New windows for the new year

The year 2008 has just elapsed, ushering in the new year with new changes for the business circle. Following are a few highlights on such changes and windows of opportunities.

Corporate income tax lowered to 25%

The corporate income tax rate is reduced from the current 28% to 25% effective from January 1. Enterprises that are operating in oil exploration and exploitation, however, will be subject to higher corporate income tax rate of between 32% and 50% depending on each specific project.

For incentives, the income tax is 10% within the maximum 15 years, tax exemption of not more than four years plus a tax reduction by half within nine years for newly-established enterprises or those operating in poverty-stricken areas. Furthermore, enterprises can deduct 10% from their pre-tax profit to finance research and development activity.

New VAT law has wider scopes

The new law, also effective from January 1, spells out specific tax rates for each specific group of products or services. In fact, while the 2003 law provided three categories of tax rates – 0%, 5%, and 10% for each group of goods and services - the new law uses an elimination approach. It provides two groups of goods and services that can receive tax rates of 0% and 5%. The tax rate of 0% shall apply to exported goods and services, and international transportation. The rate of 5% applies to such products and services as clean water, minerals for manufacturing fertilizers, insecticide, animal feed, fresh food, medical devices, and farming machinery. The remaining goods and services are subject to a tax rate of 10%. However, the following are exemptions: technology transfers and intellectual-property transfers to foreign countries; reinsurance offshore; credit services, assignment of capital and derivative financial services; post and telecommunications services; and exports of unprocessed natural resources and minerals.

Foreigners’ house ownership

Since January 1, foreigners have the right to purchase houses in Viet Nam within 50 years. The Ministry of Construction estimates that at least 10,000 foreigners living in Viet Nam are eligible to buy houses or apartments.

Up to July last year, foreigners hired around 1 million square meters for living. Now, the country has 80,000 foreigners living and working. (SGT)