Would you like to know which business sectors in Vietnam are encouraged for investment? Or are you interested to know whether your investment project is eligible for investment incentives in Vietnam? This guide will tell you all of that, and more.
Table of Contents
Maybe you are planning to start an investment project in Vietnam. Or you already have your project. And you have heard somewhere that the Vietnamese Government is encouraging certain types of investment. That there are available investment incentives in Vietnam. But what kind of encouragement is that exactly, and which fields are eligible? In this guide, we will tell you all about the different types of investment incentives in Vietnam.
Let us start with the Vietnamese Law on Investment of 2020. Article 15 determines that there are the following investment incentives in Vietnam: (i) corporate income tax incentives, (ii) exemption from import tax, (iii) exemption from and reduction of land levies and land rent, and (iv) accelerated depreciation. Let us have a closer look at this.
The following entities are eligible for investment incentives in Vietnam: (a) investment projects that have certain business lines registered, (b) investment projects that are located in certain geographical areas, (c) investment projects with a capital of VND 6,000 billion ( ~ USD 265 million) or more, (d) social housing construction projects, (e) hi-tech projects, (f) start – up projects, National innovation centres and research & development centres, and (g) SME supporting projects. This is a wide range of entities, and they are not restricted to Vietnamese – owned companies only.
Each company in Vietnam must register one or more business lines. This happens at the very beginning, when you are setting up your company. These business lines are taken from a big directory, which covers basically every imaginable business activity in Vietnam.
A company is only allowed to deploy the business activities that it has registered, and it is possible to update those business lines every now and then. So which business lines are eligible for investment incentives in Vietnam?
There is a whole list available, but some of the most eye – catching ones include: high – technologies, agriculture, environmental protection, preservation of culture, investment in sports centres, production of software, and manufacturing of energy – saving products. So if you are planning to implement one or more of these activities, then make sure that you also register the business lines officially.
The thing to keep in mind here is that the Law does not say that investment incentives in Vietnam only apply to Vietnamese – owned companies. However, not all of the business lines that are eligible for investment incentives, are open to foreign investment. Or at least, not yet.
There was a time that almost all business sectors were closed to foreign investment. Even before that, most business sectors were not even open to private investment in general. At that time, most companies in Vietnam were State – owned.
However, Vietnam has come a long way since then. In recent years, and especially after Vietnam joined the World Trade Organization in 2007, the country has really opened its market to foreign investment.
This line seems to continue, and Vietnam has recently been very active in signing free trade agreements with countries around the World. Many of those free trade agreements also include investment promotion.
Having said that, there are still several business lines that are only open to Vietnamese investment. Meaning that in practice, foreign – owned companies could only benefit from a few of the incentives. Perhaps the most notable example of a business line with incentives that is open to foreign – owned companies is software production. We will cover that one in more detail here below.
According to the Vietnamese Law on Investment, certain areas are also eligible for investment incentives in Vietnam. These include: (i) disadvantaged areas, and extremely disadvantaged areas, and (ii) industrial parks, export – processing zones, hi – tech zones, and economic zones.
There is a list of 54 provinces that have one or more such disadvantaged areas. Furthermore, all around Vietnam there are industrial parks, and there are also more and more hi – tech zones. Typical investment incentives in those areas are the reduction of land rent and utilities.
One investment field that is popular among foreigners, and that is eligible for investment incentives in Vietnam is the field of software production. As we have covered in the Business taxes in Vietnam guide, the normal corporate income tax rate in Vietnam is 20%.
However, software production is a line of business that is encouraged in Vietnam, which means that preferential tax treatment applies. So instead of the aforementioned 20%, software production companies are: (a) exempt from corporate income tax during the first four years, (b) they get a discount of 50% during the next nine years, (c) for year 14 and 15 they pay 10%, and (d) only from year 16 they pay the full 20%. This is a very attractive investment incentive, from which many foreign – invested companies have already benefited.
In order to qualify for investment incentives in Vietnam, it is important to register the correct business lines. Often when applying for the investment registration certificate (IRC), you will already need to apply with the Ministry of Planning and Investment for investment incentives. Then after this certificate has been approved, investors can go to the relevant Government agency (for example: the Tax Authority) in order to obtain the incentives.
Your start up expert can support you with this. Furthermore, it is highly recommended that you work with a good accountant. So that you are not only eligible for investment incentives in Vietnam ( = register the correct business lines), but to make sure that your company will also effectively benefit from those incentives.
Good to know: if an investment project is eligible for more than one investment incentive, then the highest level of incentives shall apply.