Vietnam Issues Decision 29 on Special Investment Incentives

On October 6, 2021, Vietnam’s government issued Decision No. 29/2021/QD-Ttg (Decision 29) on Special Investment Incentives to facilitate more high-tech investments into the country. Decision 29, an implementing regulation of the 2020 Law on Investment (LOI), provides the requirements and applicable incentives for eligible investment projects.

The LOI was passed in June 2020 which repeals the 2014 LOI and aims to further attract foreign investment. The new LOI opens up new business sectors that are eligible for investment incentives, such as for the manufacture of medical equipment, the establishment of innovative start-up projects, and the incorporation of research and development centers (R&D), among others. In addition, LOI 2020 has removed 22 sectors from the ‘conditional list’ — sectors in which investors are subject to specific conditions before being permitted to invest.

What incentive schemes are available under Decision 29?

Decision 29 provides three investment scheme levels:

Scheme 1

• A preferential corporate income tax rate of nine percent for 30 years, with an initial exception for five years followed by a 50 percent reduction for 10 years; and
• Land and water surface rent exemption for 18 years, followed by a 55 percent reduction for the remaining period of the project.

The incentives under Scheme 1 are available for projects in preferential sectors with a total investment capital of at least VND 30 trillion (US$1. billion) with at least VND 10 trillion (US$440 million) disbursed from the issuance of the Investment Registration Certification (IRC).

Scheme 2

• A preferential corporate income tax rate of seven percent for 37 years, with an initial exception for six years followed by a 50 percent reduction for 12 years; and
• Land and water surface rent exemption for 20 years, followed by a 65 percent reduction for the remaining period of the project.

The investment projects under Scheme 2 also include projects in preferential sectors with a total investment capital of at least VND 3 trillion (US$130 million) with at least VND 10 trillion (US$440 million) disbursed from the issuance of the Investment Registration Certification (IRC). These projects must meet one of the following criteria:

• Are considered as level 1 high-tech projects;
• Are considered as level 1 supply chain projects;
• Are projects where value-added accounts for between 30 to 40 percent of the final product’s cost; and
• Meet the criteria as level 1 technology transfer projects.

Further, other eligible projects include new investment projects with total investment capital of at least VND 3 trillion (US$130 million) or more with at least VND 1 trillion (US$43 million) is disbursed within three years from the issuance of an IRC; however, this does not include National Innovation Center projects.

Scheme 3

• A preferential corporate income tax rate of five percent for 37 years, with an initial exception for six years followed by a 50 percent reduction for 13 years; and
• Land and water surface rent exemption for 22 years, followed by a 75 percent reduction for the remaining period of the project.

The projects eligible for Scheme 3 incentives include National Innovation Centers in addition to projects in preferential sectors with a total investment capital of at least VND 30 trillion (US$1.3 billion) with at least VND 10 trillion (US$440 million) disbursed from the issuance of the Investment Registration Certification (IRC). These projects must also fulfill at least one of the following criteria:

• Level 2 high-tech projects;
• Level 2 supply chain projects;
• Projects where value-added accounts for between 30 to 40 percent of the final product’s cost; and
• Level 2 technology transfer projects.

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