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					Tax Monthly News
November 2009

New regulations on investment under BOT, BTO, and BT                                 3
Capital sources for carrying out projects and minimum capital obligation
 to implement projects                                                               3
Preparation and publication of list of projects                                      4
Changes in Project contracts                                                         4
Procedures for issuance of Investment Certificate                                    4
Transfer of project facilities upon expiry of the duration of commercial operation   5
Investment incentives                                                                5
Minimum salary scheme applicable from 01 January 2010                                6
Presentation of financial reports based on Accounting Standards                      6

Value Added Tax (VAT)                                                                7
Goods and services supplied to organizations, individuals in non-tariff zones        7
Invoice issuance after the point of goods export                                     7
VAT for international inland transportation                                          7
Personal Income Tax (PIT)                                                            8
Determining the incomes subject to PIT exemption                                     8
Tax Management                                                                       8
Guidance on the handling of tax-law violation                                        8

Import, Export and Customs                                                           9
Customs procedures regarding imported, temporarily importation of non-
trading goods                                                                        9

New regulations on investment under BOT, BTO, and BT
Investment in the form of BOT (Build –           Capital sources for carrying out projects and
Operate – Transfer), BTO (Build – Transfer –     minimum capital obligation to implement
Operate), and BT (Build – Transfer) contracts    projects
are always highly encouraged by the
Government, particularly in infrastructure       In comparison with the previous legal
construction area. Accordingly, on 27            documents, this is the first time the
November 2009, the Government issued             progressive principle applicable to ratio on
Decree 108/2009/ND-CP (“Decree 108”),            investor’s equity and amount of money as
which replaces Decree 78/2007/ND-CP              security for the obligation to implement the
(“Decree 78”) dated 11 May 2007 with an aim      project contract (this amount shall be in the
to provide further transparent provisions on     form of a bank guarantee) is stipulated in
this area. Major changes in Decree 109           Decree 108. Details are as follows:

                                                                Amount of money as security
        Total investment
  No                               Investor’s equity           for the obligation to implement
                                                                     the project contract

                            Minimum at 15% of total             Minimum at 2% of total
         Less than or
                            investment capital                  investment capital
   1     equal to VND
                            (20% and 30% under previous         (2% and 3% under previous
         1,500 billion
                            regulations)                        regulations)

                            Defined under the progressive       Minimum at 2% for investment
                            principle: minimum at 15% for       capital less than or equal to
                            investment capital less than or     VND 1,500 billion and 1% for
         More than VND
   2                        equal to VND 1,500 billion and      the portion above VND 1,500
         1,500 billion
                            10% for the portion above VND       billion.
                            1,500 billion.                      (2% and 3% under previous
                            (10% under previous regulations)    regulations)

    Preparation and publication of list of projects   Procedures for issuance of Investment
    Decree 108 stipulates more detailed
    provisions on procedures for publishing list of   Under Decree 78, the Ministry of Planning
    projects calling for investment capital.          and Investment (“MPI”) shall be responsible
    Accordingly, the Ministries, authority branches   for evaluating and issuing Investment
    and the provincial People’s Committees shall      Certificate (“IC”) for such projects. However,
    publish such list of projects in every January    IC shall be granted by the MPI or the
    for investors’ selection and registration for     Provincial People’s Committees, based on
    project implementation (within 30 days from       criteria stipulated in Decree 108. Project
    the last publication of the list of projects).    dossier shall generally comprise feasibility
                                                      study report, Request for IC, Project contract,
    Changes in Project contracts                      and Company Charter; and criteria for
                                                      evaluation including (1) rights and obligations
    In accordance to this Decree, investors can       of parties engaged in the Project contract; (2)
    partially or wholly transfer their rights and     Project implementation schedule; (3) Demand
    obligations in their project contracts provided   for land use; (4) Environmental solutions; (5)
    that they have been approved by relevant          Petitions of investors for investment
    authorities and do not influence objectives,      incentives and Government’s guarantee (if
    scales,      technology      standards      and   any).
    implementation progress of the projects.
    Moreover, investors can also change the
    scales, technology standards and investment
    capital of projects.

Transfer of project facilities upon expiry of        shall comprise: the CIT rate of 10% in 15
the duration of commercial operation                 years which could be extended to a maximum
                                                     of 30 years in case of large-scale projects; 4
Unlike the former regulations, the Decree            years of tax exemption and 50% tax reduction
stipulates that within 6 months from the date        in 9 subsequent years. It, therefore, can be
of project completion as agreed in Project           understood that BOT and BTO enterprises,
contract, investors have to issue a finalization     which mainly invest in infrastructure, are likely
report on investment capital utilization in such     to enjoy the above incentives as stipulated in
project, in accordance with laws and                 the Law on CIT and Circular 130/2008/TT-
regulations on construction. Authorized              BTC.
Government Agencies and investors shall
reach an agreement with regard to the                Similar to Decree 78, BOT, BTO and BT
selection of an independent auditor to audit         enterprises and sub-contractors are eligible
the investment capital utilized in the project.      for import duty exemption in accordance with
                                                     the Law on Import and Export Duty.
Investment incentives                                Accordingly, such enterprises shall enjoy
                                                     import duty exemption for certain goods
In accordance with Decree 78, enterprises            imported to form fixed assets, components,
incorporated in the form of BOT and BTO              and materials for project implementation. In
shall be entitled to special investment              addition, such enterprises are also entitled to
incentives and preferential tax rate for the         exemption/reduction of land rental or land use
entire duration of project. In detail, CIT rate of   fee during the whole life of project.
10% for the whole life of the project, CIT
exemption in 4 years and 50% reduction in 9          Decree 108 is in force from 15 January 2010.
years thereafter will be applied.                    Investors who were granted IC prior to this
                                                     date remain to be governed by the regulations
However, special investment incentives as            specified in their Project contract and their
stipulated in Decree 108 shall no longer apply.      current IC. In case the signing of the Project
In stead, CIT incentives shall comply with           contract takes place before the effective date
Circular 130/2008/TT-BTC guiding the                 of the Decree but IC has not been issued yet,
implementation of the Law on CIT. In detail,         contract revision should be made in order to
investment      incentives   applicable    for       comply with the procedures for issuance of IC
investment in construction of infrastructure         as stipulated in this Decree.

    Minimum salary scheme                               Presentation of financial reports
    applicable from 01 January 2010                     based on Accounting Standards
    On 30 October 2009, the Government issued           On 6 November 2009, the MoF issued
    Decree 97/2009/ND-CP (“Decree 97”) and              Circular     210/2009/TT-BTC         providing
    Decree 98/2009/ND-CP (“Decree 98”)                  guidelines     on   applying     International
    prescribing the regional-based minimum              Accounting Standard (IAS) No. 32 and
    salary for laborers working for Vietnamese          International Financial Reporting Standard
    companies,      enterprises,     cooperatives,      (IFRS) No 07 on the presentation of the
    cooperative groups, farms, households,              financial statements and notes on financial
    individuals     and      other    Vietnamese        instruments. Accordingly, entities in all fields
    organizations employing laborers; and               and from all economic sectors in Vietnam
    Vietnamese laborers working in foreign              involving in transactions relating to financial
    invested enterprises, foreign agencies and          instruments are allowed to apply IAS32 and
    organizations, international organizations and      IFRS07, which were issued and announced
    foreign individuals in Vietnam, respectively.       by the International Accounting Standards
                                                        Committee in 2007, to present financial
    Accordingly, the new minimum salaries               statements.
    prescribed based on different regions and
    localities with different socio-economic            This circular shall be of full force and effective
    conditions have increased in comparison to          after 45 days from the signing date and
    2009. Specifically, the monthly minimum             applied to present and note on financial
    salaries applicable to laborers working in          instruments in the financial statements from
    region I, region II, region III and region IV are   2011 onwards.
    VND 980,000, VND 880,000, VND 810,000,
    and VND 730,000, respectively as stipulated
    in Decree 97; and VND 1,340,000, VND
    1,190,000, VND 1,040,000 and VND
    1,000,000, respectively as stipulated in
    Decree 98.

    The minimum salaries regulated in Decree 97
    and Decree 98 shall be bases for calculation
    of salaries and allowances as specified in
    labor contracts applicable from 01 January
    2010, and replace relevant provisions in
    Decree 110/2008/ND-CP and Decree
    111/2008/ND-CP applied in 2009. However,
    the minimum common salary level used for
    calculation of SIHIUI have not been fixed nor
    announced by relevant authorities yet.

Value Added Tax (VAT)
Goods and services supplied to                      of ownership or use-right of goods. In case
                                                    the seller issues VAT invoice to the exporter
organizations, individuals in non-                  after the goods are exported, input VAT of this
tariff zones                                        invoice is not creditable to the exporter, but is
                                                    recorded as cost of purchased goods.
On 27 October 2009, the MoF issued Official
Letter 15057/BTC-TCT providing guidelines           The above is the guideline in Official Letter
on VAT in respect of services supplied to           4198/TCT-CS issued by the General
organizations, individuals in non-tariff zones.     Department of Taxation (“GDT”) on 13
Accordingly, services such as leasing of            October 2009.
houses, meeting halls, offices, hotels,
warehouses; transportation services for
employees; catering services (excluding             VAT for international inland
industrial serving, catering services in non-       transportation
tariff zones), which are provided by domestic
enterprises to organizations, individuals in        Under current regulations, international
non-tariff zones, will not be eligible for the 0%   transportation comprises the transport of
rate.                                               passengers, luggage and goods on
                                                    international route, of which either departure
In addition, customs clearance will not be          or arrival point is within the Vietnamese
required for goods provided by domestic             territory, and the other point is in overseas.
business for export processing enterprises’         International transportation route shall also
daily living conditions, including: food, kitchen   comprise domestic stage if stipulated in the
utilities, gas and safety clothing.                 contract.

                                                    In case an enterprise transports goods from
Invoice issuance after the point of                 Vietnam to overseas by inland transportation,
goods export                                        and such transport satisfies the above
                                                    conditions, even when the local stage
Under current regulations on VAT and invoice        accounts for 80-95% of the total route length,
management, VAT on goods is imposed at the          such transport is treated as international
time of transfer of ownership or use-right of       transportation and its revenue is entitled to
goods to the buyer, regardless whether the          0% VAT, provided that all conditions on
money is collected or not; concurrently,            transportation contract and bank payment
invoice must be issued as soon as the goods         documents are met.
are delivered.
                                                    The above is the guideline of Official Letter
Accordingly, when an enterprise purchases           4468/TCT-CS dated 02 November 2009
goods for export, the seller is required to issue   issued by the GDT to the local tax
invoice to the exporter at the time of transfer     departments.

    Personal Income Tax (PIT)
    Determining the incomes subject                 Accordingly, an act of tax-law violation is
    to PIT exemption                                sanctioned only once. In case a sanctioned
                                                    violation is repeated, it is regarded as
                                                    involving an aggravating circumstance.
    On 09 November 2009, the GDT issued
                                                    Violations repeated in the tax domain are
    Official Letter 4581/TCT-TNCN providing
                                                    cases in which a violation was previously
    guidelines to local tax departments on
                                                    committed but no penalties have been
    determining incomes subject to PIT
                                                    imposed yet and the statute of limitations has
    exemption in accordance with Circular
                                                    not yet expired.
    160/2009/TT-BTC dated 12 August 2009 of
    the MoF providing guidelines on 2009 PIT
                                                    In light of the above, in case a tax payer
    exemption. Accordingly, incomes of tax
                                                    submits several VAT declaration dossiers at
    residents being salary and wages sourced
                                                    the same time, each late-submission dossier
    from 2007 and 2008 being paid in the period
                                                    is determined as an act of tax administration
    from 01 January 2009 to 30 June 2009 shall
                                                    violation. In the case the above violation is of
    be exempted from PIT:
                                                    aggravating circumstance (due to the violation
                                                    being repeated), penalty rate of aggravating
    Tax Management                                  circumstance will be imposed.

    Guidance on the handling of tax-
    law violation
    On 16 September 2009, the GDT issued the
    Official Letter 3771/TCT-CS providing
    guidelines on the sanctioning of late
    submission of tax declaration on the basis of
    imposing 01 time penalty to 01 tax-law
    violation behavior and how to determine
    violations that are repeated.

Import, Export and Customs                         #   In case the enterprise temporarily imports
                                                       components, spare parts to replace, repair
Customs procedures regarding                           foreign ships, aircrafts without any sales
imported, temporarily importation                      contract, the customs procedure will be
                                                       implemented in accordance with the
of non-trading goods                                   guidance on temporarily imported non-
                                                       trade goods. The customs declarer is
While no legal document has been issued to             required to register the period for repairing
amend and supplement certain issues in                 with the Customs Authorities. When the
Circular 79/2009/TT-BTC by the MoF, in order           deadline is expired, if the imports are not
to solve difficulties in the process of carrying       re-exported, tax payment by the customs
out the customs procedure to imported goods            declarer will be required.
and goods temporarily imported for non-
trading purpose, on 28 October 2009, the
GDC issued Official Letter 15182/BTC-TCHQ
providing consistent guidelines on the issue
as follows:

#   In case a Vietnamese enterprise imports
    products, components for warranty service
    to customers in Vietnam under the foreign
    enterprise’s authorization without any
    sales contract, commercial invoice,
    payment, the customs procedure will be
    implemented in accordance with the
    guidance on non-trade imports. Policies
    on goods classification and taxes will be
    carried out in accordance with current

       For more information, please contact:

      Richard Buchanan                          Tom McClelland                         Donald Wilson
      Partner                                   Partner                                Senior Tax Counsel              
      Tel: +84 8 3910 5267                      Tel: 84 8 3910 0751                    Tel: +84 8 3910 5267

      Bui Ngoc Tuan                             Bui Tuan Minh                          Lynn Tastan
      Tax Director                              Tax Director                           Tax Director                           
      Tel: +84 4 3577 2530                      Tel: +84 4 3577 0782                   Tel: 84 8 3910 0751

      Andrea Tochackova
      Tax Director
      Tel: 84 8 3910 0751

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