Projects eligible for investment incentives are those that fall into the sectors of investment incentives and/or located in the geographical areas of investment incentives. Generally, the following incentives are available to investors:
Tax incentives
Incentives on Corporate Income Tax
With effect from 1 January 2009, the Law on CIT introduces a standard CIT rate of 25% for both local enterprises and FICs.
Preferential rates
Other than the standard rate, preferential rates of 10% and 20% apply to a number of investment projects which satisfy certain conditions such as investment in certain fields of business and/or encouraged geographical locations.
Specifically:
The preferential tax rate applies to newly-established FICs from investment projects in areas with specially difficult socio-economic conditions as listed in the Appendix issued with Decree No.124/2008/ND-CP dated 11 December 2008 (“Decree 124”) and in EZs and HTZs or newly-established FICs from investment projects in the sectors of (i) high-tech; scientific research and technological development; (ii) investment in development of water plants, power plants and water supply systems; in bridges, roads and railways; in airports, seaports and river-ports; in air fields, stations and other specially important infrastructure works as decided by the Prime Minister of the Government; and (iii) computer software products (the “Sectors”).
- CIT at 10% for up to 30 years
In the case of newly-established FICs from investment projects in the Sectors which are on a large scale, with high-tech or new tech and which have a special need to attract investment, the duration of applicability of the preferential tax rate may be extended but the total duration shall not exceed 30 years.
- CIT at 10% for the whole operational period
The preferential tax rate applies during the whole operational period to that part of income of any enterprise operating in the sectors of education and training, occupational or vocational training, medical health care, culture, sports and the environment (“Socialization Sectors”).
The preferential tax rate applies to newly-established FICs from investment projects in areas with difficult socio-economic conditions as listed in the Appendix of Decree 124.
The duration of applicability of the preferential tax rates is calculated consecutively from the first year in which the enterprise has turnover from the activity or operation entitled to the preferential tax rate. After the stated preferential tax rate expires, the normal CIT of 25% will be applicable for the remaining years of the relevant project.
With respect to oil and gas or rare and precious mineral exploitation projects, the CIT rate, subject to various conditions, ranges between 32% and 50%. A specific rate for these types of projects will be determined by the Prime Minister at the proposal of MOF.
CIT exemptions and reductions
In addition to preferential CIT rates, FICs and foreign parties to BCCs may enjoy CIT exemption between 02 to 04 years and a 50% reduction in CIT between 04 to 09 years subsequently. Specifically:
- Newly-established FICs from investment projects in (i) areas with specially difficult socio-economic conditions as listed in the Appendix of Decree 124, (ii) EZs and HTZs, and (iii) the Sectors are exempted from CIT for a period of 04 years and are entitled to a 50% reduction of the amount of CIT payable for a period of 09 subsequent years.
- Newly-established FICs in the Socialization Sectors operating in areas other than areas with difficult or especially difficult socio-economic conditions as listed in the Appendix of Decree 124 are exempted from CIT for a period of 04 years and are entitled to a 50% reduction of the amount of CIT payable for a period of 05 subsequent years.
- Newly-established FICs from investment projects in areas with difficult socio-economic conditions as listed in the Appendix of Decree 124 are exempted from CIT for a period of 02 years and are entitled to a 50% reduction of the amount of CIT payable for a period of 04 subsequent years.
The duration of tax exemption and reduction is calculated consecutively from the first year in which the FIC has taxable income from an investment project. If an FIC does not have taxable income in the first three years as from the first year in which it has turnover from an investment project, then the duration of tax exemption and reduction is calculated from the fourth year.
The table below summarises the CIT preferential rates, exemptions and reductions:
|
CIT Rate
|
Criteria
|
Period
applicable
|
CIT exemption*
|
50% CIT reduction
when CIT exemption period expired*
|
|
10%
|
Newly established enterprises in:
|
|
4 years
|
9 years
(5 years for newly-established enterprises in the Socialization Sectors operating in areas other than areas with difficult or specially difficult socio-economic conditions)
|
|
Locations: with specially difficult socio-economic conditions; Economic Zones, High Tech Zone established under PM’s decision
|
15 years from the first year of revenue generation
|
|
Sectors: high technology, scientific research and technology development, investment in development of specially important
infrastructure facilities of the State; production of software products.
|
15 years from the first year of revenue generation (maximum 30 years at PM’s approval)
|
|
Enterprise operating in the field of socialization (education – training, occupational training, health care, culture, port and the environment)
|
During the whole operation period
|
|
20%
|
Newly established enterprise in areas of difficult socio-economic conditions
|
10 years from the first year of revenue generation
|
2 years
|
4 years
|
|
Agricultural service cooperatives and people’s credit fund
|
During the whole operation period
|
N/A
|
N/A
|
|
25%
|
Standard rate for all projects except for projects in the fields of oil and gas or rare and precious mineral exploitation, which are subject to 32-50% CIT rates
|
N/A
|
N/A
|
N/A
|
|
Certain expenditures of enterprises in manufacturing, construction and transportation for female or ethnic minority labor are deducted from CIT
|
|
* The application of tax exemption/ reduction from the first profitable year. 3 year limit is introduced.
|
Incentives on Import Tax
Import duty exemptions
Exemption from import duty is granted for:
- Goods temporarily imported, then re-exported, for exhibition purposes if they meet certain requirements
- 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.)
- Certain goods imported by BOT enterprises and their contractors for carrying out BOT, BTO, BT projects
- Certain goods imported for oil and gas activities
- Goods temporarily imported (and then re-exported) for carrying out ODA projects
- Goods (i.e. material, semi-finished products) imported for implementing export processing contract with foreign parties, etc.
Incentives on Land Rental
The table below summarises the incentives on Land Rental:
Projects |
Exemption
|
|
In the list of investment encouragement sectors; new business development bases
|
3 yrs
|
|
Invest in areas of difficult socio-economic conditions
|
7 yrs
|
|
Invest in areas of specially difficult socio-economic conditions; in specially investment encouragement sectors; projects in the list of investment encouragement sectors investing in difficult socio-economic areas
|
11 yrs
|
|
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 specially difficult socio-economic conditions
|
15 yrs
|
Sectoral investment incentives
BOT projects
Incentives offered to BOT projects is regulated in the Decree 108/2009/ND-CP dated 27 November 2009 of the Government on investment under BOT/BTO/BT projects and Decree 24/2011/ND-CP dated 5 April 2011 on the amendment of Decree 108/2009/ND-CP.
The Government encourages the implementation of projects to build, operate and manage new infrastructure facilities or to improve, expand, modernize, operate and manage existing works in the following domains:
- Roads, road bridges, road tunnels and ferry landings;
- Railways, railway bridges and railway tunnels;
- Airports, seaports and river ports;
- Clean water supply systems; water drainage systems; and wastewater and waste collection and treatment systems;
- Power plants and power transmission lines;
- Works in health care, education and training, sport facilities, working offices
vii) Other infrastructure facilities as decided by the Prime Minister.
The investment incentives given to BOT projects in the above fields include the following:
- Reduced Corporate Income Tax (CIT) rates of 10% or 20% relative to the statutory rate of 25%
- Tax holiday for 4 years from the first profit-making year and a 50% reduction in the applicable rate for the following 9 years
- Exemption from certain import and export duties; and
- Exemption from paying land use fees
Projects located in economic zones
Corporate Income Tax (CIT)
Type of project |
Corporate Income Tax (CIT)
|
Remittance Tax
|
|
Tax rate
|
Tax holiday
|
|
Projects inside EZs
|
10% within the first 15 years since the commencement of production 25% afterwards
|
- Tax holiday within 4 years since earning profits
- 50% reduction within 9 years afterwards
|
None
|
|
High-tech projects inside EZs
|
10% within maximum of 30 years
|
|
Socialized projects inside EZs
|
10% applied to the whole duration of a project
|
Other taxes
Import Tax |
Value Added Tax (VAT) and Excise Tax
|
Personal Income Tax
|
|
Raw materials and materials – not yet domestically produced for manufacturing in IPs and EPZs
|
Commodities to form fixed assets for all projects in IPs, EPZs and EZs.
|
Good imported into EPZs, processing enterprises
|
Means of public transportation including bus and electric tramcars in IPs and EPZs
|
Goods manufactured in imported to non-tariff area in EZs
|
Some cases
|
Experts and employees in EZs
|
|
Tax holiday within 5 years
|
Tax holiday for the whole duration of the project
|
VAT 0%
|
VAT 0%
|
Exemption from Excise Tax and VAT
|
Repay VAT
|
50% reduction
|
Government supports in IPs, EPZs, and EZs infrastructure development
- Compensation and site clearance for IP infrastructure development in selected areas of difficult socio-economic conditions
- Providing technical infrastructure “out of the fence” of IPs
- Providing technical infrastructure “to the fence” of functional zones of EZs.
- Compensation and site clearance for functional zones of Ezs and establishment of resettling areas for villagers whose land has been withdrawn by the Government
- Employees in Ezs shall rent houses (with land use right) inside the EZs
- One rental fee applied to both foreign and domestic investors
Government supports in house building for IP employees
- Exemption from land rental fees
- Enjoy corporate income tax, import tax, and other special investment incentives applied to List of special investment incentive sectors
- Preferential or soft loans.
Government supports in waste treatment plant construction
- Exemption from land rental fees
- Incentives of corporate income tax and export tax applied to specially investment incentive sectors
- State budget for water treatment plant construction allocated in selected areas of difficult socio-economic conditions
- Preferential or soft loans
- State budget for sewage treatment plant construction in functional zones of EZs.
Incentives for projects in high – technologies (Law on High technology)
(List of high technologies and hi-tech products prioritized for development - Prime Minister's Decision No. 49/ 2010/QD-TTg dated July 19, 2010)
- Hi-tech enterprises are entitled to the highest incentive level under the laws on Land, Corporate income tax, Value-added tax, Import duty and export duty;
- The State supports the building of information, transport, electricity and water infrastructure, executive offices and waste treatment systems in hi-tech parks or hi-tech application agricultural parks.
- Provincial-level People’s Committees shall, within the ambit of their powers and tasks, conduct land clearance and create favorable conditions for organizations and individuals to invest in hi-tech parks or hi-tech application agricultural parks.
- Eligible for fundings by the National Master plan on high technologies development
- Eligible for financial aids by Funds for science and technology development and other Funds for activities in R&D, human resources training and technology transfers.
Incentives for projects in supporting industries (Prime Minister’s decision No. 12/2011/QD-TTg dated February 24, 2011 on policies on development of a number of supporting industries)
Enterprises investing in supporting industries are entitled for these following incentives and assistance from the government:
- Market development support: Advertisement of their projects are posted on the official website of Ministry of Industry and Trade free of charge; financial support are offered for their trade and investment promotional expenses; facilitations are offered for their engagement in product and service supply chains.
- Infrastructure support: They are prioritized in terms of land allocation; have access to the infrastructures, public and other services in industrial clusters and industrial zones; and get support in labor recruitment and training; They shall enjoy incentives of land for production for SMEs (in accordance with Decree 56/2009/ND-CP) and incentives on land under the laws on high technology.
- Science & Technology and labor training support: They are considered for getting financial aid for part of the expenses of technology transfer, purchasing design copyright, softwares, hiring foreign experts, and human resources training
- Financial support: They are considered for getting part of the State’s credit for investment development; entitled to tax incentives in accordance with provisions of the Law on High Technology.
Supporting industries development: Projects with products on the List of supporting industry’s products with development priority will be given