Circular No. 59/2001/TT-BTC dated July 17, 2001 of the Ministry of Finance guiding the implementation of financial policies applicable to the border-gate economic zones

CIRCULAR

GUIDING THE IMPLEMENTATION OF FINANCIAL POLICIES APPLICABLE TO THE BORDER-GATE ECONOMIC ZONES

In furtherance of the Prime Minister’s Decision No.53/2001/QD-TTg of April 19, 2001 on policies toward the border-gate economic zones, the Finance Ministry hereby guides the implementation of financial policies applicable to the border-gate economic zones as follows:

Part I

SCOPE AND OBJECTS OF APPLICATION

1. Scope of application:

According to the provisions of Article 5 of the Prime Minister’s Decision No.53/2001/QD-TTg of April 19, 2001, this Circular shall govern:

- The border-gate economic zones, which had been established under separate decisions of the Prime Minister before the effective date of Decision No.53/2001/QD-TTg.

- The border-gate economic zones, which have been established under separate decisions of the Prime Minister after the effective date of Decision No.53/2001/QD-TTg.

The provisions of this Circular shall not apply to Lao Bao Trade Zone (established under the Prime Minister’s Decision No.219/1998/QD-TTg of November 12, 1998).

2. Objects of application:

This Circular shall apply to the following objects:

2.1. The provinces and centrally-run cities (hereinafter referred collectively to as the provinces) where exist border-gate economic zones as defined in Section 1, Part I above;

2.2. Domestic investors of all economic sectors and foreign investors conducting business activities (including infrastructure construction, production, commercial business and service provision) in border-gate economic zones;

2.3. Only business activities conducted in the border-gate economic zones shall be eligible for the preferential policies provided for in this Circular.

2.4. In cases where domestic and foreign investors conduct business activities in the border-gate economic zones without establishing economic legal persons therein, they shall have to separately account the part of business activities conducted in such border-gate economic zones, which shall serve as basis for determining the preferential regimes.

Part II

FINANCIAL PREFERENCES

I. PREFERENCES FOR THE INVESTMENT IN CONSTRUCTION OF INFRASTRUCTURE OF BORDER-GATE ECONOMIC ZONES WITH REVENUE SOURCES INVESTED BACK BY THE CENTRAL BUDGET

The annual amounts of actually collected State budget revenues in the border-gate economic zones shall be invested back by the central budget in the construction of infrastructure of such border-gate economic zones at the following levels:

1. For border-gate economic zones established after the effective date of Decision No.53/2001/QD-TTg, or those established under separate decisions of the Prime Minister before the effective date of Decision No.53/2001/QD-TTg, for which the preferential policies provided for in the Prime Minister’s decisions on establishment of such border-gate economic zones have been implemented for less than 5 years since the effective date of such decisions:

- If the actually collected State budget revenue in a border-gate economic zone is less than VND 50 billion each year, the central budget shall invest back 100% of such amount;

- If the actually collected State budget revenue in a border-gate economic zone is more than VND 50 billion each year, the central budget shall invest back VND 50 billion plus 50% of the remaining actually collected amount.

2. For border-gate economic zones established before the effective date of Decision No.53/2001/QD-TTg, for which the preferential policies provided for in the Prime Minister’s decisions on establishment of such border-gate economic zones have been experimentally implemented for more than 5 years since the effective date of such establishment decisions:

- If the actually collected State budget revenue in a border-gate economic zone is more than VND 100 billion each year, the central budget shall invest back no more than 50% of such actually collected amount.

The Finance Ministry shall determine the capital amount to be invested back each year by the central budget in these border-gate economic zones on the basis of proposals of the People’s Committees of the provinces having border-gate economic zones and opinions of the Ministry of Planning and Investment.

- If the actually collected State budget revenue in a border-gate economic zone is less than VND 100 billion each year, the central budget shall invest back at the following levels:

+ If the actually collected State budget revenue in a border-gate economic zone is less than VND 50 billion each year, the central budget shall invest back 100% of such amount;

+ If the actually collected State budget revenue in a border-gate economic zone is between VND 50 billion and 100 billion each year, the central budget shall invest back VND 50 billion plus 50% of the remaining collected amount.

- If these border-gate economic zones have basically completed the investment in infrastructure construction under the planning, the central budget shall terminate the back investment.

3. The annual amounts of actually collected State budget revenue in border-gate economic zones, which serve as basis for determining the level of back investment by the central budget according to the provisions of Points 1 and 2 above, are the actually collected State budget revenues arising in such border-gate economic zones, excluding: value added tax and/or special consumption tax on imports; collected amounts not calculated into the local budget balance such as contributions mobilized from population; proceeds from sale of smuggled goods; school fees; hospital fees and other revenues.

II. PREFERENCES FOR BUSINESS PROJECTS IN BORDER-GATE ECONOMIC ZONES

1. Preferences for tourist projects:

According to the provisions of Point d, Clause 2, Article 2 of Decision No.53/2001/QD-TTg, projects on investment in tourist business in border-gate economic zones shall be determined as those on the investment promotion list specified in Article 15 of Law on Domestic Investment Promotion (amended) No.03/1998/QH10 of May 20, 1998. Therefore, investors of tourist business projects shall enjoy the investment preferences applicable to projects on the investment promotion list specified in List A of the Appendix to the Government’s Decree No.51/1999/ND-CP of July 8, 1999 detailing the implementation of Law on Domestic Investment Promotion (amended) No.03/1998/QH10.

This regulation shall apply only to investors subject to the Law on Domestic Investment Promotion.

2. Preferences regarding land and water surface rents:

According to the provisions of Clause 3, Article 2 of Decision No.53/2001/QD-TTg, domestic and foreign investors having investment projects in border-gate economic zones shall enjoy land and/or water surface rent preferences as follows:

2.1. Regarding land and water surface rent rates:

Land and water surface rent rates applicable to investors shall be equal to 50% of those currently applied by the State in the border-gate economic zones.

2.2. Regarding the regime of land and water surface rent exemption and reduction: It shall apply according to the current regulations.

3. Tax preferences:

According to the provisions of Clause 4, Article 2 of Decision No.53/2001/QD-TTg, investors that have investment projects in the border-gate economic zones shall enjoy tax preferences according to the current regulations.

Part III

MANAGEMENT AND USE OF CAPITAL INVESTED BACK BY THE CENTRAL BUDGET IN BORDER-GATE ECONOMIC ZONES

I. ELABORATION OF PLANS ON CAPITAL INVESTED BACK BY THE CENTRAL BUDGET

1. On the basis of the socio-economic development planning of border-gate economic zones, the People’s Committees of the provinces having such border-gate economic zones shall clearly determine the demand for investment capital for construction of infrastructure of border-gate economic zones, clearly specifying the list of projects that need investment, level of preferential investment in each project, total investment capital needed and investment capital for each project (clearly stating investment capital source: from local budget, central budget that invests back or borrowed capital source...), execution plan and tentative duration for completion, then submit it to the Ministry of Finance and the Ministry of Planning and Investment for monitoring and elaboration of plans on capital to be invested back.

2. Annually, the People’s Committees of the provinces having border-gate economic zones shall, upon drafting their local budget estimates, have to estimate the State budget revenues to arise in their border-gate economic zones according to the provisions of Point 3, Section 1 of Part II, and estimate amounts of capital to be invested back by the central budget at the levels specified at Points 1 and 2, Section 1 of Part II, then submit them to the Ministry of Finance and the Ministry of Planning and Investment.

3. Basing itself on the annual State budget revenue estimates in border-gate economic zones, the Ministry of Finance shall determine and notify the provincial People’s Committees of the capital amounts to be invested back by the central budget in border-gate economic zones at the levels specified at Points 1 and 2, Section 1 of Part II.

Basing themselves on the investment capital estimates to be annually allocated by the central budget to the border-gate economic zones, the provincial People’s Committees shall work out and send their quarterly investment capital use plans to the Ministry of Finance.

II. USE OF CAPITAL SOURCE INVESTED BACK BY THE CENTRAL BUDGET

1. In principle, the capital amounts invested back by the central budget shall be used only for construction of infrastructure in the border-gate economic zones. The capital amount separately invested by the central budget to a border-gate economic zone is a targeted subsidy from the central budget to the province. The provincial People’s Committee shall have to use the capital amount separately invested by the central budget to such border-gate economic zone for the right purpose. The capital management and use must comply with the State’s regulations on management of investment capital for capital construction.

2. Provincial People’s Committees may borrow preferential loans from the Development Assistance Fund for construction of infrastructure in their border-gate economic zones and shall be entitled to use the source of capital invested back by the central budget to repay principal and interest of the said loans.

3. In cases where the capital level invested back by the central budget in a border-gate economic zone is low, not up to the demand for investment in infrastructure construction in such zone, the concerned provincial People’s Committee may take initiative in incorporating in its annual budget plan a certain capital amount therefor.

4. In cases where the infrastructure in a border-gate economic zone has already been invested in a fairly synchronous manner, the concerned provincial People’s Committee may use the capital amount invested back by the central budget to invest in infrastructure projects outside the area of such border-gate economic zone, provided that these projects are closely related to and in direct service of development of such border-gate economic zone.

The president of the provincial People’s Committee shall take initiative in deciding the investment, be responsible for his/her decision and have to notify such to the Ministry of Finance and the Ministry of Planning and Investment.

5. Periodically at the time of drafting annual budget estimate, the Ministry of Finance shall assume the prime responsibility and coordinate with the Ministry of Planning and Investment and the People’s Committees of the provinces having border-gate economic zones in considering and re-determining the tempo of capital use and demand for capital invested back by the central budget. The central budget shall terminate the back investment when border-gate economic zones have basically completed the infrastructure construction under the planning.

III. ORDER, PROCEDURES AND MODES OF ALLOCATION, THE REPORTING REGIME AND FINAL SETTLEMENT OF CAPITAL INVESTED BACK BY THE CENTRAL BUDGET

1. The capital amount annually invested back by the central budget in a border-gate economic zone shall be quarterly allocated on the following basis:

- Annual estimate of capital to be invested back by the central budget, already approved and notified to the concerned province;

- Quarterly capital use plan elaborated and submitted by the provincial People’s Committee to the Ministry of Finance;

- Actually collected State budget revenue in the border-gate economic zone in the previous quarter.

Each quarter in the budget year (by the 20th day of the last month of each quarter), basing itself on the already approved annual estimate of capital to be invested back by the central budget and the actually collected State budget revenue in the area of the border-gate economic zone in the previous quarter, the provincial People Committee shall send to the Ministry of Finance a proposal on investment capital level of the subsequent quarter for the border-gate economic zone. At the province’s proposal, the Ministry of Finance shall consider and allocate capital through the provincial Finance and Pricing Service for subsequent transfer to projects on construction of the border-gate economic zone’s infrastructure.

2. The capital amount invested back by the central budget each year for the province shall be considered and readjusted in the first quarter of the subsequent year. On the basis of the actually collected State budget revenue in the border-gate economic zone in the previous year, the capital amount to be invested back by the central budget at the levels specified at Points 1 and 2, Section 2, Part II above shall be determined. The difference between the amount to be allocated and the amount already allocated by the central budget to the province according to the estimate shall be readjusted as follows:

- If the capital amount to be allocated by the central budget is higher than that already allocated according to the approved estimate, the difference shall be additionally allocated by the central budget to reach the level specified at Point 1 or Point 2, Section 1, Part II above.

- If the capital amount to be allocated by the central budget is higher than that already allocated according to the approved estimate, the difference shall be cleared against the amount to be allocated in the subsequent year, in order to ensure that the allocated investment capital reaches the level specified at Point 1 or Point 2, Section 1, Part II above.

3. For border-gate economic zones established before the effective date of Decision No.53/2001/QD-TTg and having made the 2001 estimate of capital amount to be invested back by the central budget determined according to the provisions of the Prime Minister’s decisions on establishment of such border-gate economic zones, the allocation of investment capital shall still comply with the approved estimate. The difference between the amount allocated according to the approved estimate and the amount to be invested back by the central budget in 2001 determined according to the levels specified at Points 1 and Point 2, Section 1, Part II above shall be adjusted in the first quarter of the following year.

The capital amount invested back by the central budget in 2001 shall be determined according to the provisions of Points 1 and 2, Section 1, Part II above on the basis of the actually collected State budget revenues arising in the border-gate economic zones since the effective date of the Prime Minister’s Decision No.53/2001/QD-TTg of April 19, 2001 on policies toward border-gate economic zones.

4. For border-gate economic zones established after the effective date of Decision No.53/2001/QD-TTg, the provincial People’s Committees shall work with the Ministry of Finance and the Ministry of Planning and Investment on the capital demand and purposes of use of capital invested back by the central budget in the establishing year. The Ministry of Finance shall decide on the levels of capital to be invested back on the basis of the agreement between the Ministry of Planning and Investment and the People’s Committees of the provinces having border-gate economic zones.

5. The capital amounts separately invested by the central budget in certain border-gate economic zones shall be aggregated and collectively settled in the local budget final settlements, with a part thereof separately recorded for investment projects in such border-gate economic zones.

6. The order, procedures and modes of allocation, the reporting regime and investment capital settling regime shall comply with the current regulations.

Part IV

ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect as from the effective date of Decision No.53/2001/QD-TTg (May 4, 2001).

2. This Circular replaces the Ministry of Finance’s Circulars guiding the implementation of financial matters involved in the Prime Minister’s decisions on establishment of border-gate economic zones.

3. For border-gate economic zones established before the effective date of Decision No.53/2001/QD-TTg and having capital amounts invested back by the central budget and allocated until the end of 2000 still lower than those determined according to the provisions of the Prime Minister’s decisions on establishment of such border-gate zones, the Ministry of Finance shall allocate the deficit amount in the subsequent year.

4. In the course of implementation, any arising problems should be reported to the Ministry of Finance for consideration and solution.

APPENDIX 1

LIST OF ECONOMIC ZONES ALREADY ESTABLISHED AND DURATIONS
FOR APPLICATION OF PILOT POLICIES UP TO THE EFFECTIVE
DATE OF DECISION No.53/2001/QD-TTg
(Issued together with the Ministry of Finance’s Circular No.59/2001/TT-BTC of July 17, 2001)