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In recent years, the Vietnamese government has been making great efforts to improve the legal framework and business environment for more new waves of investment. Especially, the government has issued several critical policies to attract potential foreign investors in the high-tech sectors. In this article, you will be provided up-to-date insights in special investment incentives and several tips for claiming these benefits.
Requirements to be met for the special investment incentives
On Decision No. 38/2020/QD-TTg, the Priminister promulgated the List of High Technology which are prioritized for investment and advancement, and the List of High Technology Product which are encouraged to develop. Thus, investment projects under the aforementioned lists will receive investment incentives.
Following the Decision 38, there are particular fields foreign investors can consider for investment
- Artificial intelligence technology
- Big data technology and big data analytics.
- Blockchain technology (Blockchain).
- Virtualization technology, cloud computing, grid computing, edge computing, fog computing.
- Technology for designing, integrating and optimizing telecommunications networks and systems in the national telecommunications infrastructure.
- Technology for integrating telecommunications and information technology systems
Aside from the listed fields, investors need to meet several conditions as stated in the Law of High Technology and the Law on Investment. In addition to this, Decision No. 10/2021/QD-TTg specified some following conditions that investors critically follow for being qualified as a high-tech business:
- At least 70% of total annual net revenue derived from hi-tech products;
- At least 0.5 to 2% of total annual net revenue allocated to research and development (R&D) activities, or at least 0.5% for enterprises with total capital over VND 6 trillion (US$260.87 million) and more than 3000 employees;
- Businesses with total capital of VND 100 billion (US$4.35 million) and more than 200 employees must allocate at least 1% to R&D activities; and all other businesses should spend at least 2%.
At the same time, investors are also required to hire employees with a bachelor degree or higher, which ranges from 1 to 5% depending on the total number of employees and investment amount. Yet, the number of college-level employees cannot be over 30% of the total workforce for high-tech businesses.
Special investment incentives for high-tech projects
Qualified investors and investment projects will enjoy special investment incentives.
Corporate income tax
According to Articles 15 and 16 of Decree 218/2013/ND-CP, with high-tech application projects in the aforementioned list, investors are entitled to 4-year tax exemption and 50% reduction of payable tax for the next 9 years. In addition, for projects that need large-scale and high-tech investments, investors will enjoy the tax rate of 10% for a period of 15 years, which can be extended but not exceeding 30 years.
CIT for projects in high-tech zones
With investment projects in high-tech zones, investors will receive the corporate income tax rate of 10% during the project implementation period, and be exempted from corporate income tax for 4 years from the date of taxable income. Along with that, 50% of the payable tax amount is reduced for the next 9 years (Clause 1, Article 3 of Decision 53/2004/QD-TTg)
Value Added Tax (VAT)
In Article 5 and Clause 15, Article 10 of the Law on VAT, machinery, equipment, spare parts and supplies are not subject to VAT if they cannot be produced at home and must be imported for direct use for scientific research and technological development. Additionally, several services for the purpose of technology development will be advantaged with the VAT rate of 5%.
Land rent
According to Article 19 of Decree 46/2014/ND-CP on collection of land rent and water surface rent, investors with high-tech projects are free from paying land rent for up to 15 years or even for the duration of the project.
Other offers
The Prime Minister issued Decision No. 2457/QD-TTg approving the National High-tech Development Program by 2020. Last year, Decision 130/ QD-TTg was approved and promulgated on the National Program for High Technology Development by 2030. Accordingly, for projects under the National High-tech Development Program, investors are permitted to:
- Borrow up to 85% of capital at Vietnam Development Bank. Plus, the Program of full interest support will assist investors for a period of 5 years.
- Support expenses for research, training, consulting, technology transfer, testing, laboratory construction, design center construction, trial production, purchase of sample products, equipment and sample lines, and test equipment.
- Make a one-time settlement for the investment budget capital, supporting the investment for the Program's tasks afterwards.
In case the investment projects meet criteria on investment capital, disbursement period, and other specific criteria (for example the proportion of high technology, the participation level of Vietnamese enterprises in the supply chain, the proportion of VAT in product costs and the level of technology transfer), the investors will benefit from other special investment incentives regulated in Decision 29/2021/ QD-TTg.
How to claim special investment incentives
Based on Article 17 of the Law on Investment 2020 and Article 23 of Decree 31/2021/ ND-CP, the procedure for investment incentives are as follow:
Step 1: Determining the basis for the application of investment incentives
If investors and investment projects are granted an investment registration certificate, investment policy decision or a science and technology certificate, the investor shall carry out procedures for enjoying investment incentives based on the contents of the certificates. Otherwise, investors shall base themselves on the beneficiaries of investment incentives specified in Clause 2, Article 15 of the Law on Investment 2020.
Step 2: Submitting the application file for investment incentives at the head office of the state agency which applies investment incentives
A set of document includes
- Declare/request for the application of investment incentives.
- An investment registration certificate, investment policy decision or a science and technology certificate (If any)
Executive agencies are Tax offices, financial agencies, customs offices, and state agencies that have the power to apply land incentives and other incentives as prescribed by law.
Step 3: Tax offices, financial agencies, customs offices, and state agencies apply land incentives and other incentives to qualified investors.
To sum up…
High-tech corporations are eyeing Vietnam as their global manufacturing base. Japanese investors pioneered the extensive investments in Vietnam, with the participation of large well-recognized corporations namely Sanyo, Matsushita, Sony, Fujitsu, Toshiba, Panasonic, Nidec, among others. These corporations have built manufacturing plants using high levels of modern technology and are continuing to invest more for their expansion activities.
Accumulated to 2021, “giant” tech corp Samsung has invested USD$ 18.2 billion in Vietnam and by the end of this year this figure is expected to exceed USD$ 21.5 billion. In addition, the group is building their largest regional research and development center worth USD$ 220 million in Hanoi, and is also planning to expand the manufacturing activities in Bac Ninh and Thai Nguyen.
Recently, Apple relocated 11 factories of Taiwanese enterprises in its supply chain to Vietnam, while many other high-tech firms such as Foxconn, Luxshare, Pegatron, Wistron have also expanded their existing production facilities here.
In short, despite being affected by the global economic crisis, along with the escalating tension of the Ukraine-Russia conflict, Vietnam still presents its potential. With tremendous investment policies and incentives, Vietnam’s high-tech industry is among one of the attractive sectors for your considerations. This is also a favorable time for you to seek new investment opportunities in Vietnam.
Yet, to have a better understanding of the investment incentive mechanisms and policies in Vietnam, foreign investors should consult top-notch experts with local expertise. Viettonkin is one of the leading professional firms with more than 12-year experience in diverse industries and majors. Our team of well-informed professionals in Vietnamese markets and legal systems are capable of assisting you to navigate through the process of establishing a new business in Vietnam. With us by your sides, you can focus on what really matters to you. Let us be your trustworthy partner!
