Circular No. 199/2012/TT-BTC dated November 15, 2012 of the Ministry of Finance guiding implementation of the Government’s Decree No. 122/2011/ND-CP, of December 27, 2011, on change of the enterprise income tax incentives for enterprises being enjoyed the enterprise income tax incentives by meeting the conditions for incentives on the export rate which are terminated due to the implementation of wto commitment

THE MINISTRY OF FINANCE

Circular No. 199/2012/TT-BTC of November 15, 2012, guiding the Government’s Decree No. 122/2011/ND-CP of December 27, 2011, on change of enterprise income tax incentives for enterprises enjoying enterprise income tax incentives for their satisfaction of the condition on export rate, which are terminated under WTO commitments

Pursuant to November 29, 2006 Tax Administration Law No. 78/2006/QH11 and its guiding documents;

Pursuant to June 3, 2008 Enterprise Income Tax Law No. 14/2008/QH12;

Pursuant to the Government’s Decree No. 122/2011/ND-CP of December 27, 2011, amending and supplementing a number of articles of the Government’s Decree No. 124/2008/ND-CP, detailing and guiding a number of articles of the Enterprise Income Tax Law;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the General Director of Taxation;

The Minister of Finance promulgates the Circular guiding the change of enterprise income tax incentives as follows:

Article 1. Scope of regulation

This Circular guides the change of enterprise income tax incentives prescribed in Clause 2, Article 2 of Decree No. 122/2011/ND-CP for enterprises enjoying enterprise income tax incentives for their satisfaction of the condition on export rate (excluding those satisfying the condition on export rate for textiles and garments), which are terminated under WTO commitments.

Article 2. Principles of selection of change of enterprise income tax incentives

1. Enterprises that obtained an investment license, a business registration certificate or an investment certificate before the Socialist Republic of Vietnam officially became a member of the World Trade Organization (January 11, 2007), earn income from business activities and are enjoying enterprise income tax incentives for their satisfaction of the condition on export rate prescribed in legal documents on foreign investment in Vietnam, domestic investment promotion and enterprise income tax, may continue enjoying the incentives prescribed in these legal documents through 2011.

2. Enterprises still in the period of enjoying enterprise income tax incentives for their satisfaction of the condition on export rate, which are terminated under WTO commitments, may, from 2012, choose to continue enjoying for the remaining period enterprise income tax incentives corresponding to the actual conditions they satisfy for enjoying investment incentives (other than the incentives for satisfying the condition on export rate), specifically as follows:

- They may choose to continue enjoying for the remaining period enterprise income tax incentives corresponding to the actual conditions they satisfy for enjoying investment incentives prescribed in legal documents on enterprise income tax which were effective during the period from the date the enterprises obtained their establishment licenses to before the effective date of the Government’s Decree No. 24/2007/ND-CP of February 14, 2007, detailing the Enterprise Income Tax Law (legal documents on enterprise income tax applicable in the period from the 2006 tax period back to the time the enterprises obtained their establishment licenses).

- Or they may choose to continue enjoying for the remaining period enterprise income tax incentives corresponding to the actual conditions they satisfy for enjoying investment incentives under legal documents on enterprise income tax effective at the time of adjustment of tax incentives due to the implementation of WTO commitments (legal documents on enterprise income tax applicable to the 2012 enterprise income tax period).

3. The above change of enterprise income tax incentives for the remaining period must adhere to the following principles:

- If, by 2012, enterprises are still enjoying enterprise income tax rate incentives for their satisfaction of the condition on export rate but these incentives are terminated due to the implementation of WTO commitments, they may change their tax rate incentives under this Circular. If, by 2012, they no longer enjoy enterprise income tax rate incentives, they may not change their tax rate incentives.

- If, by 2012, enterprises are in the period of enterprise income tax exemption and reduction for their satisfaction of the condition on export rate but these incentives are terminated due to the implementation of WTO commitments, they may change their incentives on tax exemption and reduction periods under this Circular. If, by 2012, their enterprise income tax exemption and reduction period ends, they may not change their incentives on tax exemption and reduction periods.

Article 3. Method of selection to change enterprise income tax incentives

1. Enterprises which are still enjoying enterprise income tax rate and exemption and reduction incentives may choose to continue enjoying for the remaining incentive period enterprise income tax incentives corresponding to the actual conditions they satisfy for enjoying investment incentives (other than the incentives for satisfying the condition on export rate) under legal documents on enterprise income tax applicable in the period from the time the enterprises obtained their establishment licenses to before the effective date of the Government’s Decree No. 24/2007/ND-CP or under legal documents on enterprise income tax applicable at the time of adjustment of tax incentives due to the implementation of WTO commitments.

For enterprises which are still enjoying tax rate and enterprise income tax exemption and reduction incentives but choose to change to other incentives (other than the incentives for satisfying the condition on export rate), their change of tax rate incentives and tax exemption and reduction period for the remaining period must comply with legal documents applicable at the time selected by the enterprises.

2. Enterprises which are still enjoying tax rate incentives but no longer in the tax exemption and reduction period may choose to continue enjoying for the remaining period tax rate  incentives corresponding to the actual conditions they satisfy for enjoying investment incentives (other than the incentives for satisfying the condition on export rate) under legal documents on enterprise income tax applicable in the period from the time they obtained their establishment licenses to before the effective date of Decree No. 24/2007/ND-CP or under legal documents on enterprise income tax applicable at the time of adjustment of tax incentives due to the implementation of WTO commitments.

3. Enterprises which are still in the tax exemption and reduction period but no longer enjoy tax rate incentives may choose to continue enjoying for the remaining period tax exemption and reduction incentives corresponding to the actual conditions they satisfy (other than the incentives for satisfying the condition on export rate) under legal documents on enterprise income tax applicable in the period from the time they obtained their establishment licenses to before the effective date of Decree No. 24/2007/ND-CP or under legal documents on enterprise income tax applicable at the time of adjustment of tax incentives due to the implementation of WTO commitments.

For enterprises which are still in the tax exemption and reduction period or no longer in the tax exemption period but still in the tax reduction period and, upon changing their incentives, have the number of years of enjoying enterprise income tax exemption for their satisfaction of the condition on export rate exceeding the number of years of tax exemption under other incentive conditions they satisfy and choose to apply (other than the incentives for satisfying the condition on export rate), for every year of enjoying enterprise income tax exemption in excess, they will have 2 years of enjoying 50% reduction of enterprise income tax deducted.

For enterprises which, by 2012, have not enjoyed enterprise income tax exemption and reduction for satisfying the condition on export rate because they did not have any taxable incomes: If they do not have taxable incomes in the first three years from the first year of having revenues, the tax exemption and reduction period will be counted from the fourth year of having revenues. The change of incentives for the remaining period complies with the above principles.

4. Enterprises still in the period of enjoying enterprise income tax incentives for investment expansion but having the enterprise income tax incentives for satisfying the condition on export rate terminated may choose to continue enjoying for the remaining period enterprise income tax incentives corresponding to the actual conditions for enjoying investment expansion incentives (other than the incentives for satisfying the condition on export rate) at the time of obtaining investment expansion licenses or at the time investment expansion projects commence production and business (for cases not licensed for investment expansion).

5. Some specific cases are guided as follows:

a/ For enterprises which are enjoying incentives for their satisfaction of the condition on export rate (excluding export processing enterprises).

Example 1:

Enterprise A, established in 1988, is a wholly foreign-owned enterprise engaged in export production and satisfies the following conditions for investment incentives: the project is invested within the first five years of implementation of the Investment Law and the project exports at least 80% of its export products. Under its establishment license, enterprise A is entitled to the following profit tax (enterprise income tax) incentives: a 15% profit tax rate throughout the project implementation, profit tax exemption for 2 years and 50% profit tax reduction for 2 subsequent years. Having taxable incomes from 2001, the enterprise received tax incentives as follows: enterprise income tax exemption in 2 years of 2001 and 2002 and enterprise income tax reduction in 2 subsequent years of 2003 and 2004.

From the 2012 enterprise income tax period, the enterprise income tax incentives for satisfaction of the export condition are terminated: Enterprise A already fully enjoyed the enterprise income tax exemption and reduction incentives and is still entitled only to the preferential 15% enterprise income tax rate for satisfaction of the condition on export rate, which must terminate in 2012. Enterprise income tax rate incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license - the Minister Council’s Decree No. 139-HDBT of September 5, 1988 (the time of grant of the investment license): If the condition of exporting at least 80% of export products is excluded, enterprise A only satisfies one condition specified in Clause 2, Article 37 of  Decree No. 139-HDBT (which is the project is invested within the first 5 years of implementation of the Investment Law) and  is thus not a prioritized but common project. The enterprise income tax rate applicable to the remaining period of the project is 21%.

b/ Under the Minister Council’s Decree No. 28-HDBT of December 6, 1991: Enterprise A only satisfies one condition: The project is invested within the first 5 years of implementation of the Investment Law, so it belongs to the common category and the enterprise income tax rate applicable to the remaining period of the project is 21%.

c/ Under the Government’s Decrees No. 18/CP of April 16, 1993, No. 12/CP of February 18, 1997, No. 24/2000/ND-CP of July 31, 2000, and No. 27/2003/ND-CP of March 19, 2003: Enterprise A does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25% for the remaining period of the project.

d/ Under Decrees No. 164/2003/ND-CP of December 22, 2003, and No. 152/2004/ND-CP of August 6, 2004: Enterprise A does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 28%; and from 2009, to the common enterprise income tax rate of 25% prescribed in the Government’s Decree No. 124/2008/ND-CP of December 11, 2008,  for the remaining period of the project.

e/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: Enterprise A does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25% for the remaining period of the project.

So enterprise A may choose a tax rate specified at Point a, b, c, d or e above, of which the most beneficial option is the one applied in the period specified at Point a or b: the enterprise income tax rate of 21% from 2012 for the remaining period of the project in accordance with the Minister Council’s Decree No. 139-HDBT of September 5, 1988, or Decree No. 28-HDBT of December 6, 1991.

Example 2:

Enterprise B was established on April 16, 1993, engaged in export production. It satisfies the following conditions for investment incentives: the investment project employs at least 500 laborers and exports at least 80% of its products. Under its establishment license, enterprise B is entitled to the following profit tax (enterprise income tax) incentives: a 20% profit tax rate throughout the project implementation, profit tax exemption for 2 years and 50% reduction of profit tax for 3 subsequent years. Having taxable incomes from 2003, the enterprise received tax incentives as follows: enterprise income tax exemption in 2 years of 2003 and 2004 and 50% enterprise income tax reduction in 3 subsequent years of 2005, 2006 and 2007.

From the 2012 enterprise income tax period, the enterprise income tax incentives for satisfaction of the export condition are terminated: Enterprise B already fully enjoyed the enterprise income tax exemption and reduction incentives and is only entitled to the preferential 20% enterprise income tax rate for satisfaction of the condition on export rate, which must terminate in 2012. Enterprise income tax rate incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license - the Government’s Decree No. 18/CP of April 16, 1993: If the condition on export is excluded, enterprise B only satisfies the condition of employing at least 500 workers and does not satisfy the conditions for investment incentives so it is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

b/ Under the Government’s Decree No. 12/CP of February 18, 1997: Enterprise B satisfies the condition of employing at least 500 workers and is thus entitled to a 20% enterprise income tax rate for 10 years counting from 1993 (the year it was established). The tax rate incentive period for the project ends in 2012 so it is subject to the common enterprise income tax rate of 25% for its remaining period.

c/ Under the Government’s Decrees No. 24/2000/ND-CP of July 31, 2000, and No. 27/2003/ND-CP of March 19, 2003: Enterprise B does not satisfy any conditions for investment incentives and is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

d/ Under the Government’s Decree No. 108/2006/ND-CP of September 22, 2006, a project that employs between 500 and 5,000 permanent workers is entitled to investment incentives. Under Decree No. 164/2003/ND-CP, a business established from an investment project entitled to investment incentives may enjoy a 20% enterprise income tax rate for 10 years. Enterprise B satisfies the condition of employing at least 500 workers so it is entitled to a  20% enterprise income tax rate for 10 years counting from 1993. This tax rate incentive period ends in 2012 so it is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

e/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: Enterprise B does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25%.

So enterprise B may choose to enjoy a tax rate specified at Point a, b, c, d or e above. At the above mentioned points of time, enterprise B already fully enjoyed the enterprise income tax incentives, and from 2012 is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

Example 3:

Enterprise C was established on January 1, 2003, engaged in export production. It satisfies the following conditions for investment incentives: the project carries out production in an industrial park and the project exports at least 80% of its products. Under its establishment license, enterprise C is entitled to the following enterprise income tax incentives: a 10% enterprise income tax rate throughout the project implementation, enterprise income tax exemption for 4 years and 50% reduction of enterprise income tax for 4 subsequent years. Enterprise C had taxable incomes from 2006. By the end of 2011, the enterprise received the following tax incentives: enterprise income tax exemption for 4 years from 2006 to 2009, and enterprise income tax reduction for 2 years of 2010 and 2011. From 2012 in which these incentives are terminated under WTO commitments, enterprise C is no longer entitled to a 50% reduction of enterprise income tax for the remaining 2 years and the 10% enterprise income tax.

Enterprise income tax rate exemption and reduction incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license - the Government’s Decree No. 24/2000/ND-CP of July 31, 2000: The enterprise satisfies the condition of carrying out production in an industrial park and is entitled to the following incentives: enterprise income tax exemption for 1 year in 2006, 50% enterprise income tax reduction for 2 years of 2007 and 2008 and a 20% enterprise income tax rate for the remaining period of the project.

b/ Under the Government’s Decree No. 27/2003/ND-CP of March 19, 2003: The enterprise satisfies the condition of carrying out production in an industrial park and is entitled to the following incentives: enterprise income tax exemption for 2 years of 2006 and 2007, 50% enterprise income tax reduction for 3 years from 2008 to 2010 and a 15% enterprise income tax rate for the remaining period of the project.

c/ Under Decree No. 152/2004/ND-CP: The enterprise satisfies the condition of carrying out production in an industrial park and is entitled to enterprise income tax exemption for 3 years and 50% enterprise income tax reduction for 7 subsequent years. By 2012, enterprise C already enjoyed tax exemption for 4 years from 2006 to 2009 and 50% tax reduction in 2010 and 2011 so it had one year of tax exemption in excess for which 2 years of 50% tax reduction will be deducted. Therefore, by 2012, enterprise C is entitled to the 50% tax reduction for 3 years (7 years minus 2 years of having enjoyed tax reduction and 1 year of tax exemption in excess which equals 2 years of tax reduction).

Regarding enterprise income tax rate: Under Decree No. 152/2004/ND-CP, the enterprise satisfies the condition of carrying out production in an industrial park and is entitled to a 15% enterprise income tax rate for 12 years (from 2003 to 2014), and from 2015 it is subject to the common enterprise income tax of 25% for the remaining period of the project.

d/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: Enterprise C does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25%.

So enterprise C may choose to enjoy a tax rate specified at Point a, b, c, or d above, of which the most beneficial option is the one applied in the period specified at Point b or c, from 2012:

+ Incentives under the Government’s Decree No. 27/2003/ND-CP: The tax exemption and reduction incentives are terminated from 2012 and the 15% enterprise income tax rate is applied for the remaining period of the project.

Or:

+ Tax exemption and reduction incentives under Decree No. 27/2003/ND-CP: A 50% tax reduction for 3 years from 2012 to 2014 and the 15% enterprise income tax rate from 2012 to 2014.

Example 4:

Enterprise D was established on January 7, 2004, in an area with socio-economic difficulties. Its business line is export production with over 50% of its products for export. It had taxable incomes from 2005.

Under the Government’s Decree No. 164/2003/ND-CP of December 22, 2003, the enterprise satisfies the condition of operating in a business line on List A (the project exports over 50% of its total goods, production and business value in the fiscal year) attached to Decree No. 164/2003/ND-CP, and operates in an area on List B attached to Decree No. 164/2003/ND-CP. It is entitled to the following incentives: a 15% enterprise income tax rate for 12 years from 2004 to 2015; enterprise income tax exemption for 3 years from 2005 to 2007 and 50% enterprise income tax reduction for 7 years from 2008 to 2014.

From the 2012 enterprise income tax period in which the export-rate based incentives are terminated: The enterprise is still in the tax reduction period and the tax rate incentive period for satisfaction of the condition on export rate, which both must terminate. Enterprise income tax incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license- Decree No. 164/2003/ND-CP of December 22, 2003: If the condition on export production is excluded, the enterprise still satisfies the condition of operating in an area with socio-economic difficulties and is thus entitled to a 20% enterprise income tax rate for 10 years from 2004 to 2013, tax exemption for 2 years (2005 and 2006) and 50% enterprise income tax reduction for 6 years (from 2007 to 2012). By the end of 2011, the enterprise already enjoyed tax exemption for 3 years from 2005 to 2007 (1 year of tax exemption in excess for which 2 years of 50% tax reduction will be deducted). So the enterprise is entitled to a 50% tax reduction for only 4 years from 2008 to 2011 and no longer enjoys tax exemption and reduction in 2012.

b/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: The enterprise satisfies the condition of being established from an investment project in an area with socio-economic difficulties and is thus entitled to a 20% enterprise income tax rate for 10 years from 2004 to 2013, tax exemption for 2 years (2005 and 2006) and 50% enterprise income tax reduction for 4 years (from 2007 to 2010).

So enterprise D may choose to enjoy a tax rate specified at Point a or b above, of which the most beneficial option is the one applied in the period specified at Point a: The enterprise income tax rate of 20% in 2012 and 2013 under the Government’s Decree No. 164/2003/ND-CP of December 22, 2003, and the common enterprise income tax rate of 25% from 2014. From 2012, the tax exemption and reduction period ends.

Example 5:

Enterprise E was established on January 7, 2004, engaged in export production.  Satisfying the condition of exporting over 50% of products, it is entitled to the following enterprise income tax incentives: Under Decree No. 164/2003/ND-CP, the enterprise is entitled to a 20% enterprise income tax rate for 10 years, enterprise income tax exemption for 2 years and 50% enterprise income tax reduction for 3 subsequent years. Having taxable income from 2004, enterprise E enjoyed tax incentives as follows: enterprise income tax exemption in 2004 and 2005 and 50% enterprise income tax reduction from 2006 to 2008.

From the 2012 enterprise income tax period in which export incentives are terminated, the enterprise already fully enjoyed the enterprise income tax exemption and reduction incentives for satisfaction of the export condition and is only entitled to the 20% enterprise income tax rate which will be terminated. Enterprise income tax rate incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license - Decree No. 164/2003/ND-CP of December 22, 2003: If the condition on export rate is excluded, the enterprise does not satisfy any other conditions for investment incentives and is thus subject to the 28% enterprise income tax rate. From 2009, it is subject to the common enterprise income tax rate of 25% under the Government’s Decree No. 124/2008/ND-CP of December 11, 2008, for the remaining period of the project.

b/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: The enterprise does not satisfy any other conditions for investment incentives so it is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

So enterprise E may choose to apply Point a or b above, under which it has fully enjoyed the enterprise income tax incentives and from 2012 it is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

b/ For export processing enterprises operating in export-processing zones or industrial parks

Example 6:

Export processing enterprise G is a wholly foreign-owned enterprise established on October 18, 1991, and engaged in export production. Under its establishment license, it is entitled to the following profit tax (enterprise income tax) incentives: a 10% profit tax rate throughout the project implementation, and enterprise income tax exemption for 4 years. Having taxable incomes from 1994, the enterprise enjoyed tax incentives as follows: enterprise income tax exemption for 4 years from 1994 to 1997.

From the 2012 enterprise income tax period in which the export rate-based incentives are terminated, the enterprise already fully enjoyed the enterprise income tax exemption and reduction incentives and is only entitled to the 10% enterprise income tax rate for satisfaction of the condition on export rate, which must terminate. Enterprise income tax rate incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license, under the Minister Council’s Decree No. 28-HDBT of December 6, 1991, enterprise G only satisfies one condition of investment within the first 5 years of implementation of the Investment Law, so the enterprise income tax rate applicable for the remaining period of the project is 21%.

b/ Under Decree No. 18/CP of April 16, 1993: Enterprise G does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25% for the remaining period of the project.

c/ Under the Government’s Decree No. 192/CP of December 28, 1994: If the condition on export rate is excluded, enterprise G only satisfies the condition of carrying out production in an industrial park and is thus entitled to the enterprise income tax rate of 18% for the remaining period of the project.

d/ Under the Government’s Decree No. 36/CP of April 24, 1997: If the condition on export rate is excluded, enterprise G only satisfies the condition of carrying out production in an industrial park and is thus entitled to the enterprise income tax rate of 15% for the remaining period of the project.

e/ Under the Government’s Decree No. 27/2003/ND-CP of March 19, 2003: The enterprise satisfies the condition of carrying out production in an industrial park and is thus entitled to the enterprise income tax rate of 15% for the remaining period of the project.

g/ Under Decrees No. 164/2003/ND-CP of December 22, 2003, and No. 152/2004/ND-CP of August 6, 2004: The enterprise only satisfies the condition of carrying out production in an industrial park and is thus entitled to the enterprise income tax rate of 15% for 12 years from 1991 to 2002. From 2003, the tax rate incentive period ends and the enterprise is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

h/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: Enterprise G does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25% for the remaining period of the project.

So enterprise G may choose to enjoy a tax rate specified at Point a, b, c, d, e , g or h above, of which the most beneficial option is the one  applied in the period specified at Point d or e: the enterprise income tax rate of 15% from 2012 for the remaining period of the project according to the Government’s Decree No. 36/CP of April 24, 1997, or Decree No. 27/2003/ND-CP.

Example 7:

Export processing enterprise H was established on January 8, 2000, and engaged in export production. Under its establishment license, enterprise H is entitled to the following enterprise income tax incentives: a 10% enterprise income tax rate throughout the project implementation, enterprise income tax exemption for 4 years and 50% enterprise income tax reduction for 4 subsequent years. Having taxable income from 2004, the enterprise already enjoyed tax incentives as follows: enterprise income tax exemption for 4 years from 2004 to 2007, and 50% enterprise income tax reduction for 4 years from 2008 to 2011.

From the 2012 enterprise income tax period in which the export incentives are terminated, the enterprise already fully enjoyed the enterprise income tax exemption and reduction incentives and is only entitled to the 10% enterprise income tax rate for satisfaction of the condition on export rate, which must terminate. Enterprise income tax rate incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license - the Government’s Decree No. 24/2000/ND-CP of July 31, 2000: The enterprise satisfies the condition of carrying out production in an industrial park and is thus entitled to the enterprise income tax rate of 20% for the remaining period of the project.

b/ Under the Government’s Decree No. 27/2003/ND-CP of March 19, 2003: The enterprise satisfies the condition of carrying out production in an industrial park and is thus entitled to the enterprise income tax rate of 15% for the remaining period of the project.

c/ Under Decrees No. 164/2003/ND-CP of December 22, 2003, and No. 152/2004/ND-CP of August 6, 2004: The enterprise satisfies the condition of carrying out production in an industrial park and is thus entitled to the enterprise income tax rate of 15% for 12 years from 2000 to 2011, and from 2012 is subject to the common enterprise income tax rate of 25%.

d/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: Enterprise H does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25% for the remaining period of the project.

So enterprise H may choose to enjoy a tax rate specified at Point a, b, c or d above, of which the most beneficial option is the one applied in the period specified at Point b: the enterprise income tax rate of 15% from 2012 for the remaining period of the project under the Government’s Decree No. 27/2003/ND-CP of March 19, 2003.

c/ For export processing enterprises operating outside export-processing zones or industrial parks

Example 8:

Export processing enterprise K was established in 2003 and engaged in export production and business. Annually it employs 6,000 workers on average. Under its establishment license, enterprise K is entitled to the following enterprise income tax incentives: a 10% enterprise income tax rate throughout the project implementation, enterprise income tax exemption for 4 years from the time of earning income, and 50% enterprise income tax reduction for 4 subsequent years. Having taxable incomes from 2003, the enterprise already enjoyed tax incentives as follows: enterprise income tax exemption for 4 years from 2003 to 2006, and 50% enterprise income tax reduction from 2007 to 2010.

From the 2012 enterprise income tax period in which the export rate-based incentives are terminated, the enterprise already fully enjoyed the enterprise income tax exemption and reduction incentives and no longer enjoys the preferential 10% enterprise income tax rate.

Enterprise income tax rate incentives for satisfaction of other conditions for enterprise income tax incentives apart from the condition on export rate the enterprise may choose to enjoy and notify the tax agency from 2012 include:

a/ At the time of grant of its establishment license, under the Government’s Decree No. 27/2003/ND-CP of March 19, 2003: The enterprise does not satisfy any conditions for enterprise income tax rate incentives and is thus subject to the enterprise income tax rate of 25% for the remaining period of the project.

b/ Under Decree No. 108/2006/ND-CP of September 22, 2006, a project that regularly employs at least 5,000 workers is entitled to special investment incentives. Under Decree No. 164/2003/ND-CP, a business established from an investment project entitled to special investment incentives may enjoy a 20% enterprise income tax rate for 10 years. Enterprise K satisfies the condition of employing at least 5,000 workers so it is entitled to a 20% enterprise income tax rate for 10 years from 2003 to 2012, and from 2013 is subject to the common enterprise income tax rate of 25% for the remaining period of the project.

c/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011: Enterprise K does not satisfy any conditions for investment incentives and is thus subject to the common enterprise income tax rate of 25%.

So enterprise K may choose to enjoy a tax rate specified at Point a, b or c above, of which the most beneficial option is the one applied in the period specified at Point b: the 20% enterprise income tax rate in 2012 and the common enterprise income tax rate of 25% from 2013.

d/ For enterprises still in the period of enjoying enterprise income tax incentives for investment expansion

Example 9:

Enterprise L was established on May 2, 1997. On April 1, 2005, it was licensed by a competent state agency to implement a production expansion investment project (the project operates in a field on List A - projects exporting over 50% of products- and in an area on List C). The project is entitled to tax exemption for 4 years and 50% reduction of payable tax for 7 subsequent years. The project commenced production and business in 2006. The enterprise already enjoyed incentives for the income from the expansion investment project as follows: enterprise income tax exemption for 4 years (from 2006 to 2009) and 50% enterprise income tax reduction for 2 years (from 2010 to 2011).

From the 2012 enterprise income tax period, the export rate incentives are terminated.

a/ At the time of commencement of production and business of the expansion investment project: Under Article 38 of Decree No. 164/2003/ND-CP of December 22, 2003: If the condition of being a project operating in a field on List A -projects exporting over 50% of products- is excluded, the project only satisfies the condition of operating in an area on List C and is thus entitled to investment expansion incentives, namely tax exemption for 1 year in 2006 and 50% tax reduction for 2 years in 2007 and 2008. The enterprise already enjoyed tax exemption for 4 years and 50% tax reduction for 2 years, so from 2012, the enterprise income tax exemption and reduction incentives for the expansion investment project of the enterprise terminate.

b/ At the time of termination of the export incentives due to WTO accession under the Government’s Decree No. 122/2011/ND-CP of December 27, 2011, expansion investment projects are not entitled to incentives.

So enterprise L may choose to apply Point a or b above under which from 2012, the enterprise no longer enjoys enterprise income tax incentives since the incentives for its expansion investment project have terminated.

Article 4. Procedures for change of incentives

Enterprises shall notify their managing tax agencies of their selection of incentives according to Appendix 1 to this Circular (not translated).

The deadline for sending notices to tax agencies is the deadline for submitting the 2012 enterprise income tax finalization declaration under regulations.

An enterprise that has made declaration for enjoying enterprise income tax incentives (including notification to the tax agency) but its selected incentives are lower than those prescribed in this Circular or do not conform with the selection and change of incentives prescribed in this Circular may make additional declaration in accordance with the Tax Administration Law and its guiding documents and shall concurrently notify in writing the tax agency of its selection of incentives in accordance with the change of incentives prescribed in this Circular.

Article 5. Organization of implementation

1. This Circular takes effect on December 31, 2012, and applies from the 2012 enterprise income tax period. To annul the Finance Ministry’s previous guidance contrary to the guidance of this Circular.

2. Tax agencies at all levels shall publicize and guide enterprises in the implementation of this Circular.

Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance for study and settlement.-

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN