ISSUE 011122 – Investment incentives

Dear Valued Clients,

Investment incentives play a significant role in encouraging investment as a way to promote and push the socio-economic growth of our country.

Therefore, in this Legal Article, we would like to summarize the information about investment incentives specified in the Law on Investment No. 61/2022/QH14 of the National Assembly dated June 17, 2020 (the “Law on Investment 2020”) for your kind reference and consideration.

1.      Definition

The Law on Investment 2020 currently does not prescribe specifically the notion of investment incentives. However, they can be simply understood as incentives given by the State to investors (the “Investor”) when they invest in the encouraged fields and areas to shift the economic structure to be in line with the country’s socio-economic development strategy^[1].

 2.     Forms of investment incentives

The current law on investment specifies four (04) forms of investment incentives as follows^[2]:

(i)      Corporate income tax incentives, including the application of a lower rate on the corporate income tax for a certain period or throughout the execution of the investment project; the exemption from and the reduction of tax and other incentives prescribed by the law on corporate income tax;

(ii)      Exemption from import tax on imported goods to form fixed assets; raw materials, supplies, and components for manufacturing purposes in accordance with legislations of the law on import tax and export tax;

(iii)     Exemption from and reduction of land use levy, land rental and land use tax;

(iv)     Accelerated depreciation, increasing the deductible expenses upon calculation of taxable incomes.

3.       Eligible subjects entitled to investment incentives

The current law on investment has stipulated the eligible subjects entitled to investment incentives as follows^[3]:

(i)       Investment projects in business lines eligible for investment incentives specified in Section 6 below;

(ii)      Investment projects located in the areas eligible for investment incentives specified in Section 7 below;

(iii)      Any investment projects with a capital of at least 6,000 billion VND, disbursing a minimum of 6,000 billion VND within 03 years from the issued date of the Investment Registration Certificate (“IRC”) or of the decision approving the investment guidelines, and concurrently satisfy one of the following criteria: have a total revenue of at least 10,000 billion VND each year within 03 years from the year in which the revenue is earned or employ over 3,000 employees;

(iv)      Investment projects on social housing construction; investment projects located in rural areas and employing at least 500 employees; investment projects on employing persons with disabilities in accordance with the law on persons with disabilities;

(v)       Hi-tech enterprises, science and technology enterprises and science and technology organizations; projects involving the transfer of technologies on the List of technologies encouraged to transfer in accordance with the legislations of the law on technology transfer, science and technology enterprise incubators prescribed by the law on high technologies and the law on science and technology; enterprises manufacturing and providing technologies, equipment, products and services with a view to satisfy the need for environmental protection prescribed by the law on environmental protection;

(vi)      Innovative start-up investment projects, innovation centers, research and development centers;

(vii)     Business investments in small and medium-sized enterprises’ product distribution chain; business investments in technical establishments supporting small and medium-sized enterprises, small and medium-sized enterprise incubators; business investments in co-working spaces supporting small and medium-sized enterprises to start a business as prescribed by the law on small and medium-sized enterprises.

 4.      Ineligible subjects entitled to investment incentives

The law on investments stipulates the following subjects that are not entitled to investment incentives[4]:

(i)      Investment projects in mineral mining;

(ii)     Investment projects in manufacturing/sale of goods/services subject to special excise tax according to the Law on Special Excise Tax, except for projects on the manufacturing of automobiles, aircrafts and yachts;

(iii)    Investment projects in commercial housing construction prescribed by the law on housing.

5.      Terms, conditions and levels of the investment incentives

The current law on investment has prescribed that investment incentives shall be applied with a fixed term and on the basis of the results from the execution of the projects. The Investor(s) must satisfy the criteria for the application of investment incentives as prescribed by the laws within the stipulated term^[5].

Regarding the levels of the investment incentives, the law states that an investment project that is eligible for various levels of investment incentive, including the special investment incentives may apply the highest level of the incentives[6].

6.      Business lines eligible for investment incentives

The current law on investment has stipulated quite a number of eligible business lines entitled to investment incentives. They are specified as follows[7]:

(i)      Hi-tech activities, industrial products supporting high-tech, research, manufacturing and development of products formed from science and technology results in accordance with legislations of the law on science and technology;

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

(iii)    Manufacturing key electronics, mechanical products, agricultural machinery, automobiles, automobile parts; shipbuilding;

(iv)    Manufacturing products on the List of industrial products prioritized for development;

(v)     Manufacturing IT products, software products, digital contents;

(vi)    Breeding, growing and processing agriculture 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;

(vii)   Collection, treatment, recycling or re-use of waste;

(viii)   Investment in the development, operation, management of infrastructural works; the development of public transportation in urban areas;

(ix)    Pre-school education, general education, vocational education, higher education;

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

(xi)     Investment in sports facilities for the disabled or professional athletes; protecting and promoting the value of cultural heritage;

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

(xiii)    People’s credit funds, microfinance institutions;

(xiv)    Manufacturing goods and providing services that create or participate in the value chain and industry clusters.

 7.      Areas eligible for investment incentives

 The current law on investments stipulates the following areas eligible for investment incentives[8]:

(i)      Disadvantaged areas and extremely disadvantaged areas;

(ii)      Industrial parks, export-processing zones, hi-tech zones and economic zones.

 8.     Procedures for the application of investment incentives

Pursuant to the subjects eligible for the application of investment incentives, the written approval for investment guidelines (if any), the IRC (if any) and other relevant legislations of the law, the Investor(s) shall determine investment incentives themselves and follow the procedures for the application of investment incentives at the tax authority, finance authority, customs authority or other competent authority corresponding to each type of investment incentives^[9].

As always, we hope you find this Legal Article useful and look forward to working with you in the future.

Kind regards,

ENT Law LLC

The full version of this Legal Article can be found here.

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[1] Nguyen Chi Thuong, The Law on Investment 2020: Expanding on the subjects for the application of investment incentives, Digital Portal of the Department of Planning and Investment of Ca Mau Province, accessed on October 13, 2022.

[2] Article 15.1 of the Law on Investment 2020.

[3] Article 15.2 of the Law on Investment 2020.

[4] Article 15.5 of the Law on Investment 2020.

[5] Article 15.6 of the Law on Investment 2020.

[6] Article 15.7 of the Law on Investment 2020.

[7] Article 16.1 of the Law on Investment 2020.

[8] Article 16.2 of the Law on Investment 2020.

[9] Article 17 of the Law on Investment 2020.