Abstract: Foreign-invested projects play a big part in the host country’s economic growth as they often generate great profits. Therefore, most countries have investment incentive policies to attract investors’ attention. Many investment incentive policies have been also introduced by The State of Vietnam which make Vietnam an attractive destination for foreign investors.
Keywords: Investment incentive policies; foreign-invested projects
Objects eligible for investment incentives
According to The 2014 Law on Investment and Decree No. 31/2021/ND-CP elaborates some articles of the Law on Investment, Objects eligible for investment incentives include:
- Investment projects in business lines eligible for investment incentives or business lines eligible for special investment incentives specified in Appendix II of this Decree;
- Investment projects located in disadvantaged or extremely disadvantaged areas specified in Appendix III of this Decree;
- Any investment project whose capital is at least VND 6,000 billion eligible for investment incentives if it meets the following conditions:
+ At least VND 6,000 billion is disbursed within 03 years from the issuance date of the investment registration certificate or the decision on approval for both investment guidelines and investor or decision on investor approval;
+ The total revenue is at least VND 10,000 billion per year within 03 years from the year in which the revenue is earned or the project has an annual average number of at least 3,000 employees in accordance with regulations of law on labor 03 years within 03 years from the year in which the revenue is earned.
- Projects on investment in social housing construction; investment projects located in rural areas and employing at least 500 employees; investment projects that employ persons with disabilities in accordance with regulations of law on persons with disabilities;
- Hi-tech enterprises, science and technology enterprises and science and technology organizations; projects involving the transfer of technologies on the List of technologies the transfer of which is encouraged in accordance with regulations of the Law on Technology Transfer, science and technology enterprise incubators prescribed by the Law on High Technologies and Law on Science and Technology; enterprises manufacturing and providing technologies, equipment, products and services with a view to satisfaction of environment protection requirements prescribed by the Law on Environment Protection;
- Start-up projects, national innovation centers and research and development centers;
- Investment in business in small and medium-sized enterprises’ product distribution chain; investment in the business in technical establishments supporting small and medium-sized enterprises, small and medium-sized enterprise incubators; investment in the business in co-working spaces serving small and medium-sized enterprises and startups prescribed by the Law on Small and Medium-Sized Enterprises.
Forms of investment incentives
Corporate income tax incentives
– The applicable corporate income tax rate is lower than the normal tax rate for a certain period of time or throughout the investment project execution.
– Exemption from and reduction of tax and other incentives prescribed by the Law on Corporate Income Tax including:
- New established enterprises that meet conditions for investment incentives are entitled to the tax rate of 10% within 15 years from the first year when the investment project has taxable income, income tax exemption for 4 years and a 50% reduction in corporate income tax within the next 09 years;
- Enterprises have new investment projects in the field of socialization whose locations are not on the List of geographical areas with difficult or extremely difficult socio-economic conditions specified in the List of preferential geographical areas investment regulations under Appendix III Decree No. 31/2021/ND-CP are entitled to income tax exemption for 4 years and a 50% reduction in corporate income tax within the next 05 years;
- Enterprises that have new investment projects in areas with difficult socio-economic conditions or investment projects in industrial parks (except for industrial parks located in areas with favorable socio-economic conditions) are entitled to income tax exemption for 2 years and a 50% reduction in corporate income tax within the next 04 years.
Exemption from import tax on goods imported
This incentive is for the purpose of forming fixed assets; raw materials, supplies and components for manufacturing purposes in accordance with regulations of law on import and export tax.
Exemption from and reduction of land levy and land rents
According to Decree No. 57/2018/ND-CP, exemption from and reduction of land levy and land rents are applied to the following situations:
– Exemption or reduction of land levy: An enterprise that has an agriculture project having a land area allocated by the Government or be permitted to change the use purpose of an existing land area for building house for workers as prescribed in Article 55 of the Law on land is exempted from payment of fees for changing land use purpose and the land levy of that land area after the change of use purpose.
– Exemption or reduction of land rental:
- If an enterprise that has an agriculture project eligible for investment incentives or an encouraged agriculture project leases land and/or water surface from the Government, land rental and/or water surface rental shall be calculated according to preferential land prices announced by the Provincial-level People’s Committee and fixed for at least 05 years.
- An enterprise that has an agriculture project eligible for special investment incentives shall be exempted from payment of land rental and/or water surface rental from the date on which it has land and/or water surface leased by the Government.
- An enterprise that has an agriculture project eligible for investment incentives shall be exempted from payment of land rental and/or water surface rental for the first fifteen years from the date on which it has land and/or water surface leased by the Government and shall have 50% of land rental and/or water surface rental reduced in subsequent 07 years.
- An enterprise that has an encouraged agriculture project shall be exempted from payment of land rental and/or water surface rental for the first eleven years from the date on which it has land and/or water surface leased by the Government and shall have 50% of land rental and/or water surface rental reduced in subsequent 05 years.
- An enterprise having an agriculture project has land leased by the Government to build houses for workers or to use for non-farm purposes (construction of warehouse, workshop, drying ground, road or planting of trees), or changes the use purpose of an existing land area to serve the purposes specified in this Clause, shall be exempted from payment of land rental.
- A new small and medium-sized agricultural enterprise shall be exempted from payment of land rental and/or water surface rental for the first five years from the date on which the project officially starts its operation and shall have 50% of land rental and/or water surface rental reduced in subsequent 10 years.
Accelerated depreciation, increasing the deductible expenses upon calculation of taxable income
Enterprises are allowed to accelerate depreciation in some specific cases. Accelerated depreciation is not more than twice that of straight-line method, however, enterprises must ensure to make a profit after accelerated depreciation. Enterprises can take advantage of accelerated depreciation to invest in technological innovation to serve their business activities.
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