Casinos in Vietnam’s special economic zones (SEZ) have enjoyed the possibility of considerable tax breaks to help build the industry. The normal tax rate was between 20% and 22%; however, a proposal to offer reduced rates was presented, much to the delight of casino operators.
The lucrative agreement saw a tax reduction of 100% in each of the first four years, and then 50% in each of the subsequent five years. After that, the tax amount would have been 10% for an additional 21 years before the casinos would begin to pay taxes at the normal rate. The enthusiasm and excitement morphed into chagrin recently, as the country is considering a completely different tax structure, according to local media reports.
Under the new plan, the casinos would receive a preferential tax rate of 17% for the first five years. Additionally, an excise tax of 10% had also been suggested under the initial proposal. However, casinos would be on the hook for an excise tax of 15% for the first ten years under the new deal.
The tax incentives would apply to casinos in Van Don, Bac Van Phong and Phu Quoc. There are two casinos planned for Phu Quoc, in the south, and Van Don, in the north, that are the only two authorized to allow gambling by locals under a pilot project expected to last three years.
The new proposal also suggests additional changes. Tourism and entertainment projects that include casinos would not be eligible for unlimited-time land and sea leases. The exemption period would be no more than half the total lease time of the project and would be limited to 30 years for the SEZs in Bac Von Phong and Van Don, and 20 years for the SEZ in Phu Quoc.
The SEZs have been in the works since early last year. The zones are free from local regulations, which allows them to compete on an international level. When the country first announced the development of the SEZs in March 2017, Planning and Investment Minister Nguyen Chi Dung said, “It will be a massive attraction to investment and investment will boom next year. It will be outstanding in everything: free and favourable in every aspect.”
There is a National Assembly meeting scheduled on Wednesday, in which the proposed law changes will be addressed, according to reports. The SEZs could, indeed, be a massive attraction, but the reduction in tax benefits could certainly put a damper on operators’ spirits.
