Investment Code Offers Favourable Tax Regime for Foreign Investors
The government has implemented various tax incentives under the Investment Code to attract foreign investment and stimulate economic growth. These measures aim to reduce the burden on foreign investors and make it more attractive for them to set up operations in the country.
Customs Duty Exemptions
During the installation phase, which can last up to three years, foreign companies benefiting from special treatment under the Investment Code are exempt from customs duties and taxes, including value-added tax (VAT) on the import of equipment and materials. The only exceptions are motor vehicles designed for transporting people.
Tax Exemptions
Foreign companies also benefit from a range of tax exemptions during the installation phase, including:
- Exemption from commercial tax
- Unique real estate property tax
- Lump-sum payment
- Apprenticeship tax (with the exception of a 1.5% contribution to vocational training)
Customs Tax Relief
Once operations are up and running, foreign companies are subject to a reduced customs tax rate of 2% on raw materials or imported inputs used in production. However, investors can opt for more favorable rates under the Customs Tariff if available.
Tax Breaks
Foreign companies also benefit from a dispensational tax system, which offers tax cuts for up to 10 years depending on the location of the project. The national territory is divided into two zones:
Zone A
- Offers a 100% discount on annual minimum tax, industrial and commercial profit, corporate tax, contribution for commercial and unique real estate property tax, lump-sum payment, apprenticeship tax, and registration fee for the first and second year.
- Discounts gradually reduce to 25% for the fifth, sixth, seventh, and eighth years.
Zone B
- Offers a 100% discount on annual minimum tax, industrial and commercial profit, corporate tax, contribution for commercial and unique real estate property tax, lump-sum payment, apprenticeship tax, and registration fee for the first, second, and third year.
- Discounts gradually reduce to 25% for the seventh and eighth years.
Extension of Tax Benefits
The government is authorized to extend the duration of the dispensational tax system from eight to 10 years in strategic industries or projects that create a significant number of jobs, have high capital intensity, or are declared strategically important by the government.