Vietnam’s preferential tax policies for FDI

In recent years, FDI inflows into Southeast Asia, including Vietnam, have been on the rise. Promoting domestic investment through preferential policies, including tax incentives, has helped Vietnam attract more foreign investors. However, it is not easy for foreign investors to access and implement preferential policies.

In this article, we will briefly summarize the highlights of the tax incentive policies of the Vietnamese State.

1. Corporate income tax incentives

According to Vietnamese law, the normal corporate income tax rate is 20% in the fiscal year. The tax rate may vary depending on the industry, profession and business location.

Article 18 of Circular 78/2014/TT-BTC stipulates that certain industries, professions or business investment projects in locations are entitled to preferential corporate income tax rates. It should be noted that enterprises are only entitled to tax incentives when they implement accounting, invoice, voucher and pay corporate income tax as declared.

During the period of enjoying Vietnam tax benefits for foreign investors, if an enterprise conducts many production and business activities, it must calculate separately the income from production and business activities that enjoy corporate income tax incentives (including preferential tax rates, tax exemptions and reductions) and the income from business activities that do not enjoy tax incentives to declare and pay taxes separately.

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1.1. Applying a corporate income tax rate of 10% throughout the entire period of operation applies to the income of enterprises in the following fields:

  • Implementing socialization activities in the fields of education – training, vocational training, culture, sports and environment, health;
  • Selling, leasing, and leasing-purchasing social housing;
  • Planting, tending, and protecting forests; farming and processing of agricultural and aquatic products in areas with difficult socio-economic conditions;
  • Farming and producing products in areas with difficult socio-economic conditions; production, propagation and crossbreeding of plant and animal breeds; production, exploitation and refining of salt; services for agricultural, forestry and fishery production;
  • Income of cooperatives operating in the fields of agriculture, forestry, fishery and salt production not located in areas with difficult socio-economic conditions or areas with particularly difficult socio-economic conditions;
  • Investing in post-harvest preservation of agricultural products, preservation of agricultural products, aquatic products and food.

1.2. Applying a corporate income tax rate of 10% for a period of 15 years to the income of enterprises implementing new investment projects with the following conditions:

  • In areas with particularly difficult socio-economic conditions, Economic Zones, High-tech Zones including concentrated Information Technology Zones established under the Prime Minister’s decision;
  • In the fields of scientific research and technology development; application of high technology in the list of high technologies prioritized for investment and development according to the provisions of the Law on High Technology; incubation of high technology, incubation of high-tech enterprises;
  • In the field of environmental protection;
  • High-tech enterprises, agricultural enterprises applying high technology according to the provisions of the Law on High Technology.
  • In the field of production (except for projects producing goods subject to special consumption tax, mineral exploitation projects) meeting the requirements on investment capital scale and number of employees;
  • In some other fields specified in Article 11 of Circular 96/2015/TT-BTC.

Please note: A new investment project is a project implemented for the first time or a project operating independently from a project currently conducting business investment activities.

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1.3. Applying a corporate income tax rate of 17% for a period of 10 years to the enterprise’s income

  • Implementing new investment projects in areas with difficult socio-economic conditions;
  • Implementing new investment projects on:
  • High-grade steel;
  • Production of energy-saving products;
  • Production of machinery and equipment serving agricultural, forestry, fishery and salt production;
  • Production of irrigation equipment;
  • Production and refining of animal feed, poultry and aquatic products;

Developing traditional industries (including building and developing traditional industries in the production of industrial products, handicrafts, processing agricultural products, and cultural products).

In particular, investment activities to establish People’s Credit Funds, Cooperative Banks, and Microfinance Institutions are entitled to Vietnam’s preferential tax policies for FDI of 17% throughout the entire period of operation (Clause 5, Article 19, Circular 78/2014/TT-BTC).

2. Other tax reduction cases

According to the provisions of Article 21 of Circular 78/2014/TT-BTC, the following enterprises will be considered for tax reduction:

2.1 Companies employing many female workers:

  • Enterprises operating in the fields of production, construction, and transportation.
  • Employing from 10 to 100 female workers, accounting for over 50% of the total number of employees.
  • Employing more than 100 female workers, accounting for more than 30% of the total number of workers.
  • Tax reduction corresponding to the additional expenses for female workers (if accounted for separately).

2.2 Enterprises employing ethnic minority workers:

Vietnam tax benefits for foreign investors corresponding to the actual additional expenses for ethnic minority workers.

2.3 Enterprises implementing technology transfer

3. Tax reduction programs for FDI enterprises for non-agricultural land use

Enterprises implementing the following investment projects will be exempted from non-agricultural land use tax:

  • Investment projects in sectors with special investment incentives, or investment in areas with particularly difficult socio-economic conditions;
  • Investment projects in sectors with investment incentives (investment incentives) in areas with difficult socio-economic conditions;
  • Socialized investment projects for activities in the fields of education, vocational training, health, culture, sports, and environment.

4. Conclusion

With the Tax reduction programs for FDI enterprises mentioned above, foreign investors can more easily choose investment activities in the points that enjoy tax incentives. By combining these activities with other business investment activities, enterprises can maximize their investment profits. Making the most of investment incentives, including tax incentives, will help foreign investors develop their businesses well.

S4B Vietnam:

S4B Vietnam provides legal advice to foreign investors who want to establish and operate businesses in Vietnam. Our team of lawyers can help businesses save costs with optimal Vietnam’s preferential tax policies for FDI, take advantage of incentives and develop sustainably.

Our Investment Advisory and Corporate Compliance services provide flexible solutions to address challenges and seize opportunities in the Vietnamese market. Contact us right away!

>>>Read more: New FDI regulations for foreign investors in Vietnam

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