VietNamNet Bridge – Just within two weeks, the Government has released the documents on not accepting the proposals on investment incentives made by two big hi-tech investors.
Last week, the government released a dispatch, instructing the Bac Ninh provincial authorities to grant the investment license to Nokia, to set up Nokia Vietnam Company Limited whose, main operation is manufacturing and assembling mobile phones in VSIP, an industrial zone in Bac Ninh province.
The noteworthy thing here, is that instead of licensing Nokia as a hi-tech project as proposed by the investor, the Government’s has instructed Bac Ninh authorities to grant license to Nokia in accordance with the current investment incentives applied to the enterprises in export processing zones. The licensing as hi-tech project will be done when the enterprise can meet the requirements set for hi-tech projects.
Meanwhile, Deputy Prime Minister, Hoang Trung Hai has also released a document, requesting the HCM City People’s Committee to guide First Solar Group to fulfill financial duties relating to the land leasing when implementing the project on making solar panels in accordance with the current laws.
The document has been issued to reply to the proposal made previously by the HCM City’s authorities on exempting the land leasing fee for the project.
By issuing the two documents, the government wants to send a clear message. It wants to see consistent investment policies to be implemented instead of accepting specific proposals from local authorities for specific projects.
In the last many years, local authorities have been trying to “lay out the red carpet” to lure investors by offering highest possible investment incentives to investors. Especially, they offer the investment incentives which exceeded the incentives stipulated in the current legal documents. In these cases, local authorities seek the approval from the government for the overly incentives for exception cases.
Regarding Nokia’s case, if enjoying investment incentives as hi-tech project, the investor would be able to enjoy the preferential corporate income tax rate of 10 percent for 15 years. Especially, Nokia will enjoy the tax exemption in the first four years of operation and enjoy the 50 percent tax reduction in the next nine years (5 percent).
Besides this, the investor will also enjoy the tax exemption for machine, equipment and specific vehicle imports for fixed assets.
Meanwhile, as an enterprise in export processing zone (EPZ), Nokia would have to pay the corporate income tax of 20 percent for 15 years. It will enjoy the tax exemption for the first two years of operation and enjoy the 50 percent tax reduction (10 percent) in the next four years.
The tax incentives prove to have not much significance for small projects which have modest profits. However, in Nokia’s case, the project capitalized at 200 million Euros, there is really a big difference between an enterprise in EPZ and a hi-tech enterprise.
Thoi bao Kinh te Vietnam has quoted its sources as saying “that in the past, some investors in Bac Ninh province, could also enjoy the incentives reserved for hi-tech enterprises, though they were normal investors making investment in normal industrial zones.”
Earlier this year, Bac Ninh’s authorities released a document, informing that it agrees to prop up the annual land leasing fee for the 17.25 hectares in VSIP Nokia uses for the whole operation duration of the project.
This is really a special incentive that many other investors want, including First Solar.
It is really not easy to make such decisions, because not only Vietnam, many other nations are also laying red carpet to welcome hi-tech projects.
Fred Burke, a lawyer from Baker & McKenzie, when commenting about Nokia’s and First Solar’s projects, said that Vietnam is now standing at a crossroads, when international manufacturers are looking for new homes to set up the factories, it has to make decision to either grab the opportunities or miss them.
The message that the lawyer who has tens-of-year experiences in working in Vietnam wants to convey is, that in order to attract hi-tech projects, there is no other choice than offering incentives.