What will Samsung bring to Vietnam?

Published: 23/04/2013 07:36

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It’s obvious that the existence of Samsung’s factory in Bac Ninh province has helped changed the face of a small province adjacent to Hanoi. But…

By the end of 2012, Samsung Electronics Vietnam (SEV) had disbursed $950 million out of the total $1.5 billion worth of capital registered for the mobile phone and tablet factory in Bac Ninh province. 

Big exports

A report of the local customs agency showed that in 2012, SEV exported $12.5 billion worth of products, while the imports value was $11.3 billion, a relatively high figure if noting that Vietnam’s total export turnover was $228 billion in the year.

SEV’s business performance has been going very smoothly. Just in the first two months of the year, its export turnover reached $3 billion. It is expected that the company’s import-export turnover would climb to $30 billion, an increase of $6 billion over 2012.

SDI Vietnam, another Samsung’s family member, has also been performing well. The company exported over $75 million worth of products, and imported $86.3 million dollars. The import-export turnover of the company is believed to be over 1 billion dollars this year.

Samsung has expanded its production and business scale in Vietnam by kicking off the construction of the second industrial complex in the Yen Binh Industrial Zone in Thai Nguyen province, which has the investment capital of over $2 billion.

Low tax sums paid

While the Samsung family in Vietnam has gained great achievements in its production and business, its modest tax payment to the state budget has dissatisfied tax agencies.

The reports of local customs agencies, which are in charge of collecting the taxes relating to businesses’ import and export activities, in the first two months of 2012, SEV paid VND80.4 billion in tax. Meanwhile, in the first two months of 2013, the state budget could only collect VND429 million in the environment protection tax from SEV.

And the same situation has been reported about SDI Vietnam. It paid VND80 billion in the first two months of 2012, but paid VND3.2 billion in the same period of 2013.

This has been explained by the fact that the Samsung family’s enterprises have shifted to operate as the enterprises in the export processing zones since September 2012, which, under the current laws, can enjoy bigger tax incentives.

A report of the Bac Ninh Tax Agency showed that the change in the mode of operation would lead to the sharp fall of the VAT to be paid to the local taxation agency by Samsung’s satellite companies. Under the current laws, when selling products to export processing zones’ enterprises, Samsung in this case, they would enjoy the zero VAT rate.

The power of the “big guy”

Samsung, before getting operational as an export processing enterprise, repeatedly asked for the exemption of the import tax on the accessories and parts imports for making Galaxy Tab domestically. 

However, the Ministry of Finance then refused the proposal.

The answer from the finance ministry did not satisfy SEV. The investor then began asking to shift into export processing enterprise, emphasizing that this was one of the most important factor for it to consider raising the investment capital from $670 million to $1.5 million in Bac Ninh.

SEV has also successfully demanded the tax incentives relating to the corporate income tax, VAT, import-export tax. Especially, it has also helped satellite companies reduce the tax sums they have to pay when doing business with an export processing enterprise.

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