1. What are forms of investment incentives?
Investment incentives are provided in the following forms:
1.1. lower tax rates for whole duration of investment term or part thereof; exemption from and reduction of tax rates,
1.2. import duty exemption for fixed assets, and
1.3. reduction/exemption of land rental.
2. Which projects are eligible for investment incentives?
2.1. Projects of investment shall be eligible for investment incentives if the projects invest in the following business lines:
a) high-tech activities, high-tech ancillary products; research and development,
b) production of new materials, new energy, clean energy, renewable energy; productions of products with at least 30% value added; energy-saving products,
c) production of key electronic, mechanical products, agricultural machinery, cars, car parts; shipbuilding,
d) production of ancillary products serving textile and garment industry, leather and footwear industry,
e) production of IT products, software products, digital contents,
f) cultivation, processing of agriculture products, forestry products, aquaculture products; a forestation and forest protection; salt production; fishing and ancillary fishing services; production of plant varieties, animal breads, and biotechnology products,
g) collection, treatment, recycling of waste,
h) investment in development, operation, management of infrastructural works; development of public passenger transportation in urban areas,
) preschool education, compulsory education, vocational education,
k) medical examination and treatment; production of medicines, medicine ingredients, essential medicines, medicines for prevention and treatment of sexually transmitted diseases, vaccines, biological, herbal medicines, orient medicines; scientific research into preparation technology and/or biotechnology serving creation of new medicines,
l) investment in sport facilities for the disabled or professional athletes; protection and development of cultural heritage;
m) investment in geriatric centers, mental health centers, treatment for agent orange patients; care centers for the elderly, the disabled, orphans, street children; and
n) people's credit funds, microfinance institutions.
2.2. Projects of investment shall be eligible for investment incentives if the projects invest in the following locations:
a) administrative divisions in disadvantaged area or extremely disadvantaged areas; and
b) industrial parks, export-processing zones, hi-tech zones, economic zones.
2.3. Any project in which the capital investment is VND 6,000 billion or more, and the minimum amount of at least VND 6,000 billion is disbursed within 03 years from the day on which the investment registration certificate or decision on investment policies is issued.
2.4. Any investment project in a rural area that employs at least 500 workers.
2.5. High-tech companies, science and technology companies, and science and technology organizations.
Tax incentives and criteria for eligibility to tax holidays and reduction are set out in the CIT regulations, the tax incentives are granted to new investment projects based on regulated encouraged sectors, encouraged locations and the size of the project.
- The sectors which are encouraged by the Vietnamese Government include education, health care, sport/culture, high technology, environmental protection, scientific research, infrastructure, software production and renewable energy.
- Locations which are encouraged include qualifying economic and high-tech zones, certain industrial zones and difficult socio-economic areas.
Business expansion projects which meet certain conditions are also entitled to CIT incentives. New investment projects and business expansion projects do not include projects established as the result of certain acquisitions or reorganizations.
Preferential CIT Rates
10% CIT rate shall be applied:
- within 15 years for new investment projects in an area with especially difficult socio-economic conditions, in economic zones and in high-tech zones; and to new investment projects in the sectors of high technology, scientific research and technological development, investment in development of especially important infrastructure facilities of the State, and production of software products; the products support the high technology sector; the products support the garment, textile and footwear, IT, automobiles assembly, mechanics sector and are not produced domestically as at 1 January 2015, or if produced domestically, they meet the quality standards of the EU or equivalent.
- for the entire operational period is applicable to enterprises operating in the sectors of education and training, occupational training, health care, culture, sport and the environment;
15% CIT rate shall be applied: within 10 years applied to: income of the company from farming, breeding, processing of agriculture and aquaculture products in an area other than disadvantaged areas or particularly disadvantaged area
17% CIT rate shall be applied:
- for the first 10 years applies to new investment projects in areas with difficult socio-economic conditions;
- for the entire operational period is applicable to agricultural service co-operatives and to people's credit funds.
Large manufacturing projects with investment capital of VND6,000 billion or more disbursed within 3 years of being licensed (excluding those related to the manufacture of products subject to special sales tax or those exploiting mineral resources) can also qualify for CIT incentives if the projects meet either of the following criteria:
) Minimum revenue of VND10,000 billion/annum for at least 3 years after the first year of operations; or
ii) Headcount of more than 3,000 at least 3 years after the first year of operations.
From 2015, large manufacturing projects are defined to include projects with investment capital of VND12,000 billion or more, disbursed within 5 years of being licensed (excluding those related to the manufacture of products subject to special sales tax or those exploiting mineral resources) and using technologies appraised in accordance with relevant laws.
Additional tax reductions may be available for companies engaging in manufacturing, construction and transportation activities which employ many female staff or employ ethnic minorities.
Tax incentives which are available for investment encouraged sectors do not apply to other income, which is broadly defined.
INCENTIVES ON IMPORT TAX
Import duty exemptions (as regulated in Decree 87/2010/ND-CP dated 13th August 2010 of the Government detailing a number of articles of the Law on import and export duties)
Exemption from import duty is granted to:
a) Goods temporarily imported, then re-exported, for exhibition purposes if they meet certain requirements
b) Goods imported to form fixed assets of projects which are included in encouraged projects in the Investment Law, including: machinery and equipment; certain means of transportation and construction materials (which cannot be produced in Vietnam; raw material, spare parts, etc.)
c) Plant varieties and animal breeds permitted to be imported for the execution of investment projects in the sectors of agriculture, forestry and fishery.
e) Certain goods imported by BOT enterprises and their contractors for carrying out BOT, BTO, BT projects
f) Certain goods imported for oil and gas activities
g) Goods temporarily imported (and then re-exported) for carrying out ODA projects
h) Goods ( material, semi-finished products) imported for implementing export processing contract with foreign parties, etc.
) Raw materials and supplies imported to directly serve the production of software products, which cannot be domestically produced yet, are exempt from import duty.
k) Goods imported for direct use in scientific research and technological development, including machinery, equipment, spare parts, supplies and means of transport which cannot be domestically produced yet, technologies which cannot be domestically produced yet; scientific documents, books and newspapers and journals and electronic scientific and technological information sources are exempt from import duty.
Raw materials, supplies and accessories which cannot be domestically produced yet and are imported for production activities of investment projects in domains in which investment is specially encouraged or in geographical areas with extremely difficult socio-economic conditions are exempt from import duty for 5 (five) years after the date of commencement of manufacture.
INCENTIVES ON LAND RENTAL
The table below the incentives on Land Rental (as regulated in Decree 46/2014/ND-CP dated 15 May 2014 of the Government on Regulations on collection of land and water surface rental fees):
In the list of investment encouragement sectors; new business development bases
Invest in areas of difficult socio-economic conditions
Invest in areas of difficult socio-economic conditions; in specially investment encouragement sectors; projects in the list of investment encouragement sectors investing in difficult socio-economic areas
Projects in the list of specially investment encouragement sectors investing in areas of difficult socio-economic conditions or projects in the list of investment encouragement sectors investing in the areas of difficult socio-economic conditions
Projects in the list of specially investment encouragement sectors investing in areas of difficult socio-economic conditions
Whole project life