Vietnam has a booming economic environment that attracts international companies looking to expand their operations in the nation. Being a member of ASEAN, its strategic location in Southeast Asia along with several free trade agreements makes the nation a desirable investment location. Its population of about 99 million individuals provides
foreign company owners with access to a young and vibrant workforce at reasonable prices.
In addition to that, to foster an advantageous business atmosphere and promote foreign direct investment throughout different sectors in the nation, the government has introduced numerous investment incentives. The different forms of investment incentives for foreign companies in Vietnam include incentives for research and development, tax incentives, land incentives, and financial incentives. All these incentives for foreign investors in Vietnam provide numerous benefits such as tax exemptions, land rent reductions, and the option to have access to capital at lower interest rates.
In this article, we will highlight the different investment incentives for foreign companies in Vietnam. It will cover how the incentives for foreign investors in Vietnam provide individuals with opportunities in different business sectors.
Numerous Investment Incentives for foreign companies in Vietnam
There are different kinds of incentives for foreign investors in Vietnam, such as:
1. Corporate Income Tax (CIT) incentives
Corporate Income Tax (CIT) incentives are one of the most alluring Investment incentives for foreign companies in Vietnam. CIT incentives are offered to both domestic as well as foreign investors in order to invest in industries or geographic regions that support plans for national development. Specific initiatives under the CIT incentives are eligible to be exempt from corporate income tax for a given period. The period for such tax incentives depends on the area and type of investment.
There are two primary categories of CIT incentives for foreign investors in Vietnam, including:
- Preferential tax rates
- Tax holiday
Preferential Tax Rates
Businesses are allowed to contribute to CIT at a rate that’s less than the usual 20%. Three preferential rates are available: 10%, 15%, and 17%. By the given provisions, these reduced rates may be applicable for the duration of a project or for a specific time frame. With some limited exceptions, including high-tech businesses or endeavors, the preferential tax rate generally begins to apply with the year in which revenue is initially generated.
Companies may be eligible to avoid paying CIT for a predetermined time, often four years. In some circumstances, businesses also enjoy a partial tax holiday following the expiration of a full tax holiday, in which instance they are only required to contribute 50% of the applicable tax.
2. Land Incentives
Another investment incentive for foreign companies in Vietnam is land incentives. The land is a crucial component of investment, and Vietnam provides a range of land incentives that draw in investors from overseas. These incentives make it easier for investors to make investments in various industries and further assist in lowering the expenses related to purchasing and employing land for commercial purposes, whether it’s during the early years or throughout the entire project.
Here are the following land incentives for foreign investors in Vietnam:
Land leasing conditions
The maximum rental duration for land assigned to endeavors with foreign investments is typically 50 years, with the option of further extensions.
Land use rights
Overseas investors have the option of obtaining land use rights in Vietnam. These rights provide the investors with the ability to legally possess and utilize the land. These sort of investment incentives for foreign companies in Vietnam provides more protection and flexibility.
Land rental exemptions
Foreign businesses may occasionally be exempted from paying land rent or have their payments reduced. Vietnam provides extremely attractive land rental reductions based on the corporate sector and geographical region.
The government grants such incentives and exemptions for specialized projects that meet specified requirements, including investment in promoted industries, particular business disciplines, and/or promoted geographical areas.
Incentives like these are often offered to promote investment in particular sectors or high-priority locations like high-tech parks, industrial zones, or economic zones.
3. Customs Duty Exemptions
The Vietnamese government has put in place customs incentives designed to lower the expenses associated with importing tools, machinery, and raw materials for manufacturing to assist international businesses there.
Several significant customs incentives are as follows:
Exemptions from Import Duty
International enterprises may qualify for customs duty exemptions when importing machinery and tools that are required for their investment ventures but are unavailable within the nation’s border. This encourages the implementation of modern technologies while lowering the initial investment expenses.
Import Duty Reductions
When import charges are necessary, international businesses may profit from lower duty rates on imported inputs or commodities utilized in production or processing. These discounted rates support increased competitiveness and reduce production expenses.
Companies that satisfy one of the following requirements may benefit from exemptions from import duties:
- Commodities are imported to create fixed assets of certain legally authorized ventures.
- Imported goods are used to carry out export processing agreements with external partners.
- The necessary supplies and raw materials are imported to facilitate the manufacturing of software goods since they cannot be manufactured locally
- Products that cannot be manufactured locally are imported for purposes of scientific research and technical progress.
4. Investment Capital Incentives
For international businesses wishing to expand in Vietnam, having access to funding and investment capital is essential. The Vietnamese government provides a range of financial incentive programs to encourage investment and lower financing expenses.
These incentives consist of:
Another one of the incentives for foreign investors in Vietnam is access to funds at a lower interest rate. Investors from other countries might be able to acquire low-interest loans offered by commercial banks or financial organizations connected to the government. It is simpler for businesses to provide funding for their investment initiatives with these loans because they are frequently provided at advantageous interest rates and have longer terms for repayment.
Investment incentives for small and medium-sized enterprises (SMEs)
Vietnamese policy prioritizes helping SMEs, which includes those with foreign investment. Foreign businesses that satisfy the requirements for SMEs might be entitled to special financial incentives and aid designed specifically for small-scale businesses.
5. Incentives For High-Tech and R&D Projects
Vietnam sets a strong priority on fostering research and development endeavors and creating high-tech businesses. The government provides significant incentives for high-tech and R&D initiatives to entice foreign investment in certain regions.
These incentives include:
Extended Tax Holidays
R&D and high-tech initiatives can be qualified for a longer tax break than what is typically allowed. As a result, businesses in certain industries might enjoy a longer period of tax exemption or reduction, which could additionally lower their operating expenses.
Investment Capital Support
High-tech and R&D initiatives receive significant financial assistance from the government in the form of incentives, subsidies, or favorable loans. This assistance intends to promote technological advancement, innovation, and the growth of sophisticated enterprises in Vietnam.
Preferential Land Access
With regards to the distribution of land, the conditions of leasing, and the price of the property high-tech and R&D projects may be given preference. Through these incentives, businesses involved in these industries are guaranteed access to appropriate land for their investment operations.
Key sectors offering investment opportunities in Vietnam
Vietnam has investment opportunities in several industries, such as:
- Manufacturing and processing: The electronics, textile, apparel, and automotive industries are all heavily concentrated in Vietnam’s manufacturing sector.
- Renewable energy: Vietnam places a lot of emphasis on the development of renewable energy, especially the development of wind and solar power plants.
- Development of infrastructure: The government is constantly funding infrastructure initiatives, such as those related to transportation, energy, and urban planning.
- Software development and information technology: The nation’s IT sector is expanding quickly and bringing in international IT giants and start-ups.
Investment is promoted in several additional sectors in Vietnam, including those the government intends to promote, make easier for investors, or those are advantageous to society, such as the following listed below:
- A few sectors related to agriculture
- The medical and educational fields
- Research and Development
- High-tech sectors
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The Vietnamese government has established several incentive opportunities for foreign corporations looking for expansion prospects in Southeast Asia. Foreign companies in Vietnam can engage in successful and profitable operations by employing the various investment incentives available in the nation which include tax exemptions, land incentives, and financial assistance. These incentives in Vietnam present businesses with access to a favorable investment climate, lower investment expenses, and promote foreign direct investment across diverse industries.
You should be aware of the various investment incentives for foreign companies in Vietnam if you are looking to start a business venture there. Our experts at Odint are highly specialized in forming companies and can guide you with the requirements for setting up your business. We can further assist you with any queries you may have regarding Incentives for Foreign Investors in Vietnam.
There are different types of tax incentives in Vietnam such as corporate income tax incentives and customs duty exemptions. CIT incentives are further categorized under preferential tax rates and tax holidays.
Internal businesses in Vietnam have different ways of obtaining financial assistance such as by acquiring low-interest loans offered by commercial banks or financial organizations connected to the government.
The major industries in Vietnam that provide prospects for investment are those involved in manufacturing, renewable energy, information technology, high-tech enterprises, research and development, the medical and educational sectors, and agribusiness.
Tax incentives, financial incentives, incentives for high-tech and R&D projects, and other types of incentives are among the many categories of investment incentives Vietnam offers international enterprises.I
Meet Apurva Gaur, an accomplished and dedicated Company Secretary, whose passion for corporate governance and legal compliance has shaped her remarkable journey in the business world. With a wealth of experience and a keen eye for detail, Apurva has emerged as a leading authority in the field of corporate governance, earning accolades for her invaluable contributions to the companies she serves.