When a BOI tax exemption starts: first revenue, not the certificate

01Two anchor dates, locking two completely different sets of deadlines

This is the single field we regard as carrying the most risk anywhere in the BOI chain. Nobody sends a reminder about it the way they do about a deadline, and no system stops you the way a checklist does. It is just a date. Enter it wrong and you may notice nothing that year; by the time someone comes asking you to reconcile, several years later, the loss has already happened.

• The certificate date locks the execution-side countdowns — the window for importing duty-exempt machinery, the deadline to start operations. From the day the certificate is in hand, those clocks are running. See what the certificate itself locks in.
• The first-revenue date locks the tax-side entitlement — the years of corporate income tax exemption count from this day, and the cap starts accumulating from this day.

Mixing the two is the most common and the most expensive mistake. Using the certificate date to work out the exemption period shifts the whole exemption window forward, so in later years you believe you are still inside it when it has in fact already expired. The other way round — using the first-revenue date to work out the machinery import window — leaves you thinking there is still time, and you go straight past the import deadline.

02What "first revenue" actually means

It means the day the promoted business actually earns its first revenue, evidenced by the documents for that first real sale. Not trial production, not samples, and not revenue from non-promoted business. Two practical points are worth settling in advance.

• Where a company has both promoted and non-promoted business, only the first revenue of the promoted business counts.
• Where a company holds more than one promotion certificate, each certificate has its own first-revenue date. They cannot share one.

03The exemption does not happen by itself: two sides, and they have to agree

Many companies assume that once the certificate is issued and the entitlement exists, the tax simply falls away when they file. In practice there are two separate tracks.

• The incentive registration side. After the certificate is issued you register the start of use of the exemption, obtain approval from the supervising authority, and reconcile it year by year. This step registers and tracks the entitlement; on its own it reduces no tax.
• The tax filing side. In each accounting year the annual corporate income tax return carries a schedule for promoted benefits: income from the promoted business is shown in separate accounts and set off year by year against the cap stated on the certificate. This is where the money is actually saved. See why the books have to keep exempt and taxable income apart.

Three figures have to be the same on both sides: the first-revenue date, the cap, and the amount used in the current year. If they do not agree, at best you are asked to explain and correct; at worst it affects your use of the entitlement in later years.

04The cap is the wall you hit before the years run out

Except for the top two tiers, a promoted project's exemption is normally capped: the tax exempted in total may not exceed a set proportion of the approved investment amount, and the approved basis generally excludes land and working capital. Which means a project that earns well often uses up the cap before the exemption years are over — once the cap is reached, normal tax resumes that same year. Which tier the project sits in is what drives both ceilings; see how the tiers differ.

When you build multi-year financial projections, put both ceilings — the years and the cap — into the schedule and reconcile them year by year. Budgeting on the years alone will overstate after-tax profit.

Which day counts as the first-revenue date on your own certificate, how the cap base is verified, whether the two sides currently agree, and whether any earlier year needs correcting all have to be checked item by item against the certificate conditions, the documents for the actual first sale, the historical financial statements and the income tax returns. Our suggestion is to have this reconciliation built by our advisers in the first year you have revenue, rather than tracing it backwards years later.