The 2020 Investment Law in Vietnam outlines a range of support measures aimed at encouraging investment and boosting economic development. These include various forms of financial, technical, and infrastructural support for specific industries, as well as special incentives for projects with significant socio-economic impact.
1. Forms of investment support
Pursuant to Clause 1, Article 18 of the 2020 Investment Law, forms of investment support include:
– Support for development of technical and social infrastructure systems inside or outside investment project fences;
– Support for human resources training and development;
– Credit support;
– Support for access to production and business grounds; support for relocation of production and business establishments under decisions of state agencies;
– Support for science, technique and technology transfer;
– Support for market development and information provision;
– Support for research and development.
In addition, in order to encourage the development of certain investment projects with significant impact on socio-economic development, the Government will decide on the application of special investment incentives and support.
2. Subjects eligible for Investment Support
Subjects eligible for investment support, as stipulated in Clause 2, Article 18 of the 2020 Investment Law, include:
– Hi-tech enterprises;
– Science and technology enterprises;
– Science and technology organizations;
– Enterprises investing in agriculture and rural areas
– Enterprises investing in education and law dissemination, and other subjects.
Based on the socio-economic development orientation and the government’s budget balance in each period, the Government will provide detailed regulations on the forms of investment support for these subjects.
3. Procedures for applying for Investment Support
Based on master plans already decided or approved in accordance with the planning law, ministries, ministerial-level agencies and provincial-level People’s Committees shall formulate plans on development investment in, and organize the construction of, technical and social infrastructure systems outside the fences of industrial parks, export processing zones, hi-tech parks and functional sub-zones of economic zones.
The State shall support part of development investment capital from the state budget and preferential credit capital for the comprehensive development of technical and social infrastructure systems inside and outside the fences of industrial parks in geographical areas meeting with difficult socio-economic conditions or geographical areas meeting with extremely difficult socio-economic conditions.
The State shall support part of development investment capital from the state budget and preferential credit capital and apply other methods to raise capital for the construction of technical and social infrastructure systems inside economic zones and hi-tech parks.
4. Regulations on special investment incentives and supports
4.1. Projects eligible for special investment incentives and support
To receive special investment incentives and support, a project must fall under the category of projects eligible for this type of investment support. According to Clause 2, Article 20 of the 2020 Investment Law, eligible projects must meet certain conditions as follows:
a. New investment projects
For this type of investment project, the following conditions apply regarding the establishment of new entities, investment capital, and investment duration:
- Investment projects to establish new innovation centers or research and development centers capitalized at VND 3 trillion or more, and having disbursed at least VND 1 trillion in 3 years after obtaining an investment registration certificate or written approval of investment policy (including also the expansion of such investment projects); and the National Innovation Center established under the Prime Minister’s decision;
- Investment projects in sectors or trades eligible for special investment incentives capitalized at VND 30 trillion or more, having disbursed at least VND 10 trillion in 3 years after obtaining an investment registration certificate or written approval of investment policy.
b. Investment projects in industries or sectors with special investment incentives
For this type of investment project, the following conditions apply regarding eligible sectors, investment capital, and investment duration:
- The investment project must belong to a specially favored sector. The list of these sectors is specified in the annex to Decree No. 31/2021/ND-CP, which guides the implementation of the 2020 Investment Law. Some familiar sectors include: renewable energy production, clean energy, salt production, marine rescue services, and the construction of social housing or resettlement housing, among others;
- The project must have a total investment capital of at least VND 30,000 billion, with a minimum of VND 10,000 billion disbursed;
- The investment period must be 3 years from the date of issuance of the Investment Registration Certificate or approval of the investment policy.
Thus, investment projects that fall under one of the two categories above and meet all the required conditions will be considered by the competent authorities for approval to apply special investment support.
4.2. Special incentive level and duration
Article 3, Clause 20 of the Investment Law stipulates:
“The level and duration of application of special incentives must comply with the Law on Enterprise Income Tax and the land law.”
Accordingly, Point a, Clause 6, Article 20 of Decree No. 31/2021/ND-CP stipulates:
“The level of incentives, the duration of applying special incentives for corporate income tax, land lease, and water surface lease shall be in accordance with the provisions of the Corporate Income Tax Law and the land law.”
The level of incentives and the duration of application shall be decided by the Prime Minister. However, the following must be ensured:
- Tax rate incentives: The tax rate should not be reduced by more than 50% compared to the standard preferential tax rate;
- Duration of applying preferential tax rates: The duration cannot exceed 1.5 times the standard preferential tax rate period. It may be extended for up to 15 years but must not exceed the investment project’s duration.
Note that investors proposing special incentives must commit to meeting the conditions stated above, as well as any other conditions specified in the Investment Registration Certificate, the decision to approve the investment policy, or written agreements with competent state authorities.
5. Cases where special investment incentives and support do not apply
Special investment incentives and support do not apply to the following cases as listed in Clause 5, Article 20 of the Investment Law:
- Investment projects that have been granted an Investment Certificate, Investment Registration Certificate, or an investment policy decision before January 1, 2021 — the date the 2020 Investment Law came into effect;
- Mining projects;
- Projects producing and trading goods and services subject to excise tax (except for investment projects in the production of automobiles, aircraft, or yachts);
- Projects for the construction of commercial housing.
Through these investment support mechanisms, the Vietnamese government seeks to foster growth in high-tech sectors, promote sustainable development, and attract significant capital into key industries. However, the eligibility criteria and procedures are carefully defined to ensure that support is allocated effectively to projects aligned with national development goals.
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