Preferential tax rates in Vietnam

in Vientam, the Corporeate income tax will be applied from 0% to 20%. How is Preferential tax rates in Vietnam ? How to file an application for CIT incentives ?

10% rate for 15 years is applied to:

a) Incomes of the enterprise from execution of new projects of investment in extremely disadvantaged areas: economic zones, hi-tech zones, including concentrated IT zones established under the Prime Minister’s Decisions.

b) Incomes of the enterprise from execution of new projects of investment in: scientific research and technology development; application of high technologies given priority according to the Law on High Technology; cultivation of high technology, cultivation of high-tech enterprises; venture capital investment in development of high technologies on the list of high technologies given priority; investment in construction, operation of facilities for cultivation of high technologies, cultivation of high-tech enterprises; investment in development of water plants, power plants, water supply and drainage system; bridges, roads, railroads, airports, seaports, air terminals, train stations, and other particularly important infrastructural works decided by the Prime Minister; software production; manufacture of composite materials, light building materials, rare and valuable materials; production of renewable energy, clean energy, waste-to-energy process, development of biotechnology.

Projects of investment in development of water plants, power plants, water supply and drainage system; bridges, roads, railroads, airports, seaports, air terminals, train stations must generate revenues or incomes from their operation in order to be given tax incentives. Income from construction of such works of the construction enterprise is not given the aforesaid tax incentives.

c) Incomes of enterprises from execution of new projects of investment in environmental protection, including: manufacture of environmental pollution reduction devices, environment monitoring and analysis devices; pollution reduction and environmental protection; collection, treatment of wastewater, exhaust, solid wastes; recycling or wastes.

d) High-tech enterprises, agriculture enterprises applying high technologies as prescribed by the Law on High Technologies.

High-tech enterprises, agriculture enterprises applying high technologies as prescribed by the Law on High Technologies are given preferential tax rates from the year in which they are granted the Certificates of High-tech Enterprise or Certificate of Agriculture Enterprise Applying High Technologies.

dd) Incomes of enterprises from execution of new projects of investment in manufacturing (except for manufacturing of products subject to special excise tax and mineral extraction projects).

e) Incomes of an enterprise from execution of projects of investment in manufacturing (except for manufacturing of products subject to special excise tax and mineral extraction projects) whose capital is VND 12,000 billion or over, using high technologies that must be appraised in accordance with the Law on High Technologies, the Law on Science and Technology, and capital of which is disbursed within 05 years from the date of investment licensing.

g) Incomes of an enterprise for execution of a new project of investment in manufacturing of products on the list of ancillary products given priority that satisfy any of the following criteria:

– Ancillary products are meant to support high technologies according to regulations of the Law on High Technologies;

– Ancillary products are meant to support manufacturing of: textile and garment; leather and footwear; electronics and IT products; manufacturing of cars; fabricating mechanics that, up to January 01, 2015, they cannot be manufactured in Vietnam or can be manufactured in Vietnam and satisfy technical standards of EU or equivalent standards.

Cases in which period of preferential tax rates may be extended:

a) The projects of investment prescribed in Point b and Point c Clause 1 of this Article with large scale and high/new technologies that need investment.

b) Projects prescribed in Point e Clause 1 of this Article that satisfy any of the following criteria:

– The products manufactured are capable of global competition; the revenue exceeds VND 20,000 billion per year after not more than 05 years from the first year in which revenues are generated by the project;

– Over 6,000 employees are hired;

– The project involves economic-technical infrastructure, including: investment in development of water plants, power plants, water supply and drainage system; bridges, roads, railroads, airports, seaports, air terminals, train stations, new energy, clean energy, energy-saving industry, oil refinery.

c) At the request of the Minister of Finance, the Prime Minister shall decide extension of preferential tax rate duration prescribed in this Clause. Nevertheless, the extension shall not exceed 15 years”.

10% tax over the entire operating period is applied to:

a) Incomes of enterprises investment in the public sector fields such as education – training, vocational training, healthcare, culture, sports, environment, and judicial expertise.

The list of types, criteria for scale, and standards of enterprises making investment in the public sector is compiled by the Prime Minister

b/ Incomes of publishing houses from publication activities in accordance with the Law on Publication;

Publication activities include publishing, printing and distribution of publications in accordance with the Law on Publication;

c/ Incomes of press agencies from printed newspapers (including advertisements on printed newspapers) in accordance with the Law on Publication;

d/ Incomes of enterprises from the implementation of projects on investment and trading in social houses for sale or lease to or hire-purchase by the subjects specified in Article 53 of the Housing Law;

e) Incomes of enterprises from planting, cultivating, protecting forests; farming, husbandry, aquaculture in disadvantaged areas; forestry in disadvantaged areas; production, propagation and cross-breeding of plant varieties, animal breeds; production, extraction, and refining of salt except for salt production prescribed in Clause 1 Article 4 of Decree 218/2013/NĐ-CP; investment in post-harvest preservation of agriculture products; preservation of agriculture products, aquaculture products, and foods, including direct investment in preservation and lease of preservation equipment”.

The preferential tax rate of 20% for ten (10) years is applicable to:

a/ Incomes of enterprises from the implementation of new investment projects in geographical areas with difficult socio-economic conditions specified

b/ Incomes from enterprises from the implementation of new investment projects on production of hi-class steel, energy-conserving products, machinery and equipment for agriculture, forestry, fisheries and salt production, irrigation and drainage equipment, livestock and aquatic animal feed; and development of traditional crafts and trades (including building and development of traditional handicraft production, farm produce and food processing and production of cultural products);

Enterprises implementing new investment projects in the fields or geographical areas eligible for the tax incentives specified in this Clause will enjoy the tax rate of 17% from January 1, 2016.

The preferential tax rate of 20%

a) The preferential tax rate of 20%(or 17% from January 1, 2016) is applicable throughout the operation duration to people’s credit funds, cooperative banks and micro-finance institutions.

b) The duration of application of preferential tax rates specified in this Article shall be counted consecutively from the first year when enterprises generate turnover from new investment projects eligible for tax incentives. For hi-tech enterprises and agricultural enterprises applying high technologies, this duration shall be counted from the year when they are recognized as hi-tech enterprises or agricultural enterprises applying high technologies. For projects applying high technologies, this duration shall be counted from the year when they are granted certificates of projects applying high technologies.

Please do not hesitate to ask ANS Law if your company want to file an application for CIT incentives.

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