects of application of financial preference policies provided for by this Circular are Vietnamese as well as foreign organizations and individuals conducting production and/or business activities in the CIZ within Moc Bai border-gate economic zone, including:

a/ Domestic investors of various economic sectors operating under the provisions of the Law on State Enterprises, the Enterprise Law and the Law on Cooperatives, individual business households and independent professional practitioners.

b/ Foreign organizations and individuals, including foreign-invested enterprises, foreign investors participating in business cooperation contracts, overseas Vietnamese operating under the Law on Domestic Investment Promotion (amended), the Law on Foreign Investment in Vietnam, and foreign investors doing business not under the Law on Foreign Investment in Vietnam.

Only business activities carried out in the geographical area of CIZ shall be entitled to the preferences for the CIZ prescribed in this Circular. In cases where organizations and individuals conduct business activities in both CIZ and Vietnam’s inland, the business activities in CIZ must be separately accounted to serve as basis for determination of preferential regimes.

For enterprises which had been granted licenses for operation in the CIZ before the effective date of Decision No. 144/2004/QD-TTg but have not yet fully enjoyed the preferences, they must request the agencies which have granted the investment licenses, investment preference certificates or business registration certificates to make additional inscription of preferences for use as basis for enjoyment of preferential policies as prescribed in this Circular.

3. Conditions for application:

The CIZ shall enjoy the financial preferences provided for in this Circular when concurrently satisfying the following conditions:

- Having solid fences isolating the CIZ from other functional quarters in the border-gate economic zone;

- Having no population quarters or no inhabitants (including foreigners) permanently or temporarily residing therein.

- Having a customs control station to supervise and inspect persons, goods and means entering and leaving the CIZ.

4. Some general regulations on customs:

- Economic organizations operating in the CIZ are permitted to export to foreign countries and/or to import from foreign countries all goods and/or services not banned by Vietnamese law.

- Goods and/or service exchange relationships between the CIZ and other functional quarters in the border-gate economic zone (abbreviated to BEZ) as well as Vietnam’s inland must comply with Vietnamese law provisions on management of export and import goods and services.

- Economic organizations and individuals in Vietnam’s inland shall be allowed to import from the CIZ goods and/or services not banned by Vietnam from import, or export into the CIZ goods and/or services not banned by Vietnam from export, and shall be subject to customs inspection and supervision.

- Tay Ninh province’s Customs Department is allowed to set up customs control stations at entrances of the CIZ. The customs stations of the CIZ shall be subject to the direct management by the Customs Sub-Department of Moc Bai border-gate.

- Export goods or import goods of any type shall be subject to the current customs procedures applicable to such type.

- Customs offices shall be directly responsible for smuggling prevention and combat in customs areas according to law provisions on customs and shall have to coordinate with the relevant sections and branches in smuggling prevention and combat under the direction by the People’s Committee of Tay Ninh province.

5. Organizations and individuals investing in the CIZ shall be entitled to the maximum preferences for investment projects in geographical areas meeting with exceptional socio-economic difficulties under the provisions of the November 12, 1996 Law on Foreign Investment in Vietnam; the June 9, 2000 Law Amending and Supplementing a Number of Articles of the Law on Foreign Investment in Vietnam; the May 20, 1998 Law on Domestic Investment Promotion (amended); the Enterprise Income Tax Law and the Value Added Tax Law as well as preferences under the international treaties or bilateral and multilateral trade contracts, which Vietnam has signed or acceded to.

6. In cases where legal documents provide for different preference levels for the same domain, the preference level provided for in documents with higher legal effect shall apply.

In cases where legal documents governing the same issue and promulgated by the same agency contain different provisions, the provisions of the latest document shall apply.

II. SPECIFIC PROVISIONS

A. FOR GOODS AND SERVICES:

1. Regarding export tax and import tax:

a/ Goods and services imported from foreign countries or the inland into the CIZ shall be exempt from import tax.

b/ For goods and services imported from the CIZ into Vietnam’s inland:

- For goods originating from foreign countries, import tax shall be paid according to the current regulations.

- For goods manufactured, processed, recycled or assembled in the CIZ, if the value of the goods of ASEAN origin accounts for 40% or higher as evidenced by certificates of ASEAN origin - Form D, and the goods meet the conditions prescribed in Circular No. 64/2003/TT-BTC of July 1, 2003 promulgating Vietnam’s List of goods and tax rates for implementation of the Common Effect Preferential Tariffs (CEPT) of the ASEAN countries for the 2003-2006 period, the CEPT preferential import tax rates shall apply when they are imported into Vietnam’s inland.

- For goods manufactured, processed, recycled or assembled in the CIZ without the use of imported raw materials or components, they shall not be liable to import tax when being imported into Vietnam’s inland.

- For goods manufactured, processed, recycled or assembled in the CIZ with the use of imported raw materials or components, when being imported into Vietnam’s inland, import tax shall be imposed only on the volume of the imported raw materials or components constituting such goods.

Bases for determining the payable import tax on the volume of imported raw materials or components constituting the goods imported into Vietnam’s inland include:

+ The value of each type of imported raw material or component constituting each unit of goods (calculated as being the import price (CIF price) or the domestic market price of the raw material or component of the same type (in VND) multiplied by the consumption norm of each type of the imported raw material or component in each unit of goods, and the units shall set such consumption norm by themselves and bear responsibility before law for its truthfulness).

+ The volume of goods imported into Vietnam’s inland.

+ The import tax rate for each type of raw material or component.

Business enterprises and individuals shall have to register with the customs offices the lists of import goods for use as raw materials in production of goods to be imported into the inland before the importation.

c/ Goods manufactured, processed, recycled or assembled in the CIZ, when being exported to foreign countries, shall be exempt from export tax.

d/ For export tax-liable goods which are brought into the CIZ from Vietnam’s inland, export tax shall be paid according to the current regulations.

2. Regarding special consumption tax:

- Special consumption tax-liable goods and services manufactured and consumed in the CIZ shall not be liable to special consumption tax. They include special consumption tax-liable goods and services which are manufactured, supplied and consumed in the CIZ; or imported from foreign countries into the CIZ.

- Special consumption tax-liable goods and services, which are exported from the CIZ to foreign countries, shall not be liable to special consumption tax.

- Special consumption tax-liable goods and services, which are imported from the CIZ into Vietnam’s inland, shall be liable to special consumption tax like import goods according to the current regulations.

- Special consumption tax-liable goods, which are transited via the CIZ’s border-gates under the already signed bilateral or multilateral agreements, or through branches or localities permitted by the Prime Minister, shall not be liable to special consumption tax.

3. Regarding value added tax:

- Goods and services, which are imported from foreign countries into the CIZ, shall not be liable to value added tax (VAT).

- Goods and services which are exported from the CIZ to foreign countries shall enjoy the VAT rate of 0%; goods and services which are exported from Vietnam’s inland into the CIZ shall also enjoy the VAT rate of 0%. The conditions for VAT reimbursement shall comply with current law provisions thereon.

- Goods and services which are brought from the CIZ into the inland shall be liable to VAT like import goods according to current regulations.

- Goods and services circulated within the CIZ shall not be liable to VAT. For such types of goods, the VAT lines in VAT invoices shall be crossed out (x).

4. Regarding customs procedures:

a/ For goods imported from foreign countries into the CIZ:

The CIZ enterprises shall make customs declarations and submit customs dossiers according to regulations applicable to each form of importation at Moc Bai border-gate Customs Sub-Department and shall be subject to supervision by the CIZ’s customs control stations;

b/ Goods imported from foreign countries into the inland through Moc Bai border-gate shall go through the customs procedures at Moc Bai border-gate Customs Sub-Department.

c/ For goods and services brought from the inland into the CIZ, the customs offices shall carry out customs procedures when being so requested by enterprises. Customs procedures shall be carried out as follows:

- The CIZ enterprises and inland enterprises shall make customs declarations and submit customs dossiers strictly according to regulations applicable to each form of exportation. For internal transportation of goods between enterprises and their branches inside or outside the CIZ, sale-purchase contracts shall be substituted for by ex-warehousing bills.

- In cases where inland enterprises register export declarations at inland Customs Sub-Departments, they shall make customs declarations and submit customs dossiers strictly according to regulations applicable to each form of exportation. The CIZ enterprises shall make customs declarations and submit customs dossiers strictly according to regulations applicable to each form of importation.

d/ For goods exported from the CIZ to foreign countries:

The CIZ enterprises shall make customs declarations and submit customs dossiers strictly according to regulations applicable to each form of exportation at Moc Bai border-gate Customs Sub-Department or the customs control stations in the CIZ.

e/ For goods exported from the inland to foreign countries through Moc Bai border-gate, customs procedures shall be carried out at Moc Bai border-gate Customs Sub-Department. In cases where customs procedures are carried out at inland Customs Sub-Departments, the transportation of goods to Moc Bai border-gate shall comply with the regulations on export goods transported from border gates to border gates.

f/ For goods brought from the CIZ into the inland, customs procedures shall be carried out at Moc Bai border-gate Customs Sub-Department or the customs control stations in the CIZ. The CIZ enterprises (sellers) and inland enterprises (purchasers) shall have to:

- Make customs declarations and submit customs dossiers strictly according to regulations applicable to each form of exportation or importation. For internal transportation of goods between enterprises and their branches inside or outside the CIZ, where enterprises themselves bring their goods into the inland for sale, contracts in customs dossiers shall be substituted for by ex-warehousing bills.

- The CIZ enterprises shall have to additionally submit to customs offices copies of declarations of goods imported from foreign countries into the CIZ if goods brought into the inland are those of foreign origin. Such copies shall be affixed with true-copy seals of enterprises.

- The CIZ enterprises (sellers) shall have to submit to Moc Bai border-gate Customs Sub-Department the norms of imported raw materials constituting products if such products are manufactured, processed, recycled or assembled in the CIZ with the use of foreign raw materials and/or components.

Customs offices shall have to open books for monitoring each enterprise in order to make statistics, inspection and comparison with ex-warehousing bills of such goods or services.

g/ Exported, imported and transited goods; transport means on exit, entry or transit through the CIZ shall be allowed to go through gates where customs control stations exist.

h/ Besides the provisions of this Circular, the involved parties shall also have to fulfill other obligations prescribed in the Customs Law, the Export Tax and Import Tax Law, the Government’s Decree No. 101/2001/ND-CP of December 31, 2001 detailing the implementation of a number of articles of the Customs Law on customs procedures, customs inspection and supervision regime and other guiding documents regarding customs.

B. FOR INVESTMENT PROJECTS IN THE CIZ:

1. Regarding enterprise income tax:

- Investment projects in the CIZ shall enjoy the enterprise income tax rate of 10% for a duration of 15 years after they commence business operation and be exempt from enterprise income tax for another 4 years after their taxable incomes are generated; and enjoy a 50% reduction of the payable enterprise income tax amounts for 9 subsequent years. In special cases where higher preferences are needed, the Finance Ministry shall submit to the Prime Minister for decision the preferential tax rate of 10% to be applied throughout the project execution duration.

The procedures for enjoying enterprise income tax exemption or reduction shall comply with the provisions of the Finance Ministry’s Circular No. 128/2003/TT-BTC of December 22, 2004.

- For investment projects on building new production chains, expanding production scales, renewing technologies, improving the ecological environment or raising the production capacity:

+ Enterprise income tax rate for extra incomes brought about by projects shall comply with the provisions of Item 5.1.4. of the Finance Ministry’s Circular No. 88/2004/TT-BTC of September 1, 2004 and other current law provisions.

+ The duration of enterprise income tax exemption or reduction for extra incomes brought about by projects: Investment projects not on List A promulgated together with the Government’s Decree No. 164/2003/ND-CP of December 22, 2003 shall be exempt from enterprise income tax for one year for the extra incomes brought about by investment and enjoy a 50% reduction of the payable tax amounts for 2 subsequent years at most. Investment projects on List A promulgated together with the Government’s Decree No. 164/2003/ND-CP of December 22, 2003 shall be exempt from enterprise income tax for four years for the extra incomes brought about by investment and enjoy a 50% reduction of the payable tax amounts for 7 subsequent years at most.

+ The accounting of extra incomes brought about by investment projects on building new production chains, expanding production scales, renewing technologies, improving the ecological environment or raising the production capacity shall comply with the provisions of Point 7 of the Finance Ministry’s Circular No. 88/2004/TT-BTC of September 1, 2004 and other current law provisions.

- Organizations and individuals producing and/or trading in goods and/or services as well as foreign-invested enterprises and foreign parties to business cooperation contracts, that conduct business activities in the CIZ and suffer from losses  shall, after making settlement with the tax offices, be allowed to carry forward such losses to the subsequent years for deduction from their taxable incomes. The duration for carrying forward losses shall not exceed 5 years.

- Taxable incomes from the transfer of land use right and transfer of the right to lease land affixed with infrastructure or architectural objects shall be liable to income tax according to the provisions of Section C of Circular No. 128/2003/TT-BTC of December 22, 2003 guiding the implementation of the Government’s Decree No. 164/2003/ND-CP of December 22, 2003 detailing the implementation of the Enterprise Income Tax Law.

2. Regarding land assignment with land use levy collection, land rent rates and rental

- Land users in the CIZ may invest in building infrastructures, conduct production and/or business activities or provide services, and have rights and obligations corresponding to the forms of land assignment or lease according to the provisions of land legislation.

- Investment projects in the CIZ shall be exempt from land rental for the first 11 years after land lease contracts are signed and enjoy a land rent rate equal to 30% of that applied in the region from the 12^th year on.

- One-land rent rate regime shall be applied to land-renting individuals and enterprises, regardless of whether they are Vietnamese or foreign.

For cases of land re-assignment or sub-lease not through auctions of land use rights or biddings for projects involving land use, the Management Board of Moc Bai border-gate economic zone shall decide on land use levy levels, land rent rates, land use levy or land rent rate exemption or reduction levels for each project in order to ensure the investment promotion, on the basis of the land prices decided by the People’s Committee of Tay Ninh province.

3. Regarding investment credit:

Domestic enterprises of various economic sectors, which have investment projects on production and/or business in the CIZ, shall be given priority to borrow the State’s development investment credit capital, provided with post-investment interest rate supports or investment credit guarantees under the provisions of the Government’s Decree No. 106/2004/ND-CP of April 1, 2004 and the Finance Minister’s Decision No. 54/2004/QD-BTC of June 16, 2004 on the State’s development investment credit.

4. Regarding other prices, charges, fees and taxes:

- Management Board of Moc Bai border-gate economic zone is allowed to collect assorted charges and fees corresponding to the tasks authorized by State management agencies according to current regulations. When being authorized by competent State management agencies to perform tasks, the Management Board of Moc Bai border-gate economic zone shall have to notify and register with the tax office of the locality where it is headquartered the collection of charges and fees for the performance of such authorized tasks.

- The prices for use of infrastructure works, public facilities and common services in the CIZ such as traffic roads, ports, technical infrastructure system, lighting electricity, electricity, water, communications,… shall be the prices agreed upon by the infrastructure-dealing enterprises and the users.

- Other taxes, charges and fees shall comply with the current regulations in the tax laws; the Law on Domestic Investment Promotion (amended); the Law on Foreign Investment in Vietnam; the Ordinance on Charges and Fees; and other legal documents.

C. REGARDING PERSONS TRAVELING THROUGH THE CIZ:

- Domestic and foreign tourists, when entering the CIZ, may purchase and bring various kinds of goods into the inland and shall enjoy import tax exemption if the total value of such goods does not exceed VND 500,000/person/day. If the total value of purchased goods exceeds the above-said level, goods purchasers shall have to pay import tax for the excessive quantity according to current law provisions.

Tourists purchasing goods in the CIZ and bringing them into the inland shall have to make custom declarations at the custom control station of Moc Bai border gate or the customs control stations in the CIZ.

The Management Board of Moc Bai border-gate economic zone shall guide in detail criteria for determining persons traveling through the CIZ to be tourists after consulting the People’s Committee of Tay Ninh province.

- Passengers entering Vietnam through Moc Bai border gate with passports granted by Vietnamese or foreign competent State agencies, when entering the CIZ, may carry along into Vietnam’s inland duty-free goods according to the provisions of the Government’s Decree No. 66/2002/ND-CP of July 1, 2002 on luggage limits applicable to persons on exit or entry and duty-free imported gifts or presents.

- For transport means on exit, entry or transit; and goods, luggage and foreign exchange of persons on exit, entry or transit, customs procedures shall be carried out at the Customs Sub-Departments of Moc Bai border gate.

- Domestic transport means traveling through the CIZ shall be subject to the supervision by the customs stations of the CIZ.

III. IMPLEMENTATION PROVISIONS

- The People’s Committee of Tay Ninh province shall have to ensure the full satisfaction of the conditions prescribed in Clause 3, Section I for the CIZ to enjoy the financial regime provided for in this Circular. In cases where such conditions are not yet fully satisfied, the financial regime shall not be applied.

- The People’s Committee of Tay Ninh province shall direct concerned bodies (border guards, border-gate police, customs office, tax office, etc.) to enhance their coordination in applying inspection and supervision measures to combat smuggling and trade fraud acts in Moc Bai CIZ.

- After two years’ implementation, the People’s Committee of Tay Ninh province shall assume the prime responsibility for, and coordinate with the Finance Ministry in, reviewing and evaluating the application of a number of additional financial preference policies to Moc Bai border-gate economic zone.   

- This Circular takes effect 15 days after its publication in the Official Gazette. Any problems arising in the course of implementation should be reported to the Ministry of Finance for study and solution.