WHAT ARE BUSINESS LINES AND AREAS ELIGIBLE FOR INVESTMENT INCENTIVES?
QUESTION
Dear TLK Law Firm, I would like to ask your company to answer the following questions: I'm currently looking for ways to conduct investment projects in Vietnam. Nevertheless, I still have several questions regarding business lines and areas eligible for investment incentives. I await your answer. Thank you.
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Thank you for entrusting your queries to TLK Law Firm. Based on legal regulations and practical experience, we would like to offer the following advice to you:
LEGAL BASIS
1. Investment Law No. 61/2020/QH14 passed by the National Assembly on June 17, 2020;
2. Decree No. 31/2021/ND-CP issued by the Government on March 26, 2021 detailing and guiding the implementation of some articles of the Investment Law;
3. Other relevant guiding legal documents.
CONSULTATION CONTENT
To encourage domestic and foreign investment in Vietnam, the government has issued investment incentive policies based on the current state of investment activities, the development of economic sectors, together with the local and regional economic conditions, besides opening the market. Nonetheless, determining the investment incentives applied to the project can be difficult for investors, particularly when determining which business lines are eligible for investment incentives, as business lines have various incentives.
One of the related contents that many domestic and foreign investors are interested in are business lines and areas eligible for investment incentives. To address your concern, we will provide you with the most basic regulations on business lines and areas eligible for investment incentives in Vietnam through the following writing:
Photo 1. What are business lines and areas eligible for investment incentives in Vietnam?_Hotline: +(84) 97 211 8764
I. SOME IMPORTANT LEGAL ISSUES RELATED TO REGULATIONS ON INVESTMENT INCENTIVES FOR FOREIGN-INVESTED BUSINESS ENTITY
1. Business lines eligible for investment incentives
Business lines eligible for investment incentives include:
- Hi-tech activities, hi-tech ancillary products, research, manufacturing and development of from science and technology products under regulations of law on science and technology;
- Manufacturing of new materials, new energy, clean energy, renewable energy; manufacturing of products with an added value of 30% or more; energy-saving products;
- Manufacturing of key electronics, mechanical products, agricultural machinery, automobiles, automobile parts; shipbuilding;
- Manufacturing of products on the List of prioritized supporting products;
- Manufacturing of IT products, software products, and digital contents;
- Breeding, growing and processing of agriculture products, forestry products, aquaculture products; afforestation and forest protection; salt production; fishing and fishing logistics services; production of plant varieties, animal breeds, and biotechnology products;
- Collection, treatment, recycling, or re-use of waste;
- Investment in development, operation, and management of infrastructural works; development of public transportation in urban areas;
- Pre-school education, general education, vocational education, higher education;
- Medical examination and treatment; manufacturing of medicinal products and medicinal materials, storage of medicinal products; scientific research into preparation technology and biotechnology serving the creation of new medicinal products; manufacturing of medical equipment;
- Investment in sports facilities for the disabled or professional athletes; protection and promotion of the value of cultural heritage;
- Investment in geriatric centers, mental health centers, treatment for agent orange patients; care centers for the elderly, the disabled, orphans, and street children;
- People's credit funds, microfinance institutions;
- Manufacturing of goods and provision of services to create or participate in value chains and industrial clusters.
2. Areas eligible for investment incentives
Areas eligible for investment incentives include:
- Disadvantaged areas and extremely disadvantaged areas;
- Industrial parks, export-processing zones, hi-tech zones and economic zones.
If a new administrative division is established under the Resolution of the National Assembly Standing Committee or the Government on adjustment of administrative divisions (full division, partial division or upgrading of old administrative divisions affiliated to areas eligible for investment incentives) due to the arrangement or adjustment of commune-level administrative divisions in areas with different socio-economic conditions that have yet to be considered as areas eligible for investment incentives, follow the instructions below:
- The newly established administrative division shall be considered as an area eligible for investment incentives enjoyed by the majority of commune-level administrative divisions;
- If the number of commune-level administrative divisions in a disadvantaged area equals that in an extremely disadvantaged area, the newly established administrative division shall be considered as an extremely disadvantaged area;
- If the number of commune-level administrative divisions in a disadvantaged area equals that in an area not affiliated to the area eligible for investment incentives, the newly established administrative division shall be considered as a disadvantaged area;
- If the number of commune-level administrative divisions in an extremely disadvantaged area equals that in an area not affiliated to the area eligible for investment incentives, the newly established administrative division shall be considered as an extremely disadvantaged area.
Note: Upon adjusting an administrative division, the adjusted commune-level administrative division is entitled to the investment incentives applied to the district-level administrative division to which it belongs.
3. Forms of investment incentives
Forms of incentives include:
- Corporate income tax incentives, include the application of a lower rate of corporate income tax for a certain time or throughout the investment project execution; exemption from and reduction of tax, and other incentives prescribed by the Law on Corporate Income Tax.
- Exemption from import tax on goods imported to form fixed assets; raw materials, supplies, and components for manufacturing purposes under regulations of law on import and export tax;
- Exemption from and reduction of land levy and land rents;
- Accelerated depreciation, increasing the deductible expenses upon calculation of taxable income.
Note: The list of business lines and areas eligible for investment incentives are promulgated by the Government attached with Decree 31/2021/ND-CP dated March 26, 2021 detailing and guiding their implementation of some articles of the Investment Law.
Photo 2. What are business lines and areas eligible for investment incentives in Vietnam?_Hotline: +(84) 97 211 8764
=> See more: Investment incentives for foreign investors in Vietnam
II. HOW SHOULD YOU CHOOSE THE BEST LEGAL SERVICE PROVIDER?
An organization of high-quality and renowned legal services should meet the following criteria:
First, they must be an official legal organization with a legal operating license;
Second, their board of directors must be lawyers with extensive experience and it will be better if they have a high degree.
Third, they have a team of lawyers, a professional and well-trained human resource system;
Fourth, they are friendly and dedicated. They make every effort for the benefit of customers and consider customer satisfaction and work quality as their honor;
Fifth, their professional, thoughtful, flexible, and logical service delivery process to optimize work performance and maximize customer time savings;
Sixth, reasonable and competitive service prices;
Seventh, wide range of services in both the field of providing service packages in the same field for customers to choose the appropriate service package, as well as being able to provide comprehensive support to customers throughout the process.
Eighth, they have capable of connecting – promoting commercial relationships for customers who have specific requirements.
=> Any client wants to choose a professional and reputable legal service provider because no one wants to take the chance of losing money or time, coupled with the results that aren't what they were expecting. Finding such an organization, however, is difficult due to an available large number of service providers of varying quality.
TLK Law Firm does not claim to be the best legal service provider on the market, but we meet all of the above criteria and more. Therefore, TLK Law Firm will unquestionably provide a good service for you.
Photo 3. What are business lines and areas eligible for investment incentives in Vietnam? _Hotline: +(84) 97 211 8764
III. SOME QUESTIONS RELATED TO REGULATIONS ON INVESTMENT INCENTIVES IN VIETNAM
Question 1: Our enterprise invests in mineral mining projects in rural areas. Based on our estimates, we expect to employ 1000 workers, mainly local people. Will our project be eligible for investment incentives?
Answer: It's a No.
Regulations in Points b, c, and d Clause 2 of Article 15 Investment Law 2020 do not apply to:
- Mineral mining projects;
- Projects on manufacturing/sale of goods/services are subject to special excise tax according to the Law on Special Excise Tax, except for projects on manufacturing of automobiles, aircraft, and yachts.
- Commercial housing construction projects prescribed by the Law on Housing.
Thus, although your project is in a rural area with over 500 employees, it will still not be entitled to investment incentives as it is a mineral mining project.
Question 2: What is the way to deal with a situation where an enterprise has an investment project in a field that was previously eligible for investment incentives but is no longer eligible under the Investment Law 2020?
Answer:
In principle, Vietnamese law does not apply retroactively. To facilitate business investment, the Government applies favorable policies for enterprises. As a result, enterprises with investment projects which is in fields subject to incentives under the Prime Minister's decision or the Government's Decree issued previously must now comply with the Investment Law and other documents guiding the Law's implementation, still continue to benefit from the incentives until the end of the incentive period if the project is not in the field of investment incentives.
Question 3: May I ask what is the list of business lines eligible for investment incentives in agriculture?
Answer:
Under Appendix II to the List of business lines eligible for investment incentives attached with Decree 31/2021/ND-CP, they include:
1. Cultivation, harvesting, and processing of herbs; protection, preservation of genetic resources and rare, valuable indigenous herbs.
2. Manufacture, processing of animal feeds, and aquatic fees.
3. Technological services relevant to seed farming, breeding, aquaculture, and protection of plants and domestic animals.
4. Construction, renovation, and upgrade of slaughterhouses; industrial preservation, processing of poultry and cattle, wholesale markets, domestic animal and husbandry product auction centers.
5. Construction, and development of concentrated material areas serving the processing industry.
6. Harvesting marine life.
7. Investment in the manufacture of biological crop protection chemicals, manufacture of organic fertilizers; scientific research, and transfer of technology for the development of organic fertilizers.
8. Cultivation, processing of agriculture, forestry, and aquaculture products in the form of product chain; Cultivation, processing of agriculture, forestry, and aquaculture products in the form of organic agriculture.
9. Manufacture of handicrafts, products made of bamboo, rattan, ceramics, glass, textile and garment, threads, woven and sewn products.
10. Scientific research and development of agricultural technology.
11. Maintaining domestic animal breeds, preservation of genetic resources of rare, valuable, and indigenous domestic animals.
=> See more: When is a foreign-invested business entity granted a business license?
The above information is broad consulting content that we would like to provide to customers. As a service provider, we are always aware of and ready to assist customers with their needs and problems. If you have any further questions or require more detailed guidance, please contact the hotline: +(84) 97 211 8764/ +(84) 969 760 195 (Tel/ Whatsapp/ Zalo) for direct advice from a lawyer (free consultation).
Thank you very much!
Business and Investment Department – TLK Law Firm
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