Investment Incentives in Vietnam

Since the 2005 investment law, investors regardless of foreign investors or domestic investors are entitled to one investment incentives principle in order to attract investment activities and mobilise capital in Vietnam. Additionally, preferences are not only strictly regulated in the investment law, investment incentives are also accommodated by different regions, locations and industrial zones in order to promote an open and diverse environment for investors.

Some key contents relating to investment incentives are regulated in the 2005 investment law

Entities subject to investment incentives

Investors with investment projects (including expanded investment projects) in the investment incentive sectors and geographical areas stipulated in the Vietnam investment law (specifically stimulated in the attached Decree No 108/2006/ND-CP dated September 22^nd 2006 shall be entitled to the incentives

• Incentive investment sectors

• Geographical areas of investment incentives

Incentives policies

1.  Tax incentives

Investors having projects within the categories stipulated in the legal documents shall be entitled to preferential tax rates, the duration of entitlement to such rates and the duration of exemption from and reduction of tax in accordance with the law on tax.

Investors shall be entitled to tax incentives on that portion of income from their capital contribution or purchase of shareholding in an economic organization in accordance with the law on tax after such organization has paid in full corporate income tax.

Investors shall be exempt from payment of import duty on equipment, materials, means of transportation and other goods for implementation of investment projects in Vietnam in accordance with the Law on Export and Import taxation.

Income from activities of technology transfer applicable to projects entitled to investment incentives shall be exempt from income tax in accordance with the law on tax.

2. Carrying forward losses

If an investor suffers losses after completion of tax finalization with the tax office, it shall be permitted to carry its losses forward to the following year, and the amount of such losses shall be set off against taxable income for the purposes of corporate income tax in accordance with the law on corporate income tax. The period for carrying forward losses shall not exceed five years

3. Depreciation of fixed assets

Investment projects in investment incentive sectors and geographical areas and business projects with high economic efficiency shall be subject to accelerated depreciation of fixed assets; the maximum rate of depreciation shall not be more than twice the level of depreciation as stipulated by regulations on depreciation of fixed assets.

4.  Incentives of land use

The term of land use of an investment project shall not exceed fifty years; with respect to projects with a large amount of invested capital and a slow rate of capital recovery, projects investing in areas with difficult socio-economic conditions and projects investing in areas with specially difficult socio-economic conditions which require a longer term, the term of allocation or lease of land shall not exceed seventy years.

If at the expiry of a term of land use, investors who have good compliance with the law on land have a requirement for continued land use, the competent State body shall consider an application for extension of the term of land use in conformity with the approved land use zoning.

Investors who invest in investment incentive sectors and geographical areas shall be entitled to an exemption from payment of or a reduction of land rent and land use fees in accordance with the law on land and the law on tax

Procedures for applying investment incentives

For domestic investment projects in the category for which investment is not registered and projects in the category for which investment is registered, investors shall, on the basis of the incentives and conditions for investment incentives stipulated by law, assess themselves incentives and shall conduct procedures at the competent State body for investment incentives.

If an investor requests the certification of investment incentives, it shall conduct the procedures for investment registration in order for the State administrative body for investment to record investment incentives in the investment certificate.

For domestic investment projects in the category for which there must be an evaluation for investment and which satisfy the conditions for incentives, the State administrative body for investment shall record incentives in the investment certificate.

For foreign invested projects which satisfy the conditions for incentives, the State administrative body for investment shall record investment incentives in the investment certificate.

Adjustments, supplementation of investment incentives

During the process of investment project implementation, if investors meet requirements of extended investment incentives, investors shall be entitled to the investment incentives and have rights to request the state office of investment certificate granting to adjust or supplement investment incentives as regulated in the investment certificate

During the process of investment project implementation, if investors fail to meet requirements for investment incentives, investors shall be not entitled to investment incentives. The state competent office in charge of investment incentives execution shall be responsible for notifying in writing to the state office of investment certificate granting.

Application of investment incentives

Investors who benefit from investment incentives as regulated in the law on domestic investment promotion, law on foreign investment in Vietnam, law on cooperatives and law on tax shall be continued to benefit from these investment incentives.

Investors with investment projects under implementation and belong to applicable entities as regulated in the Article 24 of Decree No 108/2006/NĐ-CP dated 22/9/2006 shall be entitled to investment incentives for the remaining period of incentives benefits since the Decree is put into practice.

In cases new laws or policies offering better investment incentives and benefits compared to those applied previously, investors shall be entitled to apply new benefits and incentives during the remaining period of investment incentives (if necessary) since new laws or policies are in effect.

In cases of international conventions which Vietnam is a member to provide new regulations as compared to the mentioned above contents, investors shall be entitled to apply the new regulations in the international conventions.

Tags: Investment Incentives in Vietnam, Vietnam investment consulting, Vietnam investment process