To attract foreign investment, the Vietnamese state has had preferential policies on investment which have been codified in relevant legal documents with specific provisions for these policies to be applied in practice. In this article, we mention the incentives for investment applied to FDI enterprises.
According to Vietnamese law, FDI enterprises comprise:
- Enterprises established in the form of investment of establishing a business organization whose members or shareholders are foreign investors and granted the investment registration certificate in accordance with the investment law; or
- Enterprises owned at least 51% of charter capital by foreign investors.
FDI enterprises shall be applied the incentives when implementing investment projects in Vietnam as follows:
1. Economic Incentives
Economic incentives applied to FDI enterprises include tax incentives and rights to be guaranteed their rights related to investment activities.
2. Tax incentives
Firstly, applying corporate income tax (“CIT”) incentives for FDI enterprises, when implementing:
- Investment projects on particular sectors such as implementing socialization activities in the fields of education – training, vocational training, culture, sports and environment, health, etc; or
- Investment projects in particular areas such as areas with extremely difficult economic conditions, economic zones, or high-tech zones including concentrated information technology zones were established under the Prime Minister’s decision…
Accordingly, FDI enterprises may be eligible for CIT incentives at the tax rates of 10%, or 17% within 10 years, 15 years, or during the implementing time of the project.
Besides, FDI enterprises may be also considered for a tax reduction if meeting the conditions for employing female employees.
The tax incentives are stated in Circular 78/2014/TT-BTT. It should be noted that FDI enterprises shall only be eligible for tax incentives when they implement the accounting, invoice, and voucher regimes and pay CIT according to the declaration.
During the period of enjoyment of CIT incentives, if FDI enterprises carry out many production and business activities, they must separately calculate income from production and business activities entitled to CIT incentives (including preferential tax rates, tax exemption and reduction rates) and income from business activities not entitled to tax incentives for separate tax declaration and payment.
Secondly, applying import tax exemption for FDI enterprises under Decrees 134/2016 ND-CP and 18/2021/ND-CP in the following cases:
- Goods imported to create fixed assets of projects entitled to investment incentives;
- Raw materials, supplies and components imported for production activities in connection with projects on investment incentives industries or in extremely difficult economic areas.
Moreover, the establishment of preferential tariff agreements for ASEAN and WTO members has helped many investors reduce input costs, increase productivity, and enhance competitiveness in domestic and foreign markets.
Finally, applying tax exemption for non-agriculture land use
FDI enterprises may be applied tax exemption for non-agriculture when implementing investment projects on investment incentives industries or in extremely difficult economic areas; investment projects in the field of investment promotion (investment incentives) in areas with difficult socio-economic conditions; or investment projects on socialization for activities in the fields of education, vocational training, health, culture, sports, and environment.
3. Rights to be guaranteed the rights related to FDI enterprises’ investment activities
Accordingly, the ownership of assets, capital, income, other lawful rights, and interests of foreign investors are recognized and protected by the Vietnamese State, especially:
- Lawful assets of foreign investors shall not be nationalized or confiscated by administrative measures;
- Where the foreign investors’ asset is bought or requisitioned by the Vietnamese State for reasons of national defense and security, national interests, state of emergency, or natural disaster management, the investors shall be reimbursed or compensated in accordance with regulations of law on asset requisition and relevant regulations of law;
- Be Permitted to transfer the assets such as investment capital and proceeds from the liquidation of its investment, income obtained from business investment activities, money, and other assets under the lawful ownership of the investors overseas after fulfilling all financial obligations to the Vietnamese government.
Besides, under the Law on Investment 2020 and Decree 31/2021/ND-CP, the Vietnam State guarantees foreign investors’ business activities as follows:
- Foreign investors shall not be required to satisfy requirements such as giving priority to purchase or use of domestic goods/services; only purchasing or use goods/services provided by domestic producers/service providers, or achieving a certain export target; restricting the quantity, value, types of goods/services that are exported or domestically produced/provided; etc.
- Where the newly promulgated legal document stipulates new investment incentives or higher investment incentives, the investor shall be entitled to investment incentives according to the provisions of the new legal document for the remaining incentive period of the investment project, except for special investment incentives for particular investment projects.
Additionally, according to Resolution 98/2023/QH15 effective from August 1, 2023, FDI enterprises who satisfy the conditions to become strategic investors may enjoy more attractive incentives when implementing investment projects according to the specified list by competent authorities in Ho Chi Minh City.
4. Land and water surface rental incentives
Subject to the investment law, FDI Enterprises may be considered for an exemption or reduction of land rent in some cases, such as implementing investment projects with special investment incentives in areas with extremely difficult socio-economic conditions, implementing social housing construction projects, etc.
It should be noted that FDI enterprises must carry out the procedures for applying for exemption or reduction according to regulations to apply this policy.
Thus, with the above investment incentive policies, the State of Vietnam has created favourable conditions to attract investment from domestic and foreign investors through FDI enterprises with the desire to promote cooperation, and world economic integration, creating a level playing field for investors, and at the same time creating favourable conditions for economic balance between regions.