On June 17th 2020, The National Assembly approved and promulgated the 2020 Law on Investment which officially took effect on 1st January 2021, replacing the 2014 Law on Investment. Subsequently, Decree No. 31/2021/ND-CP providing guidelines for some articles of the Law on Investment was promulgated and officially took effect on 26th March 2021. The two documents mentioned above involve notable changes in comparison with the 2014 Law on Investment pertaining to investment incentives and support. Besides, entirely new provisions of special investment incentives and support were brought about for the purpose of attracting large investors to Vietnam with projects which have a strong socio-economic impact. Investors need to focus on this to apply and enjoy appropriate incentives and support.
Notable modifications include: (i) additional entities eligible for investment incentives, (ii) additional forms of incentives and (iii) new provisions of special incentives and support.
Beside entities prescribed in the 2014 Law on Investment, the 2020 Law on Investment and Decree No.31/2021/ND-CP have imposed conditions to enjoy investment incentives and detailed explanation for such entities as follows:
Besides, based on the socio-economic development conditions, demands for investment attraction in each period and proposals that ministries, ministerial agencies, provincial People’s Committees, Ministry of Planning and Investment submitted to the Government, some business lines eligible for investment incentives were complemented as follows:
Complement forms of incentives: accelerated depreciation, increasing the deductible expenses upon calculation of taxable income prescribed in Article 15(1)(d) of the 2020 Law on Investment.
Heretofore, the 2014 Law on Investment and other relevant documents had not regulated special investment incentives and support. Hence, a notable point in the new law is the decision of the Government to apply special investment incentives and support for the purpose of developing some investment projects having great impact on socio-economic development as follows:
Level and duration of special incentives are prescribed in the Law on Enterprise Income Tax and land law. Forms of special investment support are performed as those of other investment support.
Principle of applying incentives:
(i) Level and duration of applying special incentives of enterprise income tax, land rental and surface rental are in accordance with regulations of the ‘Law on Enterprise Income Tax’ and land law;
(ii) Special investment incentives and support are applied to the National Innovation Center established by the Prime Minister’s decision and establishments located outside the headquarter of the Center;
The Prime Minister 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 domestic production value of the investment projects mentioned above.
Enjoying investment incentives is being considered as a special advantage that investors aim at for reducing financial costs, helping them stabilize the business activities in Vietnam. For such reasons, at the time of planning investment projects in Vietnam, aspects such as business lines, investment capital, location(s) of operating projects in Vietnam need to be carefully evaluated based on the general provisions of law, and policies of each locality and area so that investors can identify appropriate incentives that they may enjoy when investing in Vietnam.
The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.