Standard investment incentives offered to foreign investors and domestic businesses operating in Vietnam include reduced corporate tax rates, tax-free periods or tax reductions during the start-up phase, land-rent reductions and import-duty exemptions. 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:
i) CIT at 10% for 15 years:
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 11th 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”).
ii) 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.
iii) 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”).
iv) CIT at 20% for 10 years
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 2 to 4 years and a 50% reduction in CIT between 4 to 9 years subsequently. Specifically:
i) 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.
ii) 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 4 years and are entitled to a 50% reduction of the amount of CIT payable for a period of 5 subsequent years.
iii) 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 2 years and are entitled to a 50% reduction of the amount of CIT payable for a period of 4 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 field 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:
i) Goods temporarily imported, then re-exported, for exhibition purposes if they meet certain requirements
ii) 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.)
iii) Certain goods imported by BOT enterprises and their contractors for carrying out BOT, BTO, BT projects
iv) Certain goods imported for oil and gas activities
v) Goods temporarily imported (and then re-exported) for carrying out ODA projects
vi) Goods (i.e. material, semi-finished products) imported for implementing export processing contract with foreign parties, etc.
