08 Rules for applying investment incentives for investment projects in Vietnam

08 Rules for applying investment incentives in Vietnam (Internet image)

1. Forms of investment incentives in Vietnam

According to Clause 1, Article 15 of the Law on Investment 2020, forms of investment incentives include:

- Corporate income tax incentives, including 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.

2. Rules for applying investment incentives in Vietnam

Specifically, in Article 20 of Decree 31/2021/ND-CP, the rules for applying investment incentives include:

(1) The investment projects specified in Clause 3 Article 19 v are eligible for the same investment incentives as prescribed for investment projects in extremely disadvantaged areas.

(2) 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 31/2021/ND-CP are eligible for the same investment incentives as prescribed for investment projects in disadvantaged areas.

(3) 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.

(4) The specific investment incentives for the investment projects mentioned in (1), (2), and (3) shall be applied in accordance with regulations of law on tax, accounting and land.

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

(6) 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 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 2020 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 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.

(7) 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.

(8) 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 the 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).

3. Procedures for applying investment incentives in Vietnam

Article 23 of Decree 31/2021/ND-CP stipulates the procedures for applying investment incentives as follows:

- The decision on approval for investment guidelines, investment registration certificate and decision on investor approval shall provide for the forms, bases and conditions for application of investment incentives as prescribed in Articles 15 and 16 of the Law on Investment 2020 and Article 19 of Decree 31/2021/ND-CP.

- 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 application of investment incentives to several enterprises and investment projects specified in Clause 5 Article 19 of Decree 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 transfer of technology on the List of technologies the transfer of which is encouraged.

- Investors in projects other than those specified in Clauses 2 and 3 of Article 23 of Decree 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 31/2021/ND-CP and relevant regulations of law.

Thanh Rin

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