Which enterprise’s incomes are subject to tax exemption for 4 years, reduction of 50% of tax payable for the next 5 years in Vietnam?

Which enterprise’s incomes are subject to tax exemption for 4 years, reduction of 50% of tax payable for the next 5 years in Vietnam?

Based on Clause 1, Article 16 of Decree 218/2013/ND-CP, amended by Clause 16, Article 1 of Decree 12/2015/ND-CP, the tax exemption for 4 years and a 50% reduction in corporate income tax for the next 9 years applies to the following incomes:

- Income of enterprises as stipulated in Clause 1, Article 15 of Decree 218/2013/ND-CP, including:

+ Income of enterprises from implementing new investment projects in areas with especially difficult socio-economic conditions prescribed in the Appendix issued together with Decree 218/2013/ND-CP, economic zones, high-tech zones, including concentrated information technology zones established under the Decision of the Prime Minister of the Government of Vietnam;

+ Income of enterprises from implementing new investment projects in the following fields:

++ Scientific research and technological development;
++ Application of high technology in the priority list for development investment as prescribed by the [High Technology Law 2008](https://lawnet.vn/vb/Luat-cong-nghe-cao-2008-21-2008-QH12-14119.html);
++ High-tech incubation, high-tech enterprise incubation;
++ Venture capital investment for developing high technology in the priority list for development investment under the regulations of high technology law;
++ Investment in the construction and operation of high-tech incubation facilities, high-tech enterprise incubation facilities;
++ Investment in the development of water plants, power plants, water supply and drainage systems; bridges, roads, railways;
++ Airports, seaports, river ports; airports, train stations, and other especially important infrastructure facilities decided by the Prime Minister of the Government of Vietnam;
++ Production of software products; production of composite materials, various types of lightweight construction materials, rare materials;
++ Production of renewable energy, clean energy, energy from waste destruction; development of biotechnology.A new investment project producing software products is defined as a new investment project producing software products within the list of software products and meeting the software product production process as prescribed by law;

+ Income of enterprises from implementing new investment projects in the field of environmental protection, including:

++ Production of environmental pollution treatment equipment, environmental monitoring and analysis equipment;
++ Pollution treatment and environmental protection;
++ Collection, treatment of wastewater, exhaust gases, solid waste;
++ Recycling, reuse of waste;

+ High technology enterprises, agricultural enterprises applying high technology.

In cases where enterprises are enjoying corporate income tax incentives or have exhausted corporate income tax incentives under legal documents on corporate income tax and are granted a Certificate of high technology enterprise, agricultural enterprise applying high technology, the incentives for high technology enterprises and agricultural enterprises applying high technology are determined by subtracting the time of the incentives already enjoyed (both in terms of tax rate and the periods of exemption and reduction, if applicable) from the incentives specified for high technology enterprises, agricultural enterprises applying high technology under Clause 1, Article 15 and Clause 1, Article 16 of Decree 218/2013/ND-CP;

+ Income of enterprises from implementing new investment projects in manufacturing (excluding projects for manufacturing goods subject to special consumption tax, mineral exploitation projects) meeting one of the following two criteria:

++ Projects with a minimum investment capital scale of 6,000 billion VND, disbursed no later than 3 years from the first time of investment permission under investment law, with a minimum annual revenue of 10,000 billion VND no later than 3 years from the first year with revenue.
++ Projects with a minimum investment capital scale of 6,000 billion VND, disbursed no later than 3 years from the first time of investment permission under investment law, with more than 3,000 regular employees no later than 3 years from the first year with revenue.The number of regular employees is determined according to the labor laws.

+ Income of enterprises from implementing new investment projects in manufacturing (excluding projects for manufacturing goods subject to special consumption tax and mineral exploitation projects) with a minimum investment capital scale of 12,000 billion VND, using technology that must be appraised according to the High Technology Law 2008, the Science and Technology Law 2013, and completing the total registered investment capital disbursement no later than 5 years from the investment permission date under investment law.

- Income of enterprises from implementing new investment projects in private investment areas with difficult or especially difficult socio-economic conditions as stipulated in the Appendix issued together with Decree 218/2013/ND-CP.

Which enterprise’s incomes are subject to tax exemption for 4 years, reduction of 50% of tax payable for the next 5 years in Vietnam? (Image from Internet)

How to calculate the period of tax exemption for 4 years and tax reduction for the next 9 years in Vietnam?

Based on Clause 4, Article 16 of Decree 218/2013/ND-CP, the tax exemption for 4 years and a 50% reduction in corporate income tax for the next 9 years are calculated continuously from the first year with taxable income from the new investment project enjoying tax incentives. If there is no taxable income in the first three years, the period of tax exemption and tax reduction is counted from the fourth year.

The tax exemption and reduction period for high technology enterprises and agricultural enterprises applying high technology under Clause 1, Article 16 of Decree 218/2013/ND-CP is counted from the time of being recognized as high technology enterprises and agricultural enterprises applying high technology.

In cases where, in the first tax calculation period, the new investment project’s operational production and business duration is less than 12 months, the enterprise may choose to enjoy the tax exemption and reduction for the new investment project in that tax calculation period or register with the tax authority to start enjoying the tax exemption and reduction from the next tax calculation period.

Which enterprise’s incomes are not subject to tax exemption for 4 years, reduction of 50% of tax payable for the next 5 years in Vietnam?

Based on Clause 2, Article 19 of Decree 218/2013/ND-CP, supplemented by Clause 17, Article 1 of Decree 12/2015/ND-CP, the tax exemption for 4 years and a 50% reduction in corporate income tax for the next 9 years do not apply to the following types of income:

- Income from the transfer of capital, transfer of the right to contribute capital; income from real estate transfers, except income from investment and business operations of social housing as stipulated in Point d, Clause 2, Article 15 of Decree 218/2013/ND-CP; income from the transfer of investment projects, transfer of the right to participate in investment projects, transfer of exploration, exploitation rights for minerals; income received from production and business activities outside of Vietnam;

- Income from activities of searching, exploring, and exploiting oil, gas, and other rare resources; income from mineral exploitation activities;

- Income from business services subject to special consumption tax as prescribed by the Special Consumption Tax Law 2008;

- Other incomes provided in Clause 2, Article 3 of Decree 218/2013/ND-CP not related to the production and business activities eligible for tax incentives (for cases meeting the incentive conditions in the fields and industries prescribed in Articles 15 and 16 of Decree 218/2013/ND-CP).

- Income of enterprises from investment projects in commercial, service business sectors arising outside economic zones, high-tech zones, industrial zones, and areas eligible for tax incentives will not enjoy corporate income tax incentives as stipulated in Clauses 1 and 4 of Article 4 and Articles 15 and 16 of Decree 218/2013/ND-CP.