DECISION

PRESCRIBING SPECIAL INVESTMENT INCENTIVES

Pursuant to the Law on Government Organization dated June 19, 2015; the Law on Amendments to the Law on Government Organization and the Law on Local Government Organization dated November 22, 2019;

Pursuant to the Law on Investment dated June 17, 2020;

Pursuant to the Law on Corporate Income Tax dated June 03, 2008; the Law on amendments to the Law on Corporate Income Tax dated June 19, 2013 and the Law on amendments to tax laws dated November 26, 2014;

Pursuant to the Government’s Decree No. 46/2014/ND-CP dated May 15, 2014 prescribing on land and water surface rents; the Government’s Decree No. 135/2016/ND-CP dated September 09, 2016 providing amendments to Decrees on collection of land levy, land and water surface rents;

Pursuant to the Government’s Decree No. 31/2021/ND-CP dated March 26, 2021 providing guidelines for implementation of the Law on investment;

At the request of the Minister of Planning and Investment;

The Prime Minister promulgates a Decision prescribing special investment incentives.

Article 1. Scope and regulated entities

1. This Decision provides regulations on levels, duration and conditions for application of special investment incentives to investment projects as prescribed in Clause 2 Article 20 of the Law on investment.

2. This Decision applies to regulatory authorities, organizations and individuals involved in special investment incentives specified in Clause 1 of this Article.

Article 2. Definitions

1. “Vietnamese enterprise” means an enterprise or cooperative that is established and operating under the law of Vietnam, and falls into neither case specified in Clause 1 Article 23 of the Law on investment.

2. ”total R&D expenses” are total expenses on research and development activities of an investment project, which are determined according to Clause 4 Article 3 of this Decision.

Article 3. Criteria concerning high technology, technology transfer and Vietnamese enterprises joining domestic production value chain 

1. Projects meeting high technology criteria specified in Point d Clause 6 Article 20 of the Government’s Decree No. 31/2021/ND-CP dated March 26, 2021 providing guidelines for implementation of the Law on investment (hereinafter referred to as “Decree No. 31/2021/ND-CP”) are determined as follows:

a) A level-1 high technology project is a project that applies, does research and development of high technologies or produces high technology products, and meets all of the following 3 conditions:

- Revenue from high technology products is accounted for at least 70% of the project’s annual net value;

- The annual ratio of total R&D expenses to total net revenue minus input costs (including costs of imported or domestically purchased materials and components serving the production) of the investment project is at least 0,5%;

- The ratio of employees directly performing R&D tasks to total employees of the investment project of the business entity is at least 1%.

b) A level-2 high technology project is a project that applies, does research and development of high technologies or produces high technology products, and meets all of the following 3 conditions:

- Revenue from high technology products is accounted for at least 80% of the project’s annual net value;

- The annual ratio of total R&D expenses to total net revenue minus input costs (including costs of imported or domestically purchased materials and components serving the production) of the investment project is at least 1%;

- The ratio of employees directly performing R&D tasks to total employees of the investment project of the business entity is at least 2%.

2. Vietnamese enterprises joining the value chain as prescribed in Point dd Clause 6 Article 20 of Decree No. 31/2021/ND-CP are determined as follows:

a) Vietnamese enterprises joining the value chain at level 1 is the case where there are Vietnamese enterprises other than the entities specified in Clause 1 Article 23 of the Law on Investment joining the value chain and all of the following 2 conditions are satisfied:

- The number of Vietnamese enterprises joining the chain and performing contracts for assembly and supply of components, materials and services for production of products is accounted for 30% - 40% of total enterprises joining the chain;

- At least 30% of prime costs is related to Vietnamese enterprises joining the chain.

b) Vietnamese enterprises joining the value chain at level 2 is the case where there are Vietnamese enterprises other than the entities specified in Clause 1 Article 23 of the Law on Investment joining the value chain and all of the following 2 conditions are satisfied:

- The number of Vietnamese enterprises joining the chain and performing contracts for assembly and supply of components, materials and services for production of products is accounted for more than 40% of total enterprises joining the chain;

- At least 40% of prime costs is related to Vietnamese enterprises joining the chain.

3. Value-added is the prime costs of all goods and services minus payments made to foreign parties (excluding in-country imported or exported materials covered in Certificate of Origin of goods of Vietnam according to regulations in force), including:

a) Costs of input materials, depreciation of fixed assets, machinery and equipment, costs of tools and devices imported from foreign countries;

b) Royalties, technology transfer costs, administrative expenses, selling expenses, financial expenses and other costs paid to foreign parties.

4. Total R&D expenses include:

a) Annual recurrent expenses on R&D activities;

b) Costs of training or supports for training provided for R&D workforce of business entities, science and technology organizations, and training institutions in Vietnam;

c) Costs of R&D cooperation with other entities; costs of hiring at fixed rate or support for entities implementing R&D projects;

d) Royalties, costs of transfer of ownership or rights to use industrial property objects serving R&D activities; fees for registration or protection of inventions or utility solutions in Vietnam;

dd) Depreciation of infrastructure assets and fixed assets serving R&D activities.

5. Employees directly performing R&D tasks include employees who possess associate degree or higher and meet all of the following 02 criteria:

a) The number of employees possessing associate degree shall not exceed 30%;

b) These employees have entered into employment contracts with a term of at least 01 year or indefinite term for working at R&D department or other departments with similar functions in the enterprise.

6. Technology transfer criteria are determined as follows:

a) Level-1 technology transfer  

- Be issued with certificate of transfer of technology the transfer of which is encouraged in accordance with regulations of the Law on technology transfer.

- Have carried out technology transfer for less than 03 Vietnamese enterprises within a period of 05 years from the issue date of investment registration certificate or decision on approval for investment guidelines or written agreement by a competent authority.

b) Level-2 technology transfer

- Be issued with certificate of transfer of technology the transfer of which is encouraged in accordance with regulations of the Law on technology transfer.

- Have carried out technology transfer for 03 or more Vietnamese enterprises within a period of 05 years from the issue date of investment registration certificate or decision on approval for investment guidelines or written agreement by a competent authority.

If an investment project uses land allocated or leased out by the State, or permitted by the State to repurpose, the period of 05 years specified in Point a and Point b of this Clause shall commence on the date on which the investor is issued with the decision on land allocation, decision on land lease or decision on land repurposing.  If the investor has obtained the decision on land allocation, decision on land lease or decision on land repurposing but the transfer of land is delayed, the period of 05 years begins from the date on which land is transferred on site.

Article 4. Rules for application and adjustment of investment incentives

Special investment incentives and assistance prescribed in this Decision shall be provided according to Clause 6 Article 20 of Decree No. 31/2021/ND-CP and the following rules:

1. Special investment incentives are applied to new investment projects and expansion projects.

2. Special investment incentives are specified in investment registration certificates, decisions on approval for investment guidelines or written agreements by competent authorities.

3. During the period of incentive enjoyment, the business entity shall be entitled to investment incentives according to the level of its satisfaction of conditions for such investment incentives for the remaining period of incentive enjoyment. The remaining period of incentive enjoyment shall be the period of enjoyment of incentives given under actually satisfied conditions minus number of years in which the corporate income tax was exempted or reduced, the preferential corporate income tax rate applied, and the land and water surface rent was exempted or reduced.

4. In the case specified in Clause 3 of this Article, if the business entity fails to fulfill commitments and conditions for application of special investment incentives, the following actions shall be taken:

a) In case special investment incentives have not been given, the business entity shall not be entitled to special incentives as prescribed in this Decision;

b) In case special investment incentives have been declared eligible but actually conditions for such incentives are not satisfied, the business entity shall not be entitled to special investment incentives, and concurrently declare and pay amounts of investment incentives received in the years in which conditions for investment incentives are not yet satisfied (if any) and late payment interests and penalties for violations in accordance with regulations of the Law on tax administration.

5. Time of application of preferential corporate income tax rate, corporate income tax exemption and reduction shall be determined according to the Law on corporate income tax.  Time of application of land and water surface rent exemption and reduction shall be determined according to the Law on land.

Article 5. Corporate income tax rates

1. The preferential tax rate of 9% shall be applied within a period of 30 years to incomes earned by the business entity from the investment projects specified in Point b Clause 2 Article 20 of the Law on investment.

2. The preferential tax rate of 7% shall be applied within a period of 33 years to incomes earned from one of the following investment projects:

a) A project on investment in establishment (including the expansion of such establishment project) of innovation centers and research and development centers with a total investment capital of at least VND 3.000 billion of which at least VND 1.000 billion is disbursed within 03 years from the issuance date of the investment registration certificate or the decision on approval for investment guidelines.

b) An investment project specified in Point b Clause 2 Article 20 of the Law on investment and meets any of the following criteria:

- It is a level-1 high technology project;

- There are Vietnamese enterprises joining the value chain at level 1;

- The value added is accounted for more than 30% to 40% of the prime costs of total finished products of the business entity;

- It meets level-1 technology transfer criteria.

3. The preferential tax rate of 5% shall be applied within a period of 37 years to incomes earned from activities of one of the following investment objects or projects:

a) The national innovation center established under the Prime Minister’s decision.

b) An investment project specified in Point b Clause 2 Article 20 of the Law on investment and meets any of the following criteria:

- It is a level-2 high technology project;

- There are Vietnamese enterprises joining the value chain at level 2;

- The value added is accounted for more than 40% of the prime costs of total finished products of the business entity;

- It meets level-2 technology transfer criteria.

Article 6. Corporate income tax exemption and reduction period

1. Tax exemption for 5 years and 50% tax reduction for the subsequent 10 years shall be applied to incomes earned by the business entity from the investment project specified in Clause 1 Article 5 of this Decision.

2. Tax exemption for 6 years and 50% tax reduction for the subsequent 12 years shall be applied to incomes earned by the business entity from the investment project specified in Clause 2 Article 5 of this Decision.

3. Tax exemption for 6 years and 50% tax reduction for the subsequent 13 years shall be applied to incomes earned from activities of the object or the business entity from the investment project specified in Clause 3 Article 5 of this Decision.

Article 7. Land and water surface rent incentives

1. Land and water surface rent exemption for 18 years and 55% rent reduction for the remaining period shall be applied to the business entity implementing the investment project specified in Clause 1 Article 5 of this Decision.

2. Land and water surface rent exemption for 20 years and 65% rent reduction for the remaining period shall be applied to the business entity implementing the investment project specified in Clause 2 Article 5 of this Decision.

3. Land and water surface rent exemption for 22 years and 75% rent reduction for the remaining period shall be applied to the object or business entity implementing the investment project specified in Clause 3 Article 5 of this Decision.

Article 8. Implementation

1. Business entities shall declare their satisfaction of criteria and conditions for investment incentives; follow procedures for certification of their satisfaction of criteria and conditions for investment incentives (if any) and procedures for enjoyment of special investment incentives as prescribed by law.

2. Tax authorities and finance authorities shall consider giving special investment incentives in accordance with regulations of the Law on tax administration and the Law on land.

Article 9. Effect and responsibility for implementation

1. This decision comes into force from the date of signing.

2. After 5 years of implementation, the Ministry of Planning and Investment shall consolidate and appraise impacts and efficiency of policies on special investment incentives, and submit reports thereof to the Prime Minister for consideration.

3. Ministers, heads of ministerial agencies, heads of Governmental agencies, Chairpersons of People’s Committees of central-affiliated provinces and cities and relevant agencies shall implement this Decision.