On 23rd April 2020, The Ministry of Planning and Investment issued Document No. 2640/BKHDT-TH to consult related government agencies on Draft resolution of the Government on solutions to remove difficulties for production and business, promote disbursement of public investment capital and ensure social order and safety in the context of COVID-19 (“the Draft”).
This is an effort of the Government in aiming to restore the power of Vietnam’s economy that has been negatively affected since the pandemic broke out in February.
The Draft focuses on 5 main topics, with key provisions as follow:
1. Reduce/Exempt tax:
– Exemption of guarantee fee arising in 2020 for government-guaranteed loans for aviation businesses;
– Reduction of lending interest rates for small and medium-sized enterprises which are prioritized by small and medium-sized enterprise development funds: reduce lending entrusted interest rates by around 3%; reducing direct and indirect lending interest rates by approximately 2%;
– Reduce 50% of corporate income tax for small and medium enterprises and cooperatives in 2020.
– Reduce/Exempt fees: 100% exemption of license fees in 2020 for affected business households. For those that paid, the amount paid is deducted from the obligation to pay license fees in the following year;
– 50% reduction in registration fee when registering for a car manufactured or assembled domestically by the end of 2020 to stimulate domestic consumption;
– 30% reduction in land rent for a period of 6 months for production and business establishments that have been stopped due to COVID-19.
2. Delay of tax payment time:
– Allow the postponement of special consumption tax payment for domestically manufactured cars until the end of September 2020 for amounts payable from March 2020;
– Allow deferred payment of VAT to the end of September 2020 for affected enterprises;
– Extension of the time for payment of export tax to the end of September 2020 for payables arising from March 2020;
– Extension of personal income tax payment to the end of September 2020 of individuals working in the affected businesses arising from March 2020;
– Extend the term of preferential interest rate loans to 1 year.
3. Apply special entry procedures for foreign experts working for businesses in Vietnam: extend their work permit; issue new work permits to experts, business managers, technical workers who are foreigners to replace those who cannot return to Vietnam.
4. Accelerate disbursement of public investment capital;
5. Accelerate investment procedures for projects; Attract new investment resources;
6. Forbid to apply the regulation of saving 10% of total investment for new projects starting in medium-term public investment plan 2016-2020 and allocating capital from public investment plans in 2020;
7. Temporarily suspend the application term of Decree 68/2019/ ND-CP on management of construction investment costs until the end of 2020;
8. Promulgate a resolution on conversion of investment forms for 8 projects on the North-South Expressway on the east side from public-private partnership to public investment.
Some Clarifications Required
o While the Draft proposes straightforward and welcoming measures for supporting business in this pandemic, there are a number of issues that will require additional guidance, among others, such as:
o The list of enterprises affected by COVID-19 is unclear and limited, as it does not cover the petroleum, entertainment, etc. industries that are also heavily affected.
o Besides, it is unreasonable to propose VAT reduction for some affected industries such as aviation and tourism because the current laws have specific provisions for VAT reimbursement, and it creates inequality with other affected industries;
o Extension of time limit for corporate tax payment year 2019, VAT, personal income tax and land rent are only 5 months. Given that the pandemic has occurred for approximately 3 months now and has left devastating consequences, coupled with extreme natural disasters in many regions of Vietnam in the past months, the time limit should be extended to 1 year;
o Most of the wordings in the draft are quiet general; the reduction or exemption of tax and fees should be associated with specific household/individual (poor household of specific income levels, children…)
o Proposing a 50% reduction of registration fee when registering domestically manufactured or assembled cars until the end of 2020, applying special consumption tax incentives to the domestic automobile industry is a violation of the commitment to zero discrimination between domestically produced goods and imported goods upon accession to the WTO.
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Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.