Monthly Legal Update - February, 09

• Cooperate Income Tax incentives

To deal with the recession, on 13 January 2009, the Ministry of Finance issued Circular No. 03/2009/TT-BTC on guiding the implementation of Cooperate Income Tax (CIT) reduction and extension in accordance with Resolution No. 30/2008/NQ-CP dated 11 December 2008 of the Government.

Under the guidance, small and medium enterprises (SMEs) would be entitled to a 30 percent reduction of CIT for the 4th quarter of 2008 and the whole year 2009. SMEs are explained to include enterprises which satisfy one of the two below conditions: (i) having the charter capital of under VND10 billion for enterprises established before 1 January 2009; or having the initial charter capital of under VND10 billion for enterprises established from 1 January 2009; or (ii) having the average number of employees in the 4th quarter of 2008 of under 300 employees, excluding employees who signed less than 3 month term labor contracts.

The said SMEs and enterprises engaging in manufacturing; processing; processing agricultural products, forest products, aquatic products, textile, leather and electronic spare parts are entitled to delay CIT payment for 9 months from the dateline stated the Law on Tax Administration.

According to the Circular No. 05/2009/TT-BTC dated 13 January 2009, enterprises importing materials for production of exported goods and services in the field of ship building, mechanicals, processing of agricultural, forestry and aqua products, etc, shall be permitted to extend the deadline for payment of import duty.

• VAT refund incentives

On 13 January, the Ministry of Finance issued Circular No. 04/2009/TT-BTC on guiding the implementation of value added tax (VAT) refund in accordance with Resolution No. 30/2008/NQ-CP. Accordingly, enterprises engaging in manufacturing, trading of exported goods may be allowed to temporarily refund VAT even if they have not received payment from foreign buyers. The amount of temporary VAT refund is 90 percent of input VAT amount. The rest shall be refunded when the applicant submits sufficient bank transfer evidence.

The Prime Minister issued Decision No. 16/2009/QD-TTG dated 21 January 2009 to reduce 50% VAT rate from 01 February until 31 December 2009 for a number of commodities such as coke coal, basic chemicals, automobiles and automobile parts, etc.

• Management of foreign investors buying shares and stocks in Vietnam

On 24 December 2008, the Ministry of Finance issued the Decision No. 121/2008/QĐ-BTC issuing the regulations on operation of foreign investors in the stock market of Vietnam. The Regulation governs both foreign individual investors, overseas organization and 100% foreign owned companies established in Vietnam.

The activities of foreign investors on the stock market of Vietnam governed under the Decision include: trading of listed and unlisted securities, bidding for buying shares of equitized State owned companies, contributing capital for establishment of securities investment funds and of Vietnamese companies at a certain percentage of charter capital as stipulated by the Prime Minister; as well as the investment via fund management companies.

Except for the trust investment via fund management companies, foreign investors must register transaction codes with Vietnam Securities Depository, indirect investment capital accounts in Vietnam Dong at permitted banks in Vietnam, and open securities depository accounts.