Tax law revision gives lifeline to property investors ? TalkVietnam

Foreign Invested Enterprises related stories

Ngoc Lan

The prevailing law bans enterprises from using their profits from production and business activities to cover the losses from real estate operations. In other words, if they incur losses in property project transfer or investment, they must keep these losses in separate accounts.

However, as the real estate market has been going downhill, the Ministry of Finance has proposed enterprises be allowed to offset their real estate losses by using profits from production and business operations. This means their taxable incomes would fall.

For example, the owner of a production project and a property project can use his profits from production to cover losses from property investment. In the opposite case, meaning the production project runs into losses while the property one generates profits, the property profits could not be used to offset the production losses.

Nguyen Van Phung, deputy director of the Tax Policy Department of the Finance Ministry, said this move would ?open a one-way valve? for property project transfer.

When the market recovers, enterprises with profits from real estate activities will still have to open separate accounts for tax declaration and payment. They can only use gains to finance losses within the aforesaid activities.

At a conference for collecting opinions of the Vietnam Association of Foreign Invested Enterprises on the amended corporate income tax law on Thursday, Phung said that after four years of enforcement, the law had exposed shortcomings and should be revised. The main purpose of the law revision is to lower the corporate income tax rate so that enterprises can accumulate funds to improve their facilities and strengthen their competitiveness.

The amended law includes new taxable incomes, such as earnings from transfer of investment projects, transfer of mineral exploration, extraction and processing rights, transfer of capital contribution, project participation and asset use rights, along with earnings from abroad. Such earnings were previously not taxable.

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Source: http://talkvietnam.com/2013/01/tax-law-revision-gives-lifeline-to-property-investors/

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