Tax Incentive Policies for FDI Companies in Vietnam

Foreign direct investment is important in economic development in most countries, including Vietnam. The state has used many preferential policies to attract businesses with foreign direct investment (FDI), including tax incentive policies. In the article below, Viet An Law will provide information about tax incentive policies for FDI companies in Vietnam according to the law.

What is the FDI Company?

FDI stands for Foreign Direct Investment. Accordingly, Foreign Direct Investment (FDI) is a form of investment that foreign businesses, organizations, or individuals make by purchasing shares, establishing subsidiaries, joint ventures, or opening branches in another country.

According to Clause 22, Article 3 of the Investment Law 2020, economic organizations with foreign investment capital are economic organizations with foreign investors as members or shareholders. Thus, it can be simply understood that an FDI Company is an economic organization with foreign direct investment capital.

Conditions for enjoying tax incentives policies in Vietnam

According to Clause 2, Article 15 of the Investment Law 2020, FDI companies that want to enjoy tax incentives must meet one of the following conditions:

• Having an investment project belonging to preferential industries, professions, and areas;
• Investment projects with capital of VND 6000 billion or more, satisfying at least one of the following conditions:
• Total revenue reaches at least 10.000 billion VND/year within 3 years at the latest from the year of revenue;
• Employs over 3000 workers.
• Social housing building investment projects or investment projects in remote areas that employ 500 or more workers, or investment projects use disabled workers;
• High-tech businesses, scientific and technology organizations, science and technology enterprises, or technology-transfer software;
• Creative new investment projects, research and development resources, and creativity centers;
• Investing in small-medium business distribution networks.

Tax incentive policies for FDI companies in Vietnam

According to Clause 1, Article 15 of the Investment Law 2020, FDI companies practicing investment projects in Vietnam that meet the conditions will get tax incentives policies:

• Incentive for corporate income tax rates;
• Tax exemption and reduction of corporate income tax;
• Exemption from import tax;
• Exemption or reduction of land use fees, land rent, and land use lease.

Incentive for corporate income tax rates

According to Article 19 of Circular 78/2014/TT-BTC regulating preferential tax rates for FDI companies, specifically:

In case the tax rate of 10% applies for 15 years

• Enterprise income from implementing new investment projects in areas with extremely difficult socio-economic conditions, economic zones, and high-tech zones (including concentrated information technology zones);
• Enterprise income from implementing new investment projects in the fields of Scientific research and technology development, high technology application, technology incubation, venture capital to develop high technology, investing in public infrastructure systems, software production, production of rare materials, renewable energy production…; developing biotechnology;
• Enterprise income from implementing new investment projects in the field of environmental protection;
• Enterprise income from implementing new investment projects in the manufacturing sector with a minimum investment capital of VND 6000 billion, disbursed within no more than 03 years from the time the first investment is allowed and meets 1 of 2 criteria:
• Have a minimum total revenue of 10.000 billion VND/year no later than 03 years from the year of revenue;
• Regularly employ more than 3.000 workers no later than 03 years from the year of revenue;
• Enterprises implementing investment projects in the manufacturing sector with a minimum investment capital of VND 12,000 billion must have their technology appraised according to the Laws on High Technology and Science and Technology. The total registered investment capital should be disbursed within 5 years from the date of investment permission;
• Enterprise income from implementing new investment projects to produce products on the list of prioritized supporting industrial products that satisfy at least one of the following criteria:
• Industrial products supporting high technology;
• Industrial products for the textile, garment, leather, electronics, automobile, and mechanical industries must meet EU technical standards or equivalent as of 01/01/2015.

In case the tax rate of 10% throughout the operational period

• The income of enterprises from socialization activities in education, training, healthcare, culture, sports, and environmental services, as well as judicial expertise.
• The income from the publishing activities of publishing houses;
• The income from the print media activities of press agencies;
• The income of enterprises from implementing investment projects in social housing for sale, lease, or lease-purchase;
• The income of enterprises from planting, caring for, and protecting forests; aquaculture and agriculture in economically and socially disadvantaged areas; producing, breeding, and cultivating plant and animal varieties; producing, exploiting, and refining salt; investing in the preservation of agricultural products after harvest; and preserving agricultural, aquatic products, and food;
• The income of cooperatives in agriculture, forestry, fisheries, and salt production outside of disadvantaged areas;

In case the tax rate of 15%

The income of enterprises engaged in cultivation, animal husbandry, and processing in the fields of agriculture and fisheries in areas that are not classified as economically and socially disadvantaged or particularly difficult.

In case the tax rate of 17% for 10 years

• The income of enterprises from implementing new investment projects in areas with difficult economic and social conditions;
• The income of enterprises from implementing new investment projects includes producing high-quality steel, manufacturing energy-saving products, producing machinery and equipment for agriculture, forestry, fisheries, and salt production, manufacturing irrigation equipment, producing and refining animal feed for livestock, poultry, and aquatic products, and developing traditional industries.

In case the tax rate of 17% throughout the operational period

This applies to people’s credit funds, cooperative banks, and microfinance institutions.

Tax exemptions and reductions for corporate income tax

According to Article 20 of Circular 78/2014/TT-BTC, the duration of tax exemptions and reductions for corporate income tax is specified as follows:

Case of 4 years of tax exemption and a 50% reduction in the tax payable for the next 9 years

• The income of enterprises from implementing new investment projects that are eligible for a 10% tax rate for 15 years as stipulated in Clause 1 of Circular 78/2014/TT-BTC;
• The income of enterprises from implementing new investment projects in the field of socialization in economically and socially disadvantaged or particularly difficult areas.

Case of 4 years of tax exemption and a 50% reduction in the tax payable for the next 5 years

The income of enterprises from implementing new investment projects in the field of socialization in areas not listed as economically and socially disadvantaged or particularly difficult.

Case of 2 years of tax exemption and a 50% reduction in the tax for the next 4 years

• Income from implementing new investment projects that benefit from a 17% tax rate for 10 years as stipulated in Clause 4 of Circular 78/2014/TT-BTC;
• The income of enterprises from implementing new investment projects in industrial zones.

Exemption from Import Tax

• According to point b, clause 1, Article 15 of the Investment Law 2020, the exemption from import tax applies to imported goods intended for the creation of fixed assets; raw materials, supplies, and components imported for production under the regulations of the law on export and import taxes.

Exemptions and Reductions for Land Use Fees, Land Rent, and Land Use Tax

Cases of Exemption, reduction for Land Use Right Fees

According to Article 5 of Decree 57/2018/ND-CP, the cases of exemption and reduction of land use fees for enterprises with agricultural projects that are allocated land by the state or have their land use purpose changed for housing for workers are as follows:

• Exemption from the fee for changing land use purpose for the area of land converted to build housing for workers working on the project;
• Exemption from land use fees for the area of land converted to build housing for workers after the conversion.

Cases of Exemption, reduction for Non-Agricultural Land Use Tax

According to Articles 10 and 11 of Circular 153/2011/TT-BTC, the cases of exemption from non-agricultural land use tax are:

• Land of preferential investment projects and enterprises using over 50% of labor from veterans and disabled individuals…;
• Land of facilities implementing socialization in the fields of education, vocational training, healthcare, culture, sports, and the environment;
• Land of investment projects in preferential investment fields, areas with difficult socio-economic conditions, and enterprises using 20%-50% of labor from veterans and disabled individuals will have a 50% reduction in land use tax.

The above is all the information regarding tax incentive policies for FDI companies in Vietnam. If you are interested in establishing a company with foreign investment or require accounting and tax services for FDI companies, please contact Viet An Law for the best consultation and support!

Update: 08/2024