Quoted Article 16 of Decree No. 218/2013/ND-CP dated December 26, 2013 of the Government detailing and guiding the implementation of the Law on Enterprise Income Tax (This Decree takes effect on February 15, 2014 and applies to the tax period from 2014 onwards).

Article 16. Tax exemption and reduction

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3. Tax exemption for 2 years, reduction of 50% of tax payable for the next 4 years for incomes from performing new investment projects specified in Clause 3, Article 15 of this Decree and enterprise’s income from performing new investment projects in industrial parks (except for industrial parks located in the areas with advantageous socio-economic conditions);

Areas with advantageous socio-economic conditions specified in this Clause are urban districts of urban cities of special type or type I directly under the Central and urban cities of type I directly under provinces; where the industrial parks are located in both advantageous and disadvantageous, the determination of tax preferential for industrial parks based on the areas with larger industrial park area. The determination of urban cities of special type or type I specified in this Clause shall comply with regulations of the Government on classification of urban cities;

4. The time for tax exemption or reduction specified in this Article is calculated continuously from the first year of taxable income from the new investment projects entitled to tax preferential. Where there is no taxable income in the first three years, from the first year of taxable income from the new investment project, the time for tax exemption or reduction is calculated from the fourth year. The time for tax exemption or reduction applied to high-tech enterprises or agricultural enterprises applying high-tech specified in Clause 1 of this Article is calculated from the time of being recognized as high-tech enterprises or agricultural enterprises applying high-tech

Where in the first tax period but the enterprise’s new investment project with the time of production and business exempted from or reduced in tax of less than 12 (twelve) months, the enterprise shall be entitled to the tax exemption or reduction for new investment project in that tax period or registration with the tax authority the time of starting the tax exemption or reduction from the next tax period;

5. Enterprises having development investment projects operating in the fields and areas with the preferential of enterprise income tax under the provisions of this Decree and expanding scale of production, raising capacity and innovating if meeting one of three criteria specified in this Clause shall be entitled to tax preferential of projects under operation for the remaining time (if any) or be exempted from or reduced in tax for the income additionally increased from the investment and expansion. The time for tax exemption or reduction for the income additionally increased from the investment and expansion specified in this Clause is equal to the time for tax exemption or reduction applied to the new investment project in the same area and fields entitle to the preferential of enterprise income tax.

The expansion investment projects specified in this Clause must meet one of the following criteria:

- The prime cost of fixed assets increases when the investment project completed and put into operation reaches a minimum of 20 billion dong for the expansion investment project in the fields entitled to the preferential of enterprise income tax under the provisions of this Decree or from 10 billion dong for expansion investment projects implemented in the areas with difficult or extremely difficult socio-economic conditions under the regulations of Law on Enterprise Income Tax;

- The proportion of prime cost of fixed assets reaches a minimum increase of 20% compared to the total prime cost of fixed assets prior to the investment;

- The design capacity has increased at least 20% compared to the design capacity prior to investment;

Where the enterprises in operation upgrade, replace or innovate the technology of projects in operation in the areas and fields entitle to the tax preferential under the provisions of this Decree without meeting one of three criteria specified at this Point, then the tax preferential shall comply with the projects in operation for the remaining time (if any);

Where the enterprises are entitled to the tax preferential under the status of expansion investment, the income increased from expansion investment shall be separately accounted. In case of failure of separate accounting, the income from expansion investment is determined by the ratio between the prime cost of fixed assets newly invested and put into use for production and business on the total prime cost of enterprise’s fixed assets;

The time for tax exemption or reduction specified in this Clause is calculated from the year when the expansion investment project has been completed and put into production and put into production and business with revenue. Where there is no taxable income in the first three years, from the first year of revenue from the expansion investment project, then the time for tax exemption or reduction is calculated from the fourth year;

The tax preferential specified in this Clause do not apply to the expansion investment from merger or acquisition of enterprise or investment project in operation;

And reference Circular No. 78/2014/TT-BTC Of the Ministry of Finance On Enterprise Income Tax on 18^th Jun 2014 (“Circular 78”) to guide the implementation of Decree No. 218/2013/ND-CP dated 26 Dec 2013 of the Government prescribing and guiding the implementation of Law on Enterprise Income Tax. The Circular No. 78/2014/ND-CP shall effect from 2^nd Aug 2014 and apply for enterprise income tax period from 2014 on, replacing Decree No. 123/2012/TT-BTC.