Special investment support incentives for foreign investors in Vietnam
In order to improve efficiency and investment cooperation, in line with planning and development orientation of key sectors and areas on the basis of ensuring security, national defense and sustainable development and environmental protection in Vietnam, The Government of Vietnam has promulgated the Investment Law 2020, officially effective from January 1, 2021 with many provisions to encourage the development of investment projects that have a great impact on Vietnam’s socio-economic development and attract foreign investors. Specifically, Article 20 of the Law on Investment 2020 provides for the first time the form of special investment incentives and support with the following contents:
Firstly, about the subjects entitled to special investment incentives and support
“Investment incentives” are understood as beneficial policies given to investors by the State when investors have investment activities in industries and areas encouraged by the State.
“Investment support” is a measure that the State creates opportunities for investors to enjoy when certain conditions are met in order to attract investment.
Accordingly, group of subjects entitled to special investment incentives and support in the investment law 2020 include:
The beneficiaries of special investment incentives and support belong to the group of subjects with investment projects that have a great impact on the socio-economic development of the country. These investment projects are specified in Clauses 2 and 6, Article 20 of the Law on Investment 2020, as follows:
- New establishment investment projects (including the expansion of such newly established projects) innovation centers, research and development centers with total investment capital of 3,000 billion VND or more. currently disbursing at least VND 1,000 billion within 03 years from the date of issuance of the Investment Registration Certificate or approval of the investment policy;
- National Innovation Center are established by decision of the Prime Minister. For example, the National Innovation Center (NIC), based in Hoa Lac Hi-Tech Park, established under Decision No. 1269/QD-TTg, operates under an autonomous mechanism. With the function of supporting and developing Vietnam’s startup and innovation ecosystem, contributing to innovating the growth model based on science and technology.
- Investment projects in industries and trades with special investment incentives (List of industries in Appendix 2 of Decree 31/2021/ND-CP) with an investment capital of 30,000 billion VND or more, the solution is to be implemented minimum amount of VND 10,000 billion within 03 years from the date of issuance of the Investment Registration Certificate or approval of the investment policy.
- Particularly important investment projects or special administrative – economic units (typically Phu Quoc)
The Law on Investment 2020 has been based on three criteria: 1. Industry and field of investment, 2. Total registered capital for investment, and 3. Time limit for disbursement of investment capital to distinguish projects enjoying special investment incentives and support from some projects enjoying other investment incentives. These projects are on the list of beneficiaries of incentives under Clause 2, Article 15 of the Law on Investment 2020 and Article 19 of Decree No. 31/ND-CP. Such amendments and supplements are necessary to enhance, attract and promote high-quality investment in fields to develop the quality of life of Vietnamese people.
Note: some target groups are not eligible for special investment incentives and support:
Special investment incentives are applied to investors with the aim of ensuring a stable and fair legal environment, bringing benefits to society in general and areas with socio-economic conditions. difficult, especially difficult in particular. However, projects that are not entitled to special investment incentives and support specified in Clause 5, Article 15 and Clause 5, Article 20 of the Law on Investment 2020 include:
• Investment projects that have been granted investment certificates; investment registration certificates or approved investment policies before the effective date of this Law (before January 1, 2021);
• Mineral mining investment projects;
• Investment projects on production and trading of goods and services subject to excise tax under the provisions of the Law on Special Consumption Tax, except for projects on production of cars, aircraft, and yachts;
• Investment projects to build commercial houses in accordance with the law on housing.
The above projects do not enjoy special incentives and support due to the development orientation of “green economy” in Vietnam as well as in many countries around the world. The failure to apply special incentives and support to discourage investment in areas that are harmful to the environment (mineral extraction, etc.) or have adverse effects on human health (trade in alcohol, beer, cigarettes, cigars…) to protect morality, public order, human life, and natural resources.
Secondly, about level of investment incentives
Projects enjoy special investment incentives in accordance with the Law on Corporate Income Tax and the law on land. Including the main contents (tax incentives, and investment support):
Corporate income tax: 5% reduction in tax rate, maximum period not exceeding 37.5 years; about tax exemption/reduction period: 6 years of exemption, 13 years of reduction (50% of payable tax) (Article 14 Law on Corporate Income Tax);
Land rent, water surface rent: the land rent and water surface rent exemption period shall not exceed 22.5 years; the reduction of not more than 75% of the land rent is guidelined in Decree 45/2014 on collection of land use fees.
Investment support: projects eligible for investment support are implemented in the form specified in Clause 1, Article 18 of the Law on Investment 2020 and Clause 6, Article 20 of Decree No. 31/2021/ND-CP, including:
• Supporting the development of technical and social infrastructure systems inside and outside the fence of investment projects;
• Supporting in training and developing human resources;
• Supporting in credit;
• Supporting in access to production and business premises;
• Supporting in production and business establishments to relocate under decisions of state agencies;
• Supporting in scientific and technical, technology transfer;
• Supporting market development, providing information; research and development support.
Thirdly, on the authority to decide on the application of special investment incentives and support
According to the provisions of Clause 1, Article 20 of the Law on Investment 2020, the Government is the competent authority to decide on the application of special investment incentives and support. In addition, the Prime Minister also decides the level and duration of special investment incentives according to the criteria of high technology, technology transfer, Vietnamese enterprises participating in the chain, and the value of domestic production for domestic enterprisesin vestment projects specified in Clause 2, Article 20 of Law on Investment 2020. Including projects:
• Innovation center, research and development center with total investment capital of 3000 billion VND, disbursed at least 1000 billion VND/03 years;
• National Innovation Center;
• Special industries with investment incentives with total investment capital from 30000 billion VND, disbursed at least 10000 billion VND/03 years.
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