In recent years, the Vietnamese government has invested significant resources in enhancing its legal framework and improving the business environment to facilitate new waves of investment. Specifically, it has implemented crucial policies aimed at attracting potential foreign investors in high-tech areas. This article provides current insights on special investment incentives and tips on how to claim these benefits.
The prerequisites that must be fulfilled in order to qualify for the special investment incentives
Part 1:
The Prime Minister has issued Decision No. 38/2020/QD-TTg, which outlines the List of High Technology sectors that are given priority for investment and progression, as well as the List of High Technology Products that are encouraged for development. Therefore, investment projects that fall within these lists will be provided with incentives for investment. In accordance with Decision 38, there are specific sectors that foreign investors can consider for investment, which include:
+ Artificial Intelligence Technology.
+ Big Data Technology and Analytics.
+ Blockchain Technology.
+ Virtualization Technology, Cloud Computing, Grid Computing, Edge Computing, and 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.
Part 2:
Apart from the fields mentioned, investors must adhere to certain conditions as stated in the Law of High Technology and the Law of Investment. Decision No. 10/2021/QD-TTg specifies the following conditions that investors must comply with in order to be qualified as a high-tech business:
+ A minimum of 70% of total annual net revenue must come from hi-tech products.
+ A minimum of 0.5% to 2% of the total annual net revenue must be allocated to Research and Development (R&D) activities, with at least 0.5% for enterprises with a total capital of over VND 6 trillion (US$260.87 million) and more than 3000 employees.
+ Enterprises with total capital exceeding VND 100 billion (US$4.35 million) and possessing a workforce of more than 200 employees must allocate at least 1% to R&D activities; while all other businesses should spend a minimum of 2%.
Investors are also required to employ workers who have a bachelor’s degree or higher, which should range from 1% to 5% based on the total number of employees and investment amount. However, the number of college-educated workers cannot exceed 30% of the total workforce for high-tech businesses.
Special investment incentives for high-tech projects
Investors and investment projects that meet the relevant criteria will benefit from special investment incentives.
Corporate income tax:
As outlined in Articles 15 and 16 of Decree 218/2013/ND-CP, investors working on high-tech application projects listed above are eligible for a four-year tax exemption and a 50% reduction of payable tax for the subsequent nine years. In addition, investors who engage in projects requiring significant high-tech investments can benefit from a tax rate of 10% for a duration of 15 years, which can be extended for up to 30 years.
CIT for projects in high-tech zones:
Decision 53/2004/QD-TTg stipulates that investment projects located in high-tech zones will receive a corporate income tax rate of 10% during the implementation phase. Furthermore, these projects will be exempt from corporate income tax for four years starting from the taxable income date. Clause 1, Article 3 also provides that the payable tax amount will undergo a further reduction of 50% for the succeeding nine years.
Value Added Tax (VAT):
The Law on VAT states that machinery, equipment, spare parts, and supplies imported for direct use in scientific research and technological development are exempt from VAT if they cannot be domestically produced. Furthermore, a favorable VAT rate of 5% applies to several services related to technology development.
Land rent:
As per Article 19 of Decree 46/2014/ND-CP on land rent and water surface rent collection, investors with high-tech projects are exempt from land rent payment for up to 15 years, or for the project’s entirety.
Additional incentives:
The Prime Minister has approved the National High-tech Development Program until 2020 in Decision No. 2457/QD-TTg. The government introduced and authorized Decision 130/QD-TTg, which established the National Program for High Technology Development until 2030. Investors under the National High-tech Development Program are eligible for:
+ Up to 85% of capital borrowing from Vietnam Development Bank. Moreover, the Program offers full interest support for a five-year period to assist investors.
+ Financial support 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.
+ A one-time capital investment budget settlement that supports investment for the Program’s duties post-investment.
In the event that investment projects meet the requirements for investment capital, disbursement duration, and other specific criteria (such as high technology proportion, supply chain participation level of Vietnamese companies, VAT proportion in product costs, and technology transfer scale), investors will benefit from other special investment incentives outlined in Decision 29/2021/ QD-TTg.
Procedures for claiming special investment incentives
To claim investment incentives, follow the procedure outlined in Article 17 of the Law on Investment 2020 and Article 23 of Decree 31/2021/ND-CP, which involves the following steps:
Step 1: Determine the eligibility for investment incentives
After investors granted an investment registration certificate, investment policy decision, or science and technology certificate can proceed to claim investment incentives following the guidelines provided in their certificates. Otherwise, investors will need to meet the criteria specified by Clause 2, Article 15 of the Law on Investment 2020.
Step 2: Submit the investment incentive application to the relevant state agency
The application file should include declaration or a request for the investment incentives, along with the investment registration certificate, investment policy decision, or science and technology certificate (if available). Executive agencies responsible for the application of land incentives and other incentives specified by law are tax offices, financial agencies, customs offices, and state agencies.
Step 3: Tax offices, financial agencies, customs offices, and state agencies assess eligibility for the incentives and apply land and other incentives to qualified investors.
Conclusion
In conclusion, Vietnam’s investment incentives are creating exciting opportunities for foreign investors interested in the high-tech industry. The government has implemented policies and regulations aimed at facilitating foreign investment and economic growth, making Vietnam an increasingly attractive destination for investment, particularly in high-tech manufacturing, research, and development.
Foreign investors can benefit significantly from these investment incentives, which create new opportunities for innovation, growth, and market expansion in Vietnam. It is an opportune time for foreign investors to explore Vietnam’s investment options and maximize their potential advantages, creating a win-win situation for both investors and Vietnam’s vibrant economy.
Despite global economic turmoil and escalating tensions between Ukraine and Russia, Vietnam remains a promising investment destination. Its high-tech industry is particularly attractive, with significant investment incentives and policies in place. Therefore, it is an opportune time to explore investment possibilities in Vietnam.
Harley Miller Law Firm (HMLF) advises foreign corporations to seek the expertise of its business advisory unit to gain deeper insights into the Vietnamese market.
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn Email: miller@hmlf.vn
