Vietnam Regulatory Brief: Import Standards, Offshore Indirect Investment Requirements, and Proposed SME Tax Breaks - Vietnam Briefing News
New Requirements for Machinery, Equipment to Take Effect on July 1, 2o16
The Ministry of Science and Technology (MoST) issued a decree describing the requirements and procedures for import of used machinery, equipment and production lines which will take effect on July 1, 2016. Under the decree: used machinery, equipment and production lines which are not specifically prohibited from importing into the country may be imported if they meet the following conditions:
- They are imported within 10 years from the manufacture date.
- They are manufactured based on standards which conform to Vietnam’s National Technical Standards or National Standards; or that confirm with standards of G7 countries on safety, energy saving and environment protection.
The above requirements are exempted if the list of machinery, equipment and production lines has been approved in the investment license application dossier. In addition, used replacement components and spare parts can only be imported if companies need to fox or replace the currently used ones.
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New Regulation on Offshore Indirect Investment
Decree 135, regulating offshore investment by Vietnamese investors or individuals, went into effect on February 15, 2016. The regulation allows Vietnamese individuals or corporate entities that are established in the country to participate in offshore indirect investment. This also includes foreign invested companies with less than 51 percent foreign capital. Nevertheless, the State Bank of Vietnam (SBV) is expected to issue a circular on procedures and processes of how to implement the process for individuals.
The offshore indirect investment will be done by two ways: proprietary trading of offshore indirect investment and entrusted offshore indirect investment. In addition, investors can only use their own foreign currency rather than using borrowed funds. While the new regulation is a good step in allowing outbound securities investment from Vietnam, the SBV and Ministry of Planning (MOF) still need to issue the various processes on how to do so. Locals can expect that such procedures should be issued before December 31 of this year.
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Startups to Benefit from Proposed Tax Reduction
The Ministry of Finance has proposed to reduce corporate income tax particularly to aid small and medium enterprises. The ministry has proposed two ways to do this, one is by applying a general tax rate of 17 percent from January 1st of this year to 2020 for small and medium enterprises or reducing the general tax rate to 15 percent from the current 20 percent from January 1 of this year to 2020. The ministry has also proposed to reduce the corporate income tax for start-ups with investment projects in preferential areas or undeveloped and rural areas. It has proposed applying a tax rate of 10 percent in 15 years; tax exemption for four years and reduce 50 percent of the tax payable in the next nine years for new projects. The draft is being prepared for comments from the Parliament which will meet in October.
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