Overview of investment preference policies
A string of investment preference policies on corporate income tax, land lease, finance, export, as well as loss carryforward have been introduced with a view to luring investors to encouraging investment areas and fields.
Concessionary land and water surface lease
Incentives are stipulated at Decree 121/2010/ND-CP, dated December 30, 2010 on land and water surface lease fee.
Accordingly, land and water surface lease fees are exempted within three years since projects which are listed in the domains of investment preferences start operation or those which are relocated to safer places due to environmental pollution.
Seven years of land and water surface lease fee exemption are given to projects in the list of geographical areas with difficult socio-economic conditions entitled to investment preferences.
Projects in areas with extremely difficult socio-economic conditions, in the list of domains entitled to extremely investment preferences, and in areas with difficult socio-economic conditions get 11 years of fee exemption.
Meanwhile, land and water surface lease fees are exempted up to 15 years for projects in domains entitled to investment preferences in areas with extremely difficult socio-economic conditions or in domains entitled to extremely investment preferences in areas with difficult socio-economic conditions.
Especially, agricultural projects get the biggest incentives. Agricultural projects entitled to extremely investment preferences get land lease fee exemption. Those entitled to investment preferences enjoy 70% of land lease fee exemption. Those entitled to encouraging investment preferences get 50% of land lease fee exemption.
Corporate income tax incentives
Under the corporation income tax (CIT) law which was passed by the National Assembly on June 19, 2013 and came into effect since January 1, 2014, the standard corporate income tax rate is reduced to 22%, which will be further reduced to 20%, effective on January 1, 2016.
Exemption of duty
The Government’s Decree 149/2005/ND-CP, dated December 6, 2005 stipulates detailed provisions for implementation of law on import and export duty as follow:
• Goods that are imported for processing for a foreign party and are entitled to import duties exemption upon its import and export duties upon re-exported of finish goods to foreign party;
• Goods that are exported abroad for processing for a Vietnamese party and are exempted from export duties, and are entitled to import duties exemption for the value of parts of goods exported for processing under the contract;
• Goods imported to form fixed assets for encouraging investment projects;
• Plant crop and breedings which are permitted to import for implementation of investment projects in fields of agriculture, forestry and aquaculture;
• Goods imported by the BOT enterprise and its sub-contractors for implementation of BOT, BTO, BT projects;
• Exemption of duty for imported goods in service of oil and gas activities;
• Shipbuilding yards shall be entitled to exemption of export duty for exported products of sea-going vessels and exemption of import duty for the machinery and equipment forming fixed assets;
• Import duty shall be exempted in respect of raw materials and supplies directly used in processing of software which have not yet been producible in;
• Import duty shall be exempted in respect of the goods imported for direct Viet Nam use in activities of scientific research and technological development;
• Raw materials, supplies and spare parts imported for manufacture of projects in the list of specially encouraging investment fields;
• Raw materials, supplies and semi-finished products which have not yet been producible in Viet Nam and are imported for manufacture of projects in the list ofencouraging investment fields;
• Goods manufactured, processed, recycled and assembled in non-tariff zones without use of imported raw materials and components shall be subject to exemption of duty;
•Machinery, equipment and means of transport (excluding automobiles of less than 24 seats and automobiles designed to carry both passengers and goods equivalent to those of less than 24 seats) imported by the foreign contractor in form of temporary import for re-export in service of execution of ODA-funded works and projects in VietNam.
In addition, Decree 68/1998/ND-CP, dated September 3, 1988 regulates natural resource tax and Decree 158/ND-CP, dated December 10, 2003 stipulates the implementation of the Value added Tax (amended).
Enterprises suffering from losses are allowed to conduct loss carryforward to next year. The amount of loss is deducted to taxable income. Duration of loss carryforward is less than five years.