Consultation, Construction, and Factory Leasing Services

Pursuant to Article 18, Law on Enterprises No. 59/2020/QH14 as of 17/6/2020:

“Article 18. Pre-registration contracts

1. The enterprise’s founder may sign contracts serving the establishment and operation of the enterprise before and during the process of enterprise registration.

2. When the Certificate of Enterprise Registration is granted, the enterprise shall continue exercising and performing the rights and obligations under the concluded contracts mentioned in Clause 1 of this Article, and the parties shall transfer the rights and obligations in accordance with the Civil Code, unless prescribed by the contracts.

3. IN case the Certificate of Enterprise Registration is not granted, the persons who conclude the contracts mentioned in Clause 1 of this Article are responsible for their execution. Any other participant in the establishment of the enterprise is also responsible for the execution of these contracts.”

Pursuant to Clause 12.b, Article 14, Circular No. 219/2013/TT-BTC as of 31/12/2013 by the Ministry of Finance about guidance on implementation of the law on value-added tax and the Government’s Decree No. 209/2013/ND-CP dated 18/12/2013 providing guidance on some articles of the law on value-added tax:

“12. When the taxpayer authorizes another entity to make a purchase, the invoice for which bears the name of the authorized buyer, input VAT on such purchase may be deducted in the following cases:

b) Before a company is established, its founders authorizes another entity in writing to pay on their behalf some amounts related to the establishment of the company and purchase some goods, the company may deduct input VAT according to the invoices bearing the name of the authorized entity. The invoices of which the value is 20 million VND or more must be paid by bank transfer.”

Pursuant to Article 4, Circular No. 96/2015/TT-BTC dated 22/6/2015 by the Ministry of Finance, amendments of Article 6, Circular No. 78/2014/TT-BTC dated 18/6/2014 by the Ministry of Finance are stated as follows:

“Article 6. Deductible and non-deductible expenses when calculating taxable income

1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:

a) The actual expense incurred is related to the enterprise’s business operation.

b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.

c) There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).

The proof of non-cash payment must comply with regulations of law on VAT…”

Pursuant to Clause 3, Article 3, Circular No. 45/2013/TT-BTC dated 25/4/2013 by the Ministry of Finance about guiding regulation on management, use and depreciation of fixed assets:

“3. The cost of establishment of enterprise, cost of staff training, advertising cost incurred prior to the establishment of enterprise, cost of research stage, relocation, sale for possession and use of technical materials, patents, license of technology transfer, trade marks, business advantage that are not intangibles fixed assets but are amortized into business cost of enterprises in a maximum time not exceeding 3 years according regulations of Law on Enterprise Income Tax.”

Pursuant to Clause 7, Article 3, Circular No. 26/2015/TT-BTC dated 27/02/2015 amending Article 16, Circular No. 39/2014/TT-BTC dated 31/3/2014/TT-BTC on invoices for goods sales and service provision:

“7. Article 16 is amended as follows:

a) Point b Clause 1 of Article 16 (amended in Clause 3 Article 5 of Circular No. 119/2014/TT-BTC) is amended as follows:

b) When selling goods and services, including those used for trade promotion, advertising, samples, goods and services used for donation, exchange, or paid as salaries (except for goods internally circulated or internally used to proceed production), the seller must issue invoices.

Information on invoices must match the actual transactions; no erasure and change may be made; the ink used must be inedible and consistent in color; red ink is not permitted; numbers and text must be written continuously without interruption. Do not write on printed text. Any blank space shall be crossed out. It is not required to cross out blank space on self-printed invoices or ordered invoice issued by computers.”

According to the above-mentioned regulations, in case the founder of the Company has a letter of authorization to the individual who rents the office before the establishment of the Company, if the use of this office relates to the establishment of the enterprise, has enough invoices as required (invoices, documents undersigned by the authorized individual, invoices valued above VND 20 million must be paid through the banks), then it is recorded as deductible expense when calculating Corporate Income Tax, the expense is allocated into business expenses within 3 years since the enterprise started operating.

Factory Consulting, Building And Leasing Services

Factories, land belonging to redundant factory construction are real estates. Leasing factories, land belonging to factory construction is leasing real estates.

Henceforth, as long as this property satisfies the conditions, which are Real estate allowed to be traded and belonging to an enterprise licensed to trade properties, then it can be rented normally.

Therefore, leasing redundant factories is permitted and must satisfy 2 criteria:

-First, the real estate has to sufficiently satisfy the business conditions according to Article 9, Law on Real Estate Trading No. 66/2014/QH13 dated 25/11/2014.

-Second, it must satisfy the condition of the trader of the real estate.

In addition, it is necessary to consider whether the factory leasing contract of the enterprise has any term bounding re-rental.

Especially, foreign investors who rent factories from lessors with redundant area need to consult solicitors or licensing authorities whether such location is ratified for project execution.

The time limit for land leasing is agreed by both parties based on the demand and capability to satisfy the demand of each party. However, there are some factors determining the lease’s time limit, such as:

-Long-term or short-term usage of the lessees and the capability to satisfy the demand of the lessors.

-The life-span of the construction on the existing land.

-General local planning

-The differences in time limit options when negotiating price policies

For production and manufacturing enterprises when launching projects and requesting Investment Registration Certification, the duration of the investment will be explained. This is an utmost important content for these following reasons:

-Evidence for the applicability and conductibility of capital contribution as agreed;

-Complying with and controlling progress will directly relate to the investment project’s right of receiving value-added tax refund.

In reality, there have been many enterprises could not receive tax refund and their tax reached up to billions of VND. The reason is that enterprises can only receive tax refund during the investment stage. However, due to various factors during the initiation, enterprises may already have revenue before the investment is completed, or be late in requesting tax refund. These are considered severe damages to enterprises in their initial stage of operation.

Therefore, we often consult customers carefully. Especially, customers’ accountants need to understand and meticulously control this matter.

The fundamental rights when renting factories:

-Access information about Governmental regulations, industrial zones’ activities

-Guarantee in terms of security, fire prevention and protection

-Guarantee in terms of design and operation compatible with local planning

-Guarantee to provide water, electricity and usage rights for living and production activities

-In addition, depending on each contract, there will be services for personal demand