Enterprises in EZs, IZs complain on incentive cuts

Over one year of applying Decree No. 124/2008/CP, a lot of adequacies relating to the investment attraction into industrial zones and processing export zones need to be treated.

Previously, investment projects in EZs and IZs enjoy many incentives like 15% CIT in 12 years from starting operation, CIT exemption in three years from having taxable income, and 50% CIT reduction in seven following years.

According to the new rule, all enterprises (in EZs and IZs) operating in different sectors must pay 25% CIT. After three years of operation, they will enjoy CIT reduction and exemption.

Dang Huy Hiep, deputy general director of Ton Phuong Nam (Southern Tole) Co said that CIT incentives become unmeaning for its $65 million tole factory in Nhon Trach 2 IZ because it must take 3-5 years for capital refund of the factory from being put into operation.

Factually, the number of new enterprises investing in IZs and EZs is decreasing sharply. As reported by HCM City Export Processing Zone Authority (HEPZA), in 2009, the land leasing ratio of EZs and IZs fell, for example that of Vinh Loc IZ down 15.71%, Tay Bac Cu Chi IZ slumping 12%.

Nguyen Tan Phuoc, vice head of Hepza assessed, if not considering amendments in the current CIT policy, investment attraction in newly established EZs will be very difficult. "Cutting CIT incentives for enterprises in EZs and IZs is the right policy but there needs to build up a suitable reduction and exemption roadmap to avoid consequences and shocks", Phuoc wondered.

Regulations of Law on Investment and CIT do not unify the subjects to CIT incentives, Pham Van Cuong-investment manager of Dong Nai IZ Management Board said.

Law on Investment 2005 ruled on investment incentives for projects in preferential sectors and areas. But Law on CIT and Decree 124/2008/CP only concern tax incentives for newly established companies and do not mention indecencies for new investment projects and investment expansion.

Vo Quang Hue, general director of Robert Bosch Vietnam Co Ltd stressed that factually, his firm does not enjoy tax incentives because as for import export field, the company must pay CIT of 28%. After that, the company implemented a $52 million new support industry production plan (for producing automobile components) embedded with its branch in Dong Nai province's Long Thanh IZ. This was the new investment project in high tech industry in need of investment encouraging. However, according to tax agency, the project was subject to the investment expansion (although earlier, Robert Bosch Vietnam had not had any production project). So the company did not enjoy any CIT incentive.

With the same point of view, Vo Son Dien, Marketing director of My Phuoc IZ proposed the government to consider the adding of support industry companies (providing automobile and motorbike components, electronic accessories) to the tax reduction because this is the key industry sector to attract investment of big groups.

Meanwhile, Phan Thanh Phi-head of Long An IZ Management Board said, Decree 124/2008/CP narrowed the fields and subjects of investment preferences so the regulation did not encourage investors to expand production and pump capital in disadvantaged areas.

In addition, the majority of enterprises do not want to invest in IZs because of high land rental and high fee of environmental pollution treatment. They mainly rent or buy land outside IZs, build workshops or gather into an industrial complex by themselves, according to Phi.
Indeed, due to the unclear regulations, managing industrial complexes is very difficult. Once the management agencies are delinquent, surely the risks of environmental pollution and broken IZ projection will be at high.