Circular No. 212/2015/TT-BTC dated December 31, 2015 of the Ministry of Finance guiding the corporate income tax policies for environmental protection activities regulated at the Decree No. 19/2015/ND-CP dated February, 2015 of the Government detailing a number of articles of the Law on Environmental Protection

CIRCULAR

Guiding enterprise income tax policies for environmental protection activities specified in the Government’s Decree No. 19/2015/ND-CP of February 14, 2015, detailing a number of articles of the Law on Environmental Protection[1]

Pursuant to the Law on Enterprise Income Tax and guiding documents;

Pursuant to the Government’s Decree No. 19/2015/ND-CP of February 14, 2015, detailing a number of articles of the Law on Environmental Protection;

Pursuant to the Government’s Decree No. 215/2013/ND-CP of December 23, 2013, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the Director of Tax Policy Department,

The Minister of Finance promulgates the Circular guiding enterprise income tax policies for environmental protection activities specified in the Government’s Decree No. 19/2015/ND-CP of February 14, 2015, detailing a number of articles of the Law on Environmental Protection.

Article 1.Scope of regulation

1. This Circular guides a number of expenses allowed to be deducted upon  determination of enterprise income tax (EII)-liable income from environmental protection activities of organizations, enterprises and cooperatives (below collectively referred to as enterprises) and tax incentive policies for environmental protection activities eligible for EIT incentives specified in Articles 43 and 48 of Decree No. 19/2015/ND-CP.

2. Other environmental protection activities not provided in Decree No. 19/2015/ND-CP and other expenses not guided in this Circular must comply with the EIT law.

Article 2.Expenses for product promotion and sorting of waste at source

1. Expenses actually paid for promotion of products created from environmental protection activities or recovery and processing of discarded products; production and dissemination of films, television programs and scientific reportages on environmental protection; and free-of-charge supply of tools for people to sort domestic waste and discarded products at source specified in Clause 1, Article 48 of Decree No. 19/2015/ND-CP shall be accounted into deductible expense upon determination of EIT-liable income if satisfying the following conditions:

- Having adequate lawful invoices and documents according to regulations.

- Having non-cash payment documents, for expenses with goods or service purchase invoices with the value of VND 20 million or more for a single payment (VAT-inclusive prices), except cases for which non-cash payment documents are unavailable as prescribed in the Government’s Decree No. 218/2013/ND-CP of December 26, 2013, and guiding documents.

2. Expenses for promotion of products created from environmental protection activities or recovery and processing of discarded products specified in Clause 1 of this Article include:

a/ Expense for holding seminars on production methods, properties and utilities of products created from environmental protection activities or on the recovery and processing of discarded products;

b/ Expense for market research: conducting surveys and interviews, collecting, analyzing and assessing information on products created from environmental protection activities or on the recovery and processing of discarded products;

c/ Expense for market development and market research support;

d/ Expense for hiring consultants to conduct research and development and support market research;

dd/ Expense for product display and introduction and organization of trade fairs and exhibitions: expense for opening product showrooms or display kiosks; expense for hiring space to display and introduce products; expense for supplies and tools used for product display and introduction; and expense for transport of to-be-displayed or -introduced products.

3. Films, television programs and scientific reportages on environmental protection specified in Clause 1 of this Article include:

a/ Films, television programs and scientific reportages to disseminate information on, and raise public awareness about, environmental protection and sustainable consumption through environment-friendly products with the Vietnam Green Label awarded by the Ministry of Natural Resources and Environment;

b/ Films, television programs and scientific reportages to disseminate knowledge about sorting domestic waste and discarded products at source.

4. Tools supplied free of charge to people specified in Clause 1 of this Article include: waste baskets or bags; discarded product baskets or bags; boots, gloves and other specialized tools to sort domestic waste and discarded products at source.

In case an enterprise supplies free of charge tools specified in this Clause to people to sort domestic waste and discarded products at source together with leaflets explaining how to sort out organic and inorganic solid wastes, expense for making such leaflets may be included into deductible expense upon determination of EIT-liable income.

The enterprise shall make a list stating full names and addresses of persons provided with such tools; quantity and value of tools of each kind; the list must bear signatures of these persons; and signature of the at-law representative or an authorized person of the enterprise.

The at-law representative or an authorized person of the enterprise shall sign in the list of tools supplied free of charge and take responsibility before law for the accuracy and truthfulness of the list.

Article 3.Enterprise income tax incentives

1. EIT incentives specified in this Circular shall be applied to enterprises’ incomes from implementation of new investment projects:

a/ To conduct centralized wastewater treatment with a designed capacity of at least 2,500 m³of wastewater/day, for urban areas of grade IV or higher;

b/ To collect, transport and conduct centralized treatment of ordinary solid waste;

c/ To treat and improve polluted public areas;

d/ To respond to and tackle oil spill, chemical and other environmental incidents;

dd/ To build environmental protection technical infrastructure in industrial parks and complexes and craft villages;

e/ To provide cremation and electric cremation services;

g/ To conduct environmental damage assessment; environmental health assessment; environmental assessment of goods, machinery, equipment and technologies;

h/ To conduct production activities with application of environmental protection inventions protected by the State in the form of invention or utility solution patents;

i/ To manufacture environment-friendly products with the Vietnam Green Label awarded by the Ministry of Natural Resources and Environment; products from waste recycling and treatment as certified by competent state agencies;

k/  To produce petrol, diesel fuel and bio-fuel certified with technical regulation-conformity certificates; bio-coal; energy from wind power, sunlight, tide, geothermal heat and other forms of renewable energy;

l/ To produce special-use machinery, equipment and vehicles used directly for collecting, transporting and treating waste; to conduct environmental monitoring and analysis; to generate renewable energy; to treat environmental pollution; or to respond to and tackle environmental incidents.

2. Incentive levels:

a/ Tax rates:

Enterprises shall enjoy the tax rate of 10% for 15 years for income generated from new investment projects specified in Clause 1 of this Article.

For large-sized and hi-tech projects and new projects especially in need of investment attraction, the period of applying the preferential tax rate of 10% may be extended but must not exceed 30 years. Such an extension shall be decided by the Prime Minister at the proposal of the Minister of Finance.

Enterprises that satisfy criteria on establishments conducting socialization in the environmental sector under the Prime Minister’s decision will be entitled to enjoy the preferential tax rate of 10% for the income generated from socialization activities throughout their operation.

The period of applying the preferential tax rate shall be counted continuously from the first year when enterprises have turnover from their investment projects.

b/ Tax exemption and reduction:

An enterprise will be entitled to tax exemption for 4 years and a 50% reduction of payable tax amounts for 9 subsequent years for income generated from a new investment project specified in Clause 1 of this Article.

The tax exemption and reduction period shall be counted continuously from the first year the enterprise earns taxable income from its tax incentive-eligible investment project. In case the enterprise earns no taxable income within the first three years after having turnover from the new investment project, the tax exemption and reduction period shall be counted from the fourth year since the new investment project generates turnover.

Tax exemption and reduction year shall be determined in conformity with the tax period. The time of starting to enjoy tax exemption and reduction shall be the first tax period when the enterprise starts to earn taxable income (excluding losses carried forward from previous tax periods).

In the first tax period when taxable income is generated, if the period of conducting tax incentive-eligible production and business activities under the new project is less than 12 (twelve) months, the enterprise may enjoy tax incentives for the new investment project right from the first tax period or register with tax agencies to enjoy tax incentives from the subsequent tax period. If the enterprise registers to enjoy tax incentives from the subsequent tax period, it shall determine the payable tax amount of the first tax period and pay such tax amount into the state budget according to regulations.

c/ The period of applying preferential tax rates for a number of specific projects:

- For an investment project to conduct production activities with application of environmental protection inventions protected by the State in the form of invention or utility solution patents, the period of applying the  preferential tax rate shall be counted from the year the invention or utility solution patent is granted .

- For an investment project to manufacture environment-friendly products with the Vietnam Green Label awarded by the Ministry of Natural Resources and Environment, the period of applying the preferential tax rate shall be counted from the year the Ministry of Natural Resources and Environment awards the Vietnam Green Label.

- For an investment project to manufacture products from waste recycling and treatment as certified by competent state agencies, the period of applying the preferential tax rate shall be counted from the year a competent state agency certifies that products are manufactured from waste recycling and treatment activities.

In the first tax period when taxable income is generated, if the period of conducting tax incentive-eligible production and business activities under a new project prescribed at this Point is less than 12 (twelve) months, the enterprise may enjoy tax incentives for the new investment project right from the first tax period or register with tax agencies to enjoy tax incentives from the subsequent tax period. If the enterprise registers to enjoy tax incentives from the subsequent tax period, it shall determine the payable tax amount of the first tax period and pay such tax amount into the state budget according to regulations.

3. For an investments project to extend an operating project which is eligible for EIT incentives as prescribed in Clause 1 of this Article, the determination of criteria for enjoying tax incentives and application of tax incentives must comply with the EIT law.

Article 4.Effect and organization of implementation

1. This Circular takes effect 45 days from the date of its signing and applies from the 2016 tax period.

2. To annul the Ministry of Finance’s Circular No. 230/2009/TT-BTC of December 8, 2009, guiding tax incentives for environmental protection activities prescribed in the Government’s Decree No. 04/2009/ND-CP of January, 2009, on incentives and supports for environmental protection activities.

3. Enterprises having investment projects which are eligible for tax incentives under this Circular and, by the time this Circular take effect, is enjoying EIT incentives (including those enjoying incentives and those have not yet enjoyed incentives) according to legal documents on EIT tax may continuously enjoy tax incentives under such legal documents or enjoy tax incentives specified in this Circular for the remaining period.

4. Tax agencies shall disseminate and guide enterprises to comply with this Circular.

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

For the Minister of Finance
Deputy Minister
VU THI MAI