Tax Incentives for Corporate Income for New Investment Projects, Expansion Investment Projects, and by Regional Conditions?
How Are New Investment Projects Entitled to Corporate Income Tax Incentives Defined?
According to Clause 3, Article 10, Circular 96/2015/TT-BTC, the definition of a new investment project is as follows:
Amending and supplementing a number of contents at Article 18, Circular 78/2014/TT-BTC (amended and supplemented at Article 5, Circular 151/2014/TT-BTC) as follows:
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3. Amending and supplementing Clause 5, Article 18, Circular 78/2014/TT-BTC (amended and supplemented at Article 5, Circular 151/2014/TT-BTC) as follows:
5. Regarding new investment projects:
a) New investment projects entitled to corporate income tax incentives as stipulated in Articles 15 and 16 of Decree 218/2013/ND-CP include:
- Projects issued with an Investment Certificate for the first time from January 1, 2014, and generating revenue after obtaining the Investment Certificate.
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- Independent investment projects unrelated to the ongoing activities of the enterprise (including those projects with an investment capital of less than VND 15 billion and not belonging to the sectors of conditional investment) that have been issued with an Investment Certificate from January 1, 2014, to execute an independent investment project.
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New investment projects that are entitled to corporate income tax incentives according to regulations must obtain an Investment License or Investment Certificate from a competent State agency or be allowed to invest as per legal investment provisions.
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b) New investment projects entitled to corporate income tax incentives as new investments do not include the following cases:
- Projects formed by division, separation, merger, consolidation, or transformation of the type of enterprise as prescribed by law;
- Projects formed by ownership transfer (including cases where a new investment project is carried out but inherits assets, business locations, and business lines of the old enterprise to continue production and business activities; acquiring an active investment project).
Enterprises established or having projects from the transformation of enterprise types, ownership transfer, division, separation, merger, consolidation can inherit the corporate income tax incentives of the enterprise or the investment projects prior to transformation, division, separation, merger, or consolidation for the remaining time if continuing to meet the conditions for corporate income tax incentives.
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Thus, the regulations on corporate income tax incentives for new investment projects are as mentioned above.
Corporate income tax incentives for new investment projects, expanded investment projects, and by regional conditions. (Image from the Internet)
What Criteria Must an Expanded Investment Project Meet as Prescribed?
According to Clause 4, Article 10, Circular 96/2015/TT-BTC, the definition of expanded investment is as follows:
Amending and supplementing a number of contents at Article 18, Circular 78/2014/TT-BTC (amended and supplemented at Article 5, Circular 151/2014/TT-BTC) as follows:
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Amending and supplementing Point a, Clause 6, Article 18, Circular 78/2014/TT-BTC (amended and supplemented at Article 5, Circular 151/2014/TT-BTC) as follows:
6. Regarding expanded investment
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Expanded investment projects stipulated in this point must meet one of the following criteria:
- The additional original fixed asset value when the investment project is completed and put into operation must reach at least VND 20 billion for projects entitled to corporate income tax incentives under Decree 218/2013/ND-CP or at least VND 10 billion for projects conducted in areas with difficult or especially difficult socio-economic conditions as stipulated in Decree 218/2013/ND-CP.
- The percentage of the additional original fixed asset value must be at least 20% compared to the total original fixed asset value before the investment.
- The design capacity of the expanded investment must increase by at least 20% compared to the design capacity according to the economic-technical justification before the initial investment.
In cases where enterprises choose to enjoy incentives according to expanded investment, the additional income from the expanded investment must be accounted for separately. If enterprises cannot separately account for the additional income from the expanded investment, the income from the expanded investment will be determined based on the proportion of the original fixed asset value newly put into use for production, business over the total original fixed asset value of the enterprise.
The tax exemption and reduction period prescribed in this section is calculated from the year the expanded investment project is completed and put into production, business with income; if there is no taxable income in the first three years, from the first year with revenue from the expanded investment project, the tax exemption and reduction period will be calculated from the fourth year since the project generates revenue.
For enterprises conducting upgrades, replacements, or innovation of technology of active projects in sectors or regions eligible for tax incentives according to Decree 218/2013/ND-CP but not meeting one of the three criteria stipulated in this point, the tax incentives will be executed for the active project for the remaining time (if any).
Enterprises with investment projects enjoying tax incentives that during the period 2009 - 2013 have regularly supplemented machinery and equipment in the production and business process without forming part of an expanded investment project as mentioned above, the additional income from the regular machinery and equipment supplementation is also entitled to tax incentives at the rate of the active project for the remaining time, starting from the 2014 tax period.
Tax incentives prescribed in this point do not apply to expanded investment cases resulting from division, separation, merger, ownership transfer (including cases where the project continues to inherit the assets, business locations, and business lines of the old enterprise to continue production and business activities), acquiring enterprises or active investment projects.
Enterprises with projects from ownership transfer, division, separation, merger, consolidation can inherit the corporate income tax incentives of the enterprises or investment projects before the transformation, division, separation, merger, or consolidation for the remaining time if continuing to meet the conditions for corporate income tax incentives.
Thus, according to the regulations, expanded investment projects stipulated in this point must meet one of the mentioned criteria.
How Are Corporate Income Tax Incentives Guided?
According to Official Dispatch 1581/TCT-CS in 2022 on corporate income tax incentives issued by the General Department of Taxation on May 16, 2022, providing guidance as follows:
- If Project 2 of Hanil Technology VN Co., Ltd. meets the conditions of a new investment project as stipulated in corporate income tax regulations, it is entitled to corporate income tax incentives as a new investment.
- During operations, if the company continues to invest additionally in machinery and equipment meeting the conditions for expanded investment projects as per Circular 96/2015/TT-BTC, it is entitled to incentives for the additional income from the expanded investment project.
- In cases where enterprises enjoying corporate income tax incentives according to regional conditions add rental business operations for factory leasing without increasing capital or conducting expanded investment activities to increase assets, the income from the rental business activities is not entitled to corporate income tax incentives.
See details in Official Dispatch 1581/TCT-CS in 2022 on corporate income tax incentives issued by the General Department of Taxation on May 16, 2022
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