An incentive is only worth what you can evidence
Investment incentives — exemptions and reductions in corporate income tax and in land rent — matter a great deal when an enterprise weighs up where and in what to invest. But an incentive recorded on the investment registration certificate is only the necessary condition. The sufficient condition is that the enterprise can evidence that it meets the eligibility conditions, with a correct and complete file, at the right time.
What incentives are usually tied to
- The investment location: areas with difficult or especially difficult socio-economic conditions.
- Encouraged sectors: high technology, manufacturing and certain priority fields.
- Capital or headcount thresholds set by the regulations.
The difficulty is that these conditions must be maintained and evidenced continuously — not only at the point of licensing.
The risk of losing the incentive retroactively
At finalisation or during an inspection, if the enterprise cannot evidence that it met the eligibility conditions in the period, the tax authority may disallow the incentive already applied, leading to assessed tax and late-payment interest. It is a risk that is easily overlooked, because incentives tend to be treated as a given.
Build the file from day one
An enterprise should assemble the file evidencing eligibility as soon as the project starts and update it each year, rather than reconstructing it when an inspection arrives. Reviewing eligibility periodically is particularly important while international tax policy is in flux.
TLA assesses eligibility for incentives and prepares the supporting file — contact us for advice.
