Guide to investment incentives in Vietnam

Legal basis

• Law on investment 2020;
• Decree No.31/2021/ND-CP dated March 26, 2021, on the elaboration of some articles of the Law on Investment;
• Circular No.03/2021/TT-BKHDT dated April 09, 2021, on regulations for forms of documents and reports related to investment activities in Vietnam, investment from Vietnam to abroad, and investment promotion promulgated by the Ministry of Planning and Investment.

Forms of investment incentives (Clause 1, Article 15 of Law on Investment 2020)

- Corporate income tax incentives, including the application of a lower rate of corporate income tax 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.

- Exemption from import tax on goods imported to form 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;

- Accelerated depreciation, increasing the deductible expenses upon calculation of taxable income.

Entities eligible for investment incentives (Clause 2 Article 15 of Law on Investment 2020)

- Investment projects in business lines eligible for investment incentives specified in Clause 1 Article 16 of Law on investment 2020 (Appendix II of Decree No.31/2021/ND-CP);

- Investment projects in the areas eligible for investment incentives specified in Clause 2 Article 16 of Law on investment 2020 (Appendix III of Decree No.31/2021/ND-CP);

- Any investment project whose capital is at least VND 6,000 billion of which at least VND 6,000 billion of disbursed within 03 years from the issuance date of the investment registration certificate or the approval for investment guidelines and which satisfies any of the following criteria: 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 over 3,000 employees;

- Social housing construction projects; investment projects in rural areas and employ at least 500 employees; investment projects that employ persons with disabilities under regulations of law on persons with disabilities.

- Hi-technology enterprises, science, and technology enterprises and science and technology organizations; projects involving transfer of technologies under 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;

- Business investment in small and medium-sized enterprises’ product distribution chain; business investment in technical establishments supporting small and medium-sized enterprises, small and medium-sized enterprise incubators; business investment in coworking spaces serving small and medium-sized enterprises and startups prescribed by the Law on Small and Medium-Sized Enterprises.

Business lines eligible for investment incentives (Clause 1, Article 16 of  Law on Investment 2020)

- Hi-tech activities, hi-tech ancillary products, research, manufacturing and development of from science and technology products under regulations of law on science and technology;

- Manufacturing of new materials, extra energy, clean energy, renewable energy; manufacturing of products with an added value of 30% or more; energy-saving products;

- Manufacturing of key electronics, mechanical products, agricultural machinery, automobiles, automobile parts; shipbuilding;

- Manufacturing of products on the List of prioritized supporting products;

- Manufacturing of IT products, software products, digital contents;

- Breeding, growing and processing of agricultural products, forestry products, aquaculture products; afforestation and forest protection; salt production; fishing and fishing logistics services; production of plant varieties, animal breeds and biotechnology products;

- Collection, treatment, recycling or reuse of waste;

- Investment in development, operation, management of infrastructural works; development of public transportation in urban areas;

- Pre-school education, general education, vocational education, higher education;

- Medical examination and treatment; manufacturing of medicinal products and medicinal materials, storage of medicinal products; scientific research into preparation technology and biotechnology serving the creation of new medicinal products; manufacturing of medical equipment;

- Investment in sports facilities for the disabled or professional athletes; protection and promotion of the value of cultural heritage;

- Investment in geriatric centers, mental health centers, treatment for agent orange patients; care centers for the elderly, the disabled, orphans, street children;

- People's credit funds, microfinance institutions;

- Manufacturing of goods and provision of services for creating or taking part in value chains and industrial clusters.

Rules for applying investment incentives (Article 20 of Decree No.31/2021/ND-CP):

- The investment projects specified in Clause 3, Article 19 of  Decree No.31/2021/ND-CP are eligible for the same investment incentives as prescribed for investment projects in extremely disadvantaged areas.

- The investment projects located in rural areas employing at least 500 employees and projects employing persons with disabilities specified in Points b and c Clause 4, Article 19 of Decree No.31/2021/ND-CP are eligible for the same investment incentives as prescribed for investment projects in disadvantaged areas.

- Investment projects in business lines eligible for investment incentives in disadvantaged areas are eligible for the same investment incentives as prescribed for investment projects in extremely disadvantaged areas.

- The specific investment incentives for the investment projects mentioned in Clauses 1, 2, and 3, Article 20 of Decree No.31/2021/ND-CP shall be applied in accordance with regulations of law on tax, accounting, and land.

- Regarding an investment project that is eligible for various levels of investment incentive at the same time, the highest level shall apply.

- Special investment incentives and assistance for the investment projects prescribed in Clause 2 Article 20 of the Law on Investment 2020 shall be applied as follows:

• Level and duration of application of special investment incentives regarding corporate income tax and land and surface water rents shall comply with regulations of the Law on Corporate Income Tax and law on land;
• Special investment incentives and assistance shall be applied to the National Innovation Center established under the Prime Minister's decision and its affiliates located outside its headquarters;
• Any investor submitting a proposal for the application of special investment incentives must undertake to satisfy the conditions concerning business lines in which such investor invests, registered total investment capital, and duration of disbursement as specified in Points a and b Clause 2 Article 20 of the Law on Investment and other conditions written on the investment registration certificate, decision on approval for investment guidelines or written agreement with a competent authority under the Prime Minister’s Decision;
• The Prime Minister shall decide on the level and duration of application of special investment incentives according to the criteria concerning high technology, technology transfer, and Vietnamese enterprises joining domestic production chain and value for the investment projects in Clause 2 Article 20 of the Law on Investment 2020.

- Investment incentives shall be applied as follows in the case of full division, partial division, consolidation, merger, and conversion of type of a business organization (hereinafter referred to as “business organization re-organization”); full division, partial division, merger, and transfer of an investment project:

• Any business organization which is formed on the basis that it is re-organized or the investment project is transferred to the investor is entitled to inherit the investment incentives (if any) to which the investment project is entitled before the re-organization or transfer if it still satisfies the conditions for investment incentives;
• Any investment project which is formed on the basis of its full division or partial division and satisfies the conditions for receiving investment incentives is entitled to such investment incentives for the remaining incentive period before the full division or partial division;
• Any investment project which is formed on the basis of project merger shall continue to be entitled to the investment incentives according to the conditions for investment incentives applied to each project before the merger if it still satisfies such conditions. If the merged project satisfies conditions for different investment incentives, the investor is entitled to such investment incentives according to each different condition for the remaining incentive period.

Note: If an industrial park or export-processing zone has been established under the Government's regulations and its removal from the planning or repurposing is approved by a competent authority or the project on investment in construction and commercial operation of infrastructure of the industrial park or export-processing zone is terminated in accordance with regulations of law on investment, the investment projects executed in such industrial park or export-processing zone shall continue to be entitled to the investment incentives in accordance with the regulations set forth in the investment license, business license, investment incentive certificate, investment certificate, investment registration certificate, decision on investment guidelines, decision on approval for investment guidelines or another document of the competent authority providing for investment guidelines (if one of them said documents is available) or in accordance with regulations of law in effect at the time of investment in the industrial park or export-processing zone (if the said documents are not available).

Procedures for applying investment incentives

Step 1: Submitting the dossier (Article 17 of Law on Investment 2020)

- The written approval for investment guidelines (if any);

- The investment registration certificate (if any) and other relevant regulations of law

Note: Investors shall determine investment incentives themselves and follow procedures for enjoying investment incentives at the tax authority, finance authority, customs authority, or other competent authority corresponding to each type of investment incentive.

- The decision on approval for investment guidelines,

- Investment registration certificate

- Decision on investor approval

Step 2: According to the investment incentives specified in the decision on approval for investment guidelines, investment registration certificate, or decision on investor approval, the investor shall follow receiving investment incentives at incentive-applying authorities corresponding to each type of incentive.

The bases for the application of investment incentives to several enterprises and investment projects specified in Clause 5 of Article 19 Decree No.31/2021/ND-CP include:

- The certificate of science and technology enterprise, regarding a science and technology enterprise;

- The certificate of hi-tech agricultural enterprise, regarding a hi-tech agricultural enterprise;

- The certificate of hi-tech project, regarding a hi-tech project;

- The incentive certificate of manufacture of supporting industry products, regarding a supporting industry project;

- The certificate of transfer of technology the transfer of which is encouraged under the Prime Minister’s regulations, regarding a project involving the transfer of technology on the List of technologies the transfer of which is encouraged.

Note: Investors in projects other than those specified in Clauses 2 and 3, Article 23 of Decree No.31/2021/ND-CP shall determine their investment incentives and follow procedures for receiving investment incentives at incentive-applying authorities corresponding to each type of incentive according to the objects entitled to investment incentives in Article 19 of Decree No.31/2021/ND-CP and relevant regulations of law.

Step 3: Receiving the results

The above is the guide to the investment incentive in Viet Nam of Hnlaw & Partners Law Firm. If the business still has problems, unknown, or needs other legal assistance, please contact the online legal consulting department through the hotline: 0912.918.296 for answers. We hope to receive the cooperation of customers!

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