In order to encourage and attract investment, Vietnam has issued many investment preferential policies for investors. Based on the nature of the project such as industry, implementation location, objectives, and capital size, the project will be entitled to different forms of investment incentives, which may include (i) Incentives for corporate income tax (hereinafter referred to as “CIT“), (ii) Exemption from import tax, (iii) Exemption or reduction of land use levy, land rent, and land use tax, (iv) Fast depreciation, increasing the deductible expenses when calculating taxable income.[1]
I- Investment incentives on CIT
CIT investment incentives that economic organizations implementing investment projects may receive include the application of a lower corporate income tax rate than the normal tax rate for a definite term or the entire duration of the investment project; tax exemption, tax reduction, and other incentives in accordance with the law on corporate income tax.
1. The project enjoys a lower CIT rate than the normal tax rate[2]
a) The project is entitled to a tax rate of 10% for 15 years, for example:
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- New investment projects in areas with extremely difficult socio-economic conditions[3] economic zones, and high-tech zones;
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- New investment projects in the fields of science, technology, and infrastructure;
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- New investment projects in the fields of environmental protection and waste treatment;
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- High-tech enterprises, agricultural enterprises applying high technology;
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- New investment projects in the production sector when meeting the requirements on capital scale, revenue and labor;
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- New investment projects to manufacture products on the List of supporting industry products prioritized for development such as supporting industrial products for high technology or supporting industrial products for the production of products in the following industries: textile – sewing; leather – shoes; electronics and information technology; automobile production and assembly; manufactured mechanical products that cannot be produced domestically or which cannot be produced but must meet technical standards of the European Union (EU) or equivalent.
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b) The project is entitled to a tax rate of 10%:
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- socialization activities in the fields of education – training, vocational training, health, culture, sports, environment, and judicial expertise;
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- publishing activities of a publisher;
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- printing press activities;
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- investment in social housing business projects;
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- planting, tending and protecting forests; cultivating, raising, raising and processing agricultural and aquatic products in areas with difficult socio-economic conditions; cultivating forest products in areas with difficult socio-economic conditions; preserving agricultural, aquatic, and food products;
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c) The project is entitled to a tax rate of 17% including:
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- New investment projects in areas with difficult socio-economic conditions;[4]
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- New investment projects in certain sectors such as high-grade steel production; production of energy-efficient products; production of machinery and equipment for agricultural, forestry, fishery and salt production; manufacture of irrigation equipment; production and refining of animal feed, poultry and aquatic products; development of traditional professions.
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The period of application of the above-mentioned preferential tax rates shall be calculated continuously from the first year the enterprise has revenue from a new investment project; for hi-tech enterprises, hi-tech agricultural enterprises shall be counted from the date of being recognized as hi-tech enterprises or hi-tech agricultural enterprises; for hi-tech application projects, counting from the date of being granted the certificate of the high-tech application project.
2. The project is exempted from and reduced CIT[5]
a) Tax exemption for 04 years, reduction of 50% of payable tax in the next 09 years for:
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- New investment projects in areas with extremely difficult socio-economic conditions;
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- New investment projects in the fields of science, technology and infrastructure;
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- New investment projects in the fields of environmental protection and waste treatment;
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- Hi-tech investors, hi-tech agricultural investors;
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- The enterprise’s income from the implementation of new investment projects in the manufacturing sector (except for projects producing goods subject to special consumption tax, mineral exploitation projects) meets the criteria of law.
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b) Tax exemption for 04 years, reduction of 50% of payable tax in the next 05 years for: new investment projects in the field of socialization shall be implemented in areas not on the list of geographical areas with difficult or extremely difficult socio-economic conditions.
c) Tax exemption for 02 years, at least 50% of the tax payable in the next 04 years for:
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- New investment projects in areas with difficult socio-economic conditions;
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- New investment projects produce high-grade steel; energy-saving products; machinery and equipment for agricultural, forestry, fishery, and salt production; irrigation equipment; production and refining of animal feed, poultry, and aquatic products; development of fisheries;
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- New investment projects in industrial parks (except industrial parks located in areas with favorable socio-economic conditions).
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II- Investment incentives on import duties
Investment preferential policies on import duty exemption focus on imported goods to create fixed assets and imported raw materials, supplies and components for production. Projects entitled to this form of investment incentives are shown in Table 1 below:
Table 1: Investment incentives for import tax
No. | Preferential import duties | Preferential projects |
1 | Tax exemption on imported goods to create fixed assets[6] | Investment projects with the business line on the list of business lines eligible for investment incentives or business lines eligible for special investment incentives;Investment projects in areas with difficult socio-economic conditions or extremely difficult socio-economic conditions[7] |
Investment projects with an investment capital of VND 6,000 billion or more, disbursed at least VND 6,000 billion within 03 years from the date of issuance of the Investment Registration Certificate or approval of investment policies, and at the same time have one of the following criteria: (i) having a total revenue of at least VND 10,000 billion per year in the slowest period after 03 years from the year of turnover, or (ii) employing more than 3,000 employees | ||
Investment projects in rural areas employing 500 or more employees (excluding part-time employees and employees with labor contracts of less than 12 months) | ||
2 | Import duty exemption for raw materials, supplies and components for a period of 05 years[8] | Investment projects with the business line on the list of business lines eligible for special investment incentives |
Investment projects on the list of areas with extremely difficult socio-economic conditions | ||
Investment projects of hi-tech enterprises, science and technology enterprises, scientific and technological organizations |
III- Investment incentives on land lease, land use levy, land use tax
Investment projects may be entitled to reductions in land use levy, land rent, land use tax depending on the nature of the project, specifically:
a) Exemption from land rent for the whole lease term: for investment projects with the business line on the list of business lines eligible for special investment incentives conducted in the area with extremely difficult socio-economic conditions;[9]
b) Land rent exemption for a definite period: the project is exempt from land rent during the basic construction period under the project approved by a competent authority but not exceeding 03 years from the date of issuance of the land lease decision. [10] After this basic construction period, the project may continue to be exempt from land rent for a certain period, specifically:[11]
No. | The project is exempt from land rent | Period of exemption from land rent |
1 | Investment projects with the business line on the list of business lines eligible for investment incentives | 3 years |
2 | Investment projects in areas with difficult socio-economic conditions | 7 years |
3 | Investment projects in areas with extremely difficult socio-economic conditions;Investment projects with the business line on the list of business lines eligible for special investment incentives; orInvestment projects with the business line on the list of business lines eligible for investment incentives conducted in the area with difficult socio-economic conditions | 11 years |
4 | Investment projects with the business line on the list of business lines eligible for investment incentives conducted in the area with extremely difficult socio-economic conditions; orinvestment projects with the business line on the list of business lines eligible for special investment incentives conducted in the area with difficult socio-economic conditions | 15 years |
[1] Article 15.1 of the Law on Investment 2020
[2] Article 15, Decree 218/2013/ND-CP detailing and guiding the implementation of Law on Corporate income tax (amended and supplemented by Decree No. 12/2015/ ND-CP)
[3] List of geographical areas eligible for investment preferences specified in Appendix III, Decree 31/2021/ND-CP
[4] List of geographical areas eligible for investment preferences specified in Appendix III, Decree 31/2021/ND-CP
[5] Article 16, Decree 218/2013/ND-CP detailing and guiding the implementation of Law on Corporate income tax (amended and supplemented by Decree No. 12/2015/ ND-CP and Decree No. 91/2014/ ND-CP)
[6] Article 14, Decree 134/2016/ND-CP guidelines for the Law on Export and import duties (amended and supplemented by Decree 18/2021/ND-CP)
[7] List of preferential for investment and industries and trades with special investment preferences specified in Appendix II, Decree 31/2021/ND-CP elaboration of some articles of the Law on Investment
[8] Article 15, Decree 134/2016/ND-CP guidelines for the Law on Export and import duties (amended and supplemented by Decree 18/2021/ND-CP)
[9] Article 19.1, Decree 46/2014/ND-CP regulations on collection of land rent and water surface rent
[10] Article 19.2, Decree 46/2014/ND-CP regulations on collection of land rent and water surface rent
[11] Article 19.3, Decree 46/2014/ND-CP regulations on collection of land rent and water surface rent