Investment incentives in Vietnam are designed to encourage investment in sectors and regions that align with the country’s development priorities. These incentives, ranging from tax reductions to exemptions on land use, aim to drive economic restructuring and support growth in key industries like high-tech, agriculture, and environmental protection. This article outlines the forms, eligible sectors, and regions for investment incentives, as well as the procedures for investors to access these benefits.
1. What are Investment Incentives?
The law stipulates that investment incentives are benefits granted by the State to investors who invest in sectors or areas that are encouraged. The purpose of these investment incentives is to facilitate economic structural transformation in alignment with the country’s socio-economic development strategy.
The State applies investment incentives through tax policies; credit policies; land and resource use policies; export and import policies, along with other incentives based on the planning and development orientations of each period.
The Government defines lists of industries and sectors eligible for investment incentives, the geographical areas where investment incentives apply, the standards for technology levels and workforce scale, as well as the specific levels of investment incentives.
2. Forms of investment incentives
Pursuant to Clause 1, Article 15 of the 2020 Investment Law, forms of investment incentives include:
– Enterprise income tax incentives, including application of enterprise income tax rates lower than ordinary tax rates for a definite period of time or for the whole implementation duration of investment projects; exemption from or reduction of enterprise income tax and other incentives in accordance with the law on enterprise income tax;
– Exemption from import duty on goods imported to create fixed assets; and materials, supplies and components imported for production in accordance with the law on import duty and export duty;
– Exemption from or reduction of land use levy, land rental or land use tax;
– Accelerated depreciation, or increase of deductible expenses when calculating taxable incomes.
3. Subjects eligible for investment incentives
Pursuant to Clause 2, Article 15 of the 2020 Investment Law, subjects eligible for investment incentives include:
– Investment projects in the sectors and trades eligible for investment incentives specified in Clause 1, Article 16 of this Law;
– Investment projects in the geographical areas eligible for investment incentives specified in Clause 2, Article 16 of this Law;
– Investment projects capitalized at VND 6 trillion or more, having disbursed at least VND 6 trillion in 3 years after obtaining an investment registration certificate or approval of investment policy, and at the same time meeting one of the following criteria: earning a total turnover of at least VND 10 trillion in each year after 3 years from the year of generating incomes or employing more than 3,000 workers;
– Social housing investment projects; rural investment projects employing at least 500 workers; and investment projects employing workers with disabilities in accordance with the law on people with disabilities;
– Hi-tech enterprises, science and technology enterprises, and science and technology organizations; projects involving transfer of technologies on the List of technologies encouraged for transfer in accordance with the law on technology transfer; technology incubators and science and technology enterprise incubators in accordance with the law on high technologies and the law on science and technology; and enterprises producing and supplying technologies, equipment, products and services serving environmental protection requirements in accordance with the law on environmental protection;
– Innovative startup investment projects, innovation centers, and research and development centers;
– Business investment in distribution chains for products of small- and medium-sized enterprises; business investment in technical establishments in support of small- and medium-sized enterprises, and small- and medium-sized enterprise incubators; and business investment in co-working space in support of small- and medium-sized innovative startup enterprises in accordance with the law on support for small- and medium-sized enterprises.
Exceptional cases
The investment incentives specified at Points b, c and d, Clause 2 of this Article shall not apply to:
– Investment projects to exploit minerals;
– Investment projects to produce or trade in excise tax-liable products or services specified in the Law on Excise Tax, except projects to manufacture automobiles, aircraft or cruises;
– Investment projects to build commercial houses in accordance with the housing law.
4. Sectors and trades eligible for investment incentives
According to Article 16 of Consolidated Document No. 02/VBHN-VPQH on the Investment Law, the sectors and trades eligible for investment incentive are specified as follows:
– Hi-tech activities, hi-tech supporting industry products; research and development activities, and production of products formed from scientific and technological outcomes in accordance with the law on science and technology;
These enterprises will benefit from a preferential tax rate of 10% for 15 years, tax exemption for 4 years, and a 50% reduction in tax for the following 9 years.
– Production of new materials, new energies, clean energies and renewable energies; manufacture of products with an added value of at least 30% and energy-efficient products;
– Manufacture of electronic products, key mechanical products, agricultural machinery, automobiles and automobile parts; shipbuilding;
– Manufacture of products on the List of supporting industry products prioritized for development;
– Manufacture of information technology products, software and digital content;
– Cultivation and processing of agricultural, forest and fishery products; forest planting and protection; salt production; marine fishing and fishing logistics services; production of plant varieties and animal breeds and biotech products;
– Waste collection, treatment, recycling or reuse;
– Investment in development, operation and management of infrastructure facilities; development of mass transit in urban centers;
– Early childhood education, general education, vocational education, and higher education;
– Medical examination and treatment; production of drugs and drug materials, and drug storage; scientific research into preparation technologies and biotechnologies for producing new drugs; manufacture of medical equipment and devices;
– Investment in physical training and sports facilities for people with disabilities or professional athletes; protection and promotion of the value of cultural heritages;
– Investment in physical training and sports facilities for people with disabilities or professional athletes; protection and promotion of the value of cultural heritages;
– People’s credit funds and microfinance institutions;
– Production of products and provision of services created by or participating in value chains or industrial clusters.
5. Geographical areas eligible for investment incentives
Geographical areas eligible for investment incentives include:
– Geographical areas meeting with difficult socio-economic conditions and geographical areas meeting with extremely difficult socio-economic conditions;
– Industrial parks, export processing zones, hi-tech parks and economic zones.
In addition, the Government updates and amends the list of eligible sectors, industries, and geographical areas based on changing circumstances.
6. Procedures for application of investment incentives
According to Article 17 of the 2020 Investment Law, the procedures for applying investment incentives are as follows:
Article 17. Procedures for Applying Investment Incentives
“Based on the subjects stipulated in Clause 2, Article 15 of this Law, the investment policy approval document (if any), the Investment Registration Certificate (if any), and other relevant legal provisions, investors shall self-determine the applicable investment incentives and carry out the procedures to enjoy investment incentives at the tax authorities, financial authorities, customs authorities, and other competent authorities corresponding to each type of investment incentive.”
Additionally, the procedures for applying investment incentives are guided by Article 23 of Decree 31/2021/ND-CP, specifically:
– Decisions on investment policy approval, investment registration certificates, or decisions on investor approval must specify forms, and bases and conditions for application, of investment incentives as specified in Articles 15 and 16 of the Law on Investment and Article 19 of this Decree.
– Based on investment incentives specified in decisions on investment policy approval, investment registration certificates, or decisions on investor approval, investors shall carry out procedures for enjoyment of investment incentives at investment incentive-applying agencies for each type of incentives.
– Grounds for application of investment incentives to a number of enterprises and investment projects specified in Clause 5, Article 19 of this Decree are:
- Science and technology enterprise certificates, for science and technology enterprises;
- Hi-tech agriculture enterprise certificates, for hi-tech agriculture enterprises;
- Hi-tech project certificates, for hi-tech projects;
- Written certifications of incentives for production of supporting industry products, for supporting industry projects; or,
- Certificates of transfer of technologies eligible for transfer promotion under the Prime Minister’s regulations, for projects involving transfer of technologies on the list of technologies eligible for transfer promotion.
– For investment projects other than those specified in Clauses 2 and 3 of this Article, investors shall base themselves on subjects eligible for investment incentives mentioned in Article 19 of this Decree and relevant regulations to determine investment incentives and carry out procedures for enjoyment of investment incentives at investment incentive-applying agencies for each type of incentives.
In conclusion, investment incentives are vital for attracting both domestic and foreign investment in Vietnam, helping to advance the country’s economic goals. Investors must carefully follow the procedures outlined in the law to benefit from these incentives, which can significantly reduce operating costs and support growth in prioritized sectors. By understanding and applying for these incentives, investors can contribute to Vietnam’s long-term economic development while benefiting from favorable financial conditions.
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