Are foreign-invested enterprises allowed to get advertising service business?

My enterprise was established at the beginning of the year 2018 with 100% foreign capital. The main business is software production. I want to ask your company how long is my enterprise exempted or reduced corporate income tax? And does my company have additional business needs for advertising services? I'm looking forward to being advised soon.

FDVN’s opinion:

Thank you for sending the question to the FDVN Law firm. Based on your consulting requirements, after studying the legal documents, FDVN Law Firm offers the following advice:

I. CIP deduction:

 As per Decree 218/2013 / ND-CP providing guidance on corporate income tax in Article 16 on tax exemption and tax reduction:

1. Tax exemption for 4 years, reduction of 50% of tax payable for the next 9 years for:

“a) Income of enterprise from performing new investment projects is specified in Clause 1, Article 15 of this Decree;”

As per Clause 1 Article 15 of the Decree above:

1. Incentive tax rate of 10% within 15 years applied to:

“a) Income of enterprise from the performance of new investment project in the area with extremely difficult socio-economic conditions specified in the Annex issued together with this Decree, economic zones, high technology zones including concentrated information technology zones are established by decision of the Prime Minister;

b) Income of enterprise from performing new investment project in the fields: Scientific research and technological development; application of high technology in the list of hi-tech invested and developed with priority as prescribed by the high-tech Law; high-tech incubation, high-tech enterprise incubation; venture capital for high-tech development in the list of high-tech developed with priority as prescribed by high-tech law; construction investment and business of high-tech incubator, high-tech enterprise incubator; investment and development of water plants, power plants, water drainage and supply system, bridges, roadway, railway, airports, seaports, river ports, railway stations and extremely significant infrastructure that shall be decided by the Prime Minister; production of software products; production of composite materials, light building materials, rare materials, production of renewable energy, clean energy, energy from waste destruction and biotechnology development.

Software production investment projects specified at this point is the software production investment projects in the list of software products meeting the requirement on process of software production as prescribed by law;”

So, according to Resolution 41 / NQ-CP, your Company registered the lines of software product production, so according to the law on the Company, you will be exempted from tax for 4 years and reduced by 50 % of the payable tax for the next 09 years.

       [2] Can an enterprise with 100% Foreign investment capital carry out advertising service business?

In Section F of Commitment No. 318 / WTO / CK of the Government of the Socialist Republic of Vietnam, “From the date of accession, foreign service suppliers may establish joint ventures or participate in Business cooperation contracts with Vietnamese partners who are licensed to provide advertising services.

From the date of accession, joint ventures are allowed in which foreign capital contribution shall not exceed 51% of the legal capital of the joint ventures. Since 1 January 2009, there is no restriction on foreign capital contribution in a joint venture. ” 

At the same time, in Article 40 of the 2012 Law on Advertising about Foreign investment and cooperation in advertising:

       “1. Foreign organizations and individuals are allowed to cooperate with Vietnamese advertising service providers in forms of joint ventures or business association contracts

        2. The foreign investment and cooperation in advertising must comply with law provisions on investment.”

            As per the above provisions, foreign-invested enterprises only engage in advertising services in the form of joint ventures and contracts of business cooperation with Vietnamese partners already permitted to business advertising services. . and when the company contributes to joint venture capital, it does not limit the capital contribution ratio.

Above is FDVN Law Firm's advisory opinion regarding the request of a consultant of the Guest on the basis of studying legal regulations. Hopefully, FDVN's advice will be helpful to you.

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