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Tax incentives in Vietnam

Economic development is always one of the core issues that lay the foundation for a country, and Vietnam is no exception to that trend. The State increasingly stimulates and encourages economic growth, creating motivation for domestic and foreign investors to participate in the country’s economic market. The most obvious manifestation is shown through regulations related to incentives in general or regulations on tax incentives in particular. In the following article, Viet An Law will summarize regulations on industries or business lines that receive tax incentives in Vietnam according to current law.

tax accounting

Legal basis

  • Law on Investment 2020;
  • Decree 31/2021/ND-CP details and guides the implementation of the Investment Law 2020.

What are tax incentives?

Pursuant to the provisions of the Enterprise Law 2020, tax incentives are an aspect of a country’s investment incentives, designed to encourage or encourage a specific economic activity by reducing tax payments to a company in the above country.

Pursuant to the provisions of Clause 1, Article 15 of the Investment Law 2020, regulations on investment incentives include:

  • Corporate income tax incentives, including applying corporate income tax rates lower than normal tax rates for a term or the entire duration of investment project implementation; Tax exemption, tax reduction, and other incentives according to the provisions of the law on corporate income tax;
  • Exemption from import tax for goods imported to create fixed assets; raw materials, supplies, and components imported for production according to the provisions of the law on export tax and import tax;
  • Exemption or reduction of land use fees, land rent, land use tax;
  • Accelerated depreciation increases deductible expenses when calculating taxable income.

Thus, tax incentives are considered a form of investment incentives under State regulations.

How are the procedures for applying tax incentives implemented?

Under the provisions of Article 17 of the Investment Law 2020 guided by Article 23 of Decree 31/2021/ND-CP regulating procedures for applying tax incentives as follows:

  • Decision approving investment policies, Investment registration certificate, or Decision approving investors stipulating the form, basis, and conditions for applying investment incentives according to the provisions of Articles 15 and 16 of Investment Law and Article 19 of Decree 31/2021/ND-CP.
  • Based on the investment incentive content in the Investment Policy Approval Decision, Investment Registration Certificate, and Investor Approval Decision, the investor shall carry out procedures to enjoy investment incentives at the agency applied investment incentives corresponding to each type of incentive.
  • Basis for applying investment incentives to several enterprises and investment projects specified in Clause 5, Article 19 of Decree 31/2021/ND-CP.
  • For investment projects not falling into the cases specified in Clauses 2 and 3 of this Article, investors shall base on the subjects enjoying investment incentives specified in Article 19 of Decree 31/2021/ND-CP and relevant legal provisions to self-determine investment incentives and carry out procedures for enjoying investment incentives at the agency applying investment incentives corresponding to each type of incentive.

Regulations on the list of business lines eligible for tax incentives

Pursuant to Clause 1, Article 16 of the Investment Law 2020, regulations on industries eligible for investment incentives are as follows:

No Business lines Note
1. High-tech activities, high-tech supporting industrial products; research and development activities; produce products formed from scientific and technological results according to the provisions of law on science and technology. Businesses will be charged a preferential tax rate of 10% for 15 years. Tax exemption for 4 years, 50% reduction of tax payable for the next 9 years.
2. Producing new materials, new energy, clean energy, renewable energy; produce products with added value of 30% or more, energy-saving products  
3. Producing electronic products, key mechanical products, agricultural machines, cars, auto parts; shipbuilding  
4. Manufacturing products on the List of supporting industrial products prioritized for development The list of supporting industrial products prioritized for development includes 6 industry groups:

Textile and garment industry

Leather and shoe industry

Electronics and information technology industry

Automobile manufacturing and assembly industry

Mechanical manufacturing industry

Support products for the high-tech industry

5. Producing information technology products, software, and digital content. Preferential products must be provided by Vietnamese individuals, organizations, and businesses Production standards implemented by Vietnamese organizations and enterprises must have a Certificate of conformity to ISO 9001 management system standards or ISO/IEC 27001 standards issued by a registered certification organization or equivalent;
6. Cultivation and processing of agricultural, forestry, and aquatic products; planting and protecting forests; making salt; seafood exploitation and fisheries logistics services; production of plant varieties, animal breeds, and biotechnology products  
7. Collect, treat, recycle, or reuse waste Corporate income tax incentives are applied to businesses’ income from implementing investment projects such as: collecting, transporting, and treating concentrated ordinary solid waste; taking measures to treat and renovate polluted environmental areas in public areas; Responding to and handling oil spills, chemical incidents and other environmental incidents
8. Investment in the development, operation, and management of infrastructure projects; development of public passenger transport in urban areas  
9. Preschool education, general education, vocational education, university education  
10. Medical examination and treatment; production of drugs, medicinal ingredients, and drug preservation; Scientific research on preparation technology and biotechnology to produce new drugs; medical equipment production  
11. Invest in facilities for practicing and competing in physical education and sports for people with disabilities or professionals; protect and promote cultural heritage values  
12. Invest in centers for geriatrics, psychiatry, and treatment of patients infected with Agent Orange; Care centers for the elderly, people with disabilities, orphans, and homeless children  
13. People’s credit funds, microfinance institutions  
14. Producing goods, providing services, creating or participating in value chains or industry clusters  

In addition, industries eligible for investment incentives are also detailed in Appendix II of Decree 31/2021/ND-CP. The Appendix is the specification of the industries specified in Clause 1, Article 16 of the Investment Law 2020, divided into 2 groups of industries: special incentives and investment incentives, and at the same time clarifies the special industries in each group.

Regulations on adjusting tax incentives

  • Investment projects that meet the conditions to receive additional investment incentives will receive investment incentives for the remaining incentive period;
  • If the time of an investment project does not meet the conditions for investment incentives, investors will not be able to enjoy investment incentives because they do not meet the conditions for investment incentives.
  • Investors are not entitled to incentives according to the provisions of the Investment Registration Certificate and Investment Policy Approval Decision, the investment project meets the conditions for other investment incentives, the investor will enjoy incentives according to those conditions;

If you need advice or learn more about industries eligible for tax incentives in Vietnam, please contact Viet An Law Firm for the best support.

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