Are there any tax incentives or benefits available for solar energy businesses in Vietnam?
Rooftop solar power for self-production and self-consumption benefits from tax incentives under current tax laws:
- Corporate Income Tax (CIT): Eligible for a preferential CIT rate of 10% for 15 years, with a 4-year tax exemption and a 50% reduction in payable tax for the next 9 years (Point b, Clause 1, Article 13 of the 2008 Law on CIT; Point a, Clause 1, Article 16 of Decree 218/2013/NĐ-CP).
- Import Tax: Exemptions apply to:
+ Goods imported to create fixed assets for the project
+ Raw materials, supplies, and components not yet produced domestically, imported for production purposes within 5 years from the start of production
(Clause 11, Clause 13, Article 16 of the 2016 Law on Export and Import Taxes).
- Land Rental Exemption and Reduction: Investment project owners engaging in solar energy business activities are eligible for land use and land rental exemptions and reductions (Point c, Clause 2, Appendix XXX; Article 132 of Decree 08/2022/NĐ-CP).
- Exemption from Special Consumption Tax.
What will be the most efficient way to finance solar projects in Vietnam?
- Development Banks and Export Credit Agencies (ECA): Development banks such as ADB and ECAs play a significant role in financing solar energy projects, particularly in supporting capital costs and import services.
+ Advantages:
● Lower interest rates compared to commercial loans
● Long loan terms
● Credit risk support or insurance
● Attract additional international funding
+ Disadvantages:
● Requires guarantees from local banks or the government
● Strict binding conditions => increases project costs and implementation time
● Lengthy capital approval processes
- Debt Capital Markets and International Investors: Issuing bonds to raise funds from domestic markets and attract international investors with guarantees from local banks regarding payment options.
=> Disadvantages:
- The domestic debt capital market is small and lacks high liquidity.
- Exchange rate risk if capital is raised in foreign currencies.
- Local and International Joint Ventures: Receive financial support and benefit from technology transfer and expertise from international companies, helping domestic companies raise funds from multilateral development banks, such as ADB.
=> Disadvantages: Complexities in control, management, and benefit-sharing among the parties.
- Government and Local Bank Support Policies and Guarantees: Minimize risks and encourage international investors to participate. Preferential policies and guarantees on power purchase agreements (PPA) provide stability for sponsors and enhance project attractiveness. However, the legal framework is still incomplete, unstable, and subject to change.
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