Tax incentive in Vietnam

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Question: We are FDI company in Hoai Nhon district, Binh Dinh province and is located in the area where we may have the tax incentive, we are expecting to apply for the Tax incentive

Could you consult us any way to apply for that following the guidance from Government?

Answer: SBLAW would like to advise as follows:

1. Under Vietnam Law, investment incentives can be granted to an enterprise if the enterprise operates in either of

(i) preferred business lines; your company can consider carrying out one of following business activities:

a) Hi-tech activities, hi-tech ancillary products, research, manufacturing and development of from science and technology products in accordance with regulations of law on science and technology;

b) Manufacturing of new materials, new energy, clean energy, renewable energy; manufacturing of products with an added value of 30% or more; energy-saving products;

c) Manufacturing of key electronics, mechanical products, agricultural machinery, automobiles, automobile parts; shipbuilding;

d) Manufacturing of products on the List of prioritized supporting products;

đ) Manufacturing of IT products, software products, digital contents;

e) Breeding, growing and processing of agriculture products, forestry products, aquaculture products; afforestation and forest protection; salt production; fishing and fishing logistics services; production of plant varieties, animal breeds and biotechnology products;

g) Collection, treatment, recycling or re-use of waste;

h) Investment in development, operation, management of infrastructural works; development of public transportation in urban areas;

i) Pre-school education, general education, vocational education, higher education;

k) Medical examination and treatment; manufacturing of medicinal products and medicinal materials, storage of medicinal products; scientific research into preparation technology and biotechnology serving creation of new medicinal products; manufacturing of medical equipment;

l) Investment in sports facilities for the disabled or professional athletes; protection and promotion of value of cultural heritage;

m) Investment in geriatric centers, mental health centers, treatment for agent orange patients; care centers for the elderly, the disabled, orphans, street children;

n) People's credit funds, microfinance institutions;

o) Manufacturing of goods and provision of services for the purposes of creating or participating in value chains and industrial clusters.

Please note that in order to confirm that your business activities fall into item a) or b) above, you shall have to apply with the Ministry of Science and Technology and they shall verify and examine whether your products/technology can satisfy the conditions mentioned in item a) or b) above.

Again, we would like to note that only incomes incurred from above said business activities are entitled to tax incentives.

(ii) disadvantaged areas and extremely disadvantaged areas; or Industrial parks, export-processing zones, hi-tech zones and economic zones.  

2. The current registered business lines of your company do not fall into the list of preferred business lines under Vietnam Law. In addition, neither the registered head office of your company nor the factory in Hoai Nhon District fall into the list of disadvantaged areas and extremely disadvantaged areas. Then, your company is not entitled to any investment incentive under Vietnam Law.

3. We also would like to note that, in case an enterprise registers different business lines, including business lines eligible for investment incentives and business lines not eligible for investment incentives, only incomes rendered from business lines eligible for investment incentive can be entitled to the incentives. Similarly, only incomes incurred from the location eligible for investment incentive can be entitled to tax incentives.

4. In light the above analysis, we are of the opinion that, in your case, you can consider setting up a factory in one of following industrial parks in Binh Dinh Province in order to be eligible for investment incentives:

(i) Nhon Hoa Industrial Park in An Nhon Town, Binh Dinh Province;
(ii) Hoa Hoi Industrial Park in Phu Cat District, Binh Dinh Province;
(iii) Cat Trinh Industrial Park in Phu Cat District, Binh Dinh Province
With this option, your company will be entitled to preferential corporate income tax, specially: Tax exemption for 02 years, deduction of 50% tax payable for the next 4 years from the year in which the enterprise earns profit.
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