Business risks
Woochang Vietnam Co., Ltd. (100% Korean capital) has implemented an export garment project at Trang Nhat 1 Industrial Park (Dien Thang Trung, Dien Ban town). The project was completed and put into operation in December 2017, employing about 800 local workers.
In May 2022, an unexpected fire incident occurred. The fire completely burned down 5,500m2 of Woochang Vietnam's factory. To restore the burned factory (including machinery and equipment), Woochang Vietnam decided to invest an additional 2 million USD to rebuild the factory.
The Department of Planning and Investment has issued an investment registration certificate, adjusted the total investment capital and added a schedule to implement the investment in rebuilding the factory. The last adjustment on November 14, 2023 was to adjust the implementation schedule for the rebuilt factory.
The company registered for a refund of value-added tax (VAT) paid during the factory reconstruction process on November 24, 2023. However, more than 5 months have passed, Woochang has not received a refund of this VAT, while the company is facing many financial difficulties.
On May 2, 2024, the Korean Consulate General in Da Nang sent a letter to the Department of Foreign Affairs, the Department of Planning and Investment and the Tax Department of Quang Nam, hoping to receive local assistance for the difficulties that Korean enterprises investing in Quang Nam are facing, such as Woochang Vietnam.
According to Ms. Yeom Ji Yeon - Deputy Consul General of Korea in Da Nang, Korean enterprises are often very interested in how local authorities support businesses when they fall into difficult situations. Because any company can face risks in investment.
Woochang Vietnam’s efforts to continue investing despite the fact that its production facility was burned down are worthy of high praise. If the company does not lose heart, continues to overcome difficulties, and resumes its production and business activities, it will become a shining example in attracting foreign enterprises to invest in Vietnam.
The Korean Consulate General is trying very hard to support Woochang Vietnam to overcome the crisis and continue to contribute to the economic development of Vietnam and Korea through the company's production and business activities.
The Consulate General hopes to receive attention and support from the People's Committee of Quang Nam province in the matter of Woochang Vietnam.
Quang Nam's actions
Immediately upon receiving the letter from the Korean Consulate General in Da Nang, on May 4, 2024, Director of the Department of Foreign Affairs Dang Ba Du sent an official dispatch requesting the Provincial People's Committee to direct relevant departments, branches and agencies to review and verify information and answer the reason why Woochang Vietnam has not yet received a refund of VAT.
This is to support foreign-invested enterprises operating locally, especially those that fall into unexpected difficulties, and to address requests from Korean diplomatic agencies.
It is not until now that the management agencies related to investment and tax have discussed the matter of Woochang Vietnam. The Tax Department said that Woochang Vietnam submitted a request for VAT refund for the project of reinvesting the factory after the fire to the Tax Department on November 24, 2023. The amount requested for refund is more than 5.2 billion VND.
According to the analysis of the Tax Department, the case of requesting a tax refund for factory construction after a fire has not been regulated in legal documents on VAT.
The Tax Department has sent an official dispatch asking for guidance from the General Department of Taxation to resolve tax refunds for businesses. However, the General Department of Taxation responded (March 13, 2024) that it "requested the Quang Nam Tax Department to study opinions, coordinate with state management agencies on investment in the area, based on the actual records of Woochang Vietnam, based on the Law on Tax Administration, the law on VAT and related laws to handle according to regulations and authority".
On April 10, 2024, the Tax Department sent an official dispatch to the Department of Planning and Investment, requesting coordination in providing information on Woochang Vietnam's investment project. On April 12, 2024, the Department of Planning and Investment specifically responded that Woochang Vietnam Co., Ltd. would rebuild the factory. This construction was to overcome the fire incident and resume the project's production and business activities.
Accordingly, this is not a new investment project or an expanded investment project (according to the provisions of the Investment Law 2020); it is not the next investment phase (phase 2) because the project does not have investment phases.
Mr. Nguyen Viet Xuan - Deputy Director of the Tax Department said, based on legal regulations and opinions of the Department of Planning and Investment, Woochang Vietnam built a factory to fix the problem and continue operating, not a new investment project according to the provisions of the investment law, so it is not subject to VAT refund according to regulations for investment projects. Woochang Vietnam is not subject to tax refund according to investment projects.
However, Mr. Xuan said, if Woochang Vietnam meets the export conditions, it can declare input VAT deductible according to regulations for the factory reconstruction project.
If not fully deducted, it can be carried forward to the next period or input VAT can be refunded according to regulations on tax refund for exported goods and services.
On May 15, 2024, Vice Chairman of the Provincial People's Committee Ho Quang Buu requested the Department of Foreign Affairs to approve the summary of the contents of the VAT refund dossier settlement for Woochang Vietnam Co., Ltd. of the Tax Department to send a written response to the information to the Korean Consulate General in Da Nang. At the same time, the Tax Department was assigned to send a written response to Woochang Vietnam Co., Ltd.
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