Tax exemption for machinery and equipment imported to implement labor-intensive projects in Vietnam might be removed, raising foreign investors’ concerns at losing one of the country’s competitive edges.
Under draft amendments to Decree No. 149/2005/ND-CP of December 8, 2005, proposed by the Ministry of Finance (MoF), machinery and equipment for formulating labor-intensive projects employing 5,000 laborers or more will no longer be imported free of duty.
According to the Vietnam Investment Review newspaper, the MoF explains that while such projects enjoy tax incentives before they are put into operation, tax agencies have no way to be sure if they employ up to 5,000 people across their lifespan, 20 years or even 50 years.
Under Decree No. 108/2006/ND-CP of September 22, 2006, guiding the 2005 Investment Law, foreign-invested projects employing up to 5,000 laborers are listed as specially encouraged projects and, therefore, eligible for exemption from duty on the import of machinery and equipment.
Representatives of foreign business communities in Vietnam said if the MoF’s proposal is approved, Vietnam would be less attractive to new investment projects. However, the time when the MoF will submit the proposal to the Prime Minister for approval and when the removal of duty exemption is expected to come into force is still unknown.-