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LEGAL TUTORIALS FOR DOING BUSINESS IN VIETNAM

Investment incentives for business sectors in Vietnam


Investors with capital but haven't made their mind up about which business sectors to invest in in Vietnam should consider those subject to investment incentives in order to increase profits.

Business sectors with special investment incentives

Business sectors with special investment incentives are divided into 4 main groups with 27 specific sectors:

Groups of business sectors

Names of business sectors

(I) High technology, information technology, ancillary industries

1. Application of high technologies in the List of high technologies given priority of development investment under the Prime Minister’s decision (Vietnamese).

2. Production of products in the List of hi-tech products encouraged to develop under the Prime Minister’s decisions (Vietnamnese).

3. Production of ancillary industrial products under the Prime Minister’s decisions.

4. Creation of high technologies and high technological enterprises; ventured investment in high technology development; application, research and development of high technology in accordance with the regulations on high technology; manufacturing of biotechnological products.

5. Production of software products, digital information content products, mandatory information technology products, software services, information security troubleshooting services, information protection service in accordance with the regulations on information technology.

6. Production of renewable energy, clean energy, and energy from waste destruction.

7. Production of composite materials, light building materials, and rare materials.

(II) Agriculture

8. Cultivation, nuture, protection and development of forests.

9. Cultivation, process, preserve of agricultural, forest and aquatic products.

10. Production, multiplication and hybridization of plant varieties, animal breeds, forest tree seeds and aquatic breeds.

11. Production, exploit and refinement of salt.

12. Offshore fishing combines the application of advanced fishing gear methods; fishery logistic services; building fishing ship facilities and building fishing ships.

13. Sea rescue services.

(III) Environmental protection, infrastructure construction

14. Collection, treatment, recycling and reuse of concentrated waste

15. Construction, trade in infrastructure of industrial zones, export processing zones, hi-tech zones and functional zone in the economic zones.

16. Investment in the development of water plants, power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports; airports, train stations and other significantly special infrastructure works decided by the Prime Minister.

17. Development of public passenger transport in urban areas.

18. Investment in the construction and management and trade of markets in rural areas.

(IV) Culture, society, sports, healthcare

19. Construction of social housing and resettlement housing.

20. Investment in business of epidemic prevention facilities.

21. Scientific research on the technology of preparation and biotechnology for the production of new medicines.

22. Production of ingredients for making medicines and mandatory medicines, essential drugs, medicines for prevention and treatment of sexually transmitted diseases, vaccines, medical bio-products, herbal drugs, traditional drugs; the patent certificate and related certificate of drug coming to expire; application of advanced technologies and biotechnological technologies to produce medicines for human beings gaining the international GMP standards; production of packages directly exposed to the drug.

23. Investment in methadone production facilities.

24. Investment in training centers, high-achievement sports training and sport training centers for the disabled people; building sports facilities with equipment for training and competition to meet the requirements of organizing the international tournaments; facilities for practicing, competing in professionally physical training and sports.

25. Investment in centers of geriatric and psychiatric, treatment for dioxin patients, healthcare for elderly, the disabled people, orphans, homeless children.

26. Investment in the center of Treatment - Education - Social Labor; drugs detoxication facilities, tobacco detoxication; HIV/AIDS treatment facilities.

27. Investment in national-level museums, ethnic cultural houses; dance, folk songs; theaters, studios, film production facilities, film-printing; art exhibitions - photography; producting, creating, repairing the ethnic musical instruments; mantaining and preserving the museums, ethnic culture houses, cultural and art schools; the craft village for introduction and development of the traditional sectors.


Business sectors with investment incentives

Investment incentives include 5 groups of major business sectors in which there are 30 specific business sectors.

Business sector groups with investment incentives have lower incentive rates than those with special investment incentives.

Groups of business sectors

Names of business sectors

(I) Scientific technology, electronics, mechanics, material produciton, information technology

1. Manufacture of products in the List of important mechanical products under the Prime Minister's decision.

2. Investment in research and development (R&D).

3. Manufacture of steel billets from iron ore, high-grade steel, alloys

4. Manufacture of coke and activated carbon.

5. Manufacture of energy-saving products.

6. Manufacture of petrochemicals, pharmaceutical chemistry, basic chemicals, plastic components - technical rubber.

7. Manufacture of products having 30% of added value or above (in accordance with the Ministry of Planning and Investment’s instruction)

8. Manufacture of automobiles, automobile’s spare parts, shipbuilding

9. Manufacture of electronic components, electronic clusters which are not included in List A of this Appendix.

10. Production of machine tools, machinery, equipment, spare parts, machines for the industry of agriculture, forestry, fishery, salt, food processing machines and irrigation equipment which is not in the List of special investment incentives.

11. Manufacture of materials replacing asbestos.

(II) Agriculture

12. Cultivating, growing, harvesting and processing medicinal herbs; protecting and preserving sources of gene, rare and special medicinal herbs.

13. Producting, refining of animal feeds, poultry and aquaculture.

14. Scientific, technical services on cultivation, animal husbandry, aquaculture, protection of plants and animals.

15. New construction, renovation and upgrade of slaughter facilities; preservation and processing poultry, cattle that concentrates the industry.

16. Building and developing the concentrated material area serving the processing industry.

17. Seafood harvesting.

(III) Environmental protection, infrastructure construction

18. Construction, development of infrastructure of industrial cluster.

19. Constructing the apartments for workers in industrial zones, export processing zones, hi-tech zones, economic zones; Building the student dormitories and building houses for social policy beneficiaries; investing the construction of functional urban areas (including kindergartens, schools and hospitals) serving workers.

20. Handling oil spill, remedy of mountain slides and levees, riverbank, coast, dam, reservoir and other environmental incidents; applying greenhouse gas emission mitigation technology, destroying the ozone layer.

21. Investment in operation of goods exhibition centers, logistics centers, warehouses, supermarkets, shopping malls.

(IV) Education, culture, society, sports, health

22. Investment in infrastructure business of education and training facilities; investment in developing non-public education and training facilities at all levels: kindergarten education, general education and vocational training.

23. Manufacturing medical equipment, building warehouses for preserving medicines, storing medicines for human usage in order to prevent natural disasters, catastrophes and dangerous epidemics.

24. Manufacturing ingredients for making medicines and plant protection medicines, pesticides, insecticides; disease prevention and treatment for animals and aquatic animals.

25. Investment in biological testing facilities, bioavailability assessment of drugs; pharmacy facilities fulfil the standard of good practice in the manufacture, preservation, testing and clinical trials of medicines.

26. Investment in researching to prove the scientific basis of Oriental drugs, traditional drugs and the construction of testing standards for Oriental drugs and traditional drugs.

27. Investment sport centers, gymnasiums, sports clubs, stadiums, swimming pools; facilities of producing, creating or repairing equipment for physical training.

28. Investment in the public library, cinema.

29. Investment in the construction of cemeteries, cremation services.

(V) Other business sectors

30. Activities of people's credit funds and microfinance institutions.


If investors select business sectors eligible for investment incentives and have related projects located in areas with difficult socio-economic conditions, they will enjoy the same preferences as those in geographical areas with extremely difficult socio-economic conditions.

Preferential rate of geographical areas with extremely difficult socio-economic conditions will be higher than the preferences of geographical areas with difficult socio-economic conditions.

For example:

An investor chooses to invest in animal feed production, which is qualified for investment incentives.

The project is then based in Nghia Hanh District of Quang Ngai Province, with which comes difficult socio-economic conditions.


As a result
, the investor is entitled to preferences applicable to areas with extremely difficult socio-economic conditions.

Investment projects that meet the conditions to enjoy different investment incentive rates will receive the highest preferential rates.

For example:  

An investor produces software in Ly Nhan District, Ha Nam Province.

  • Software production is entitled to corporate income tax (CIT) preference: maximum tax exemption for the first 4 years, 5% tax rate for the next 9 years, and 10% for the next 2 years.
  • Ly Nhan District of Ha Nam Province is an area with difficult socio-economic conditions, subject to a preferential CIT rate of 17% for 10 years.

Since the investor can only enjoy either one of the abovementioned, he/she is entitled to the highest incentive that is sector-related. 

Article 16 of the Law on Investment 2014

Annex 1 of Decree 118/2015/ND-CP

 

Possible investment incentives:

  • Lower CIT rates
  • CIT exemption and reduction
  • Import duty exemption
  • Land rental and land use tax exemption
     

How to specifically determine investment incentive levels applicable to each industry?

Determination of appropriate investment incentive levels would bring benefits to investors throughout their duration of operation in Vietnam.

However, the detailed level respectively applicable to each industry is regulated in different legal documents, including:

  • The Law on Investment;
  • International treaties;
  • Legal documents governing specialized sectors, etc.

In addition, these investment incentive regulations are written in Vietnamese.

When using the service of Starting a business in Vietnam, investors can request PLF to advise on specific incentive levels applicable to their sectors of interest.

Questions