Effective from August 1, the Circular provides guidance on the Law on Investment and Decree No. 118 introduced in November 2015.
It governs incentives in corporate income tax (CIT), import tax, and non-agricultural land use tax, with detailed guidance on applications, especially for investment projects in the fields of science and technology and agriculture.
Corporate income tax
Enterprises satisfying conditions regarding revenues from science and technology required by law and which have been granted a business license for science and technology activities are entitled to CIT incentives when conducting investment in high-tech zones. They will be exempt from CIT for four years with a 50 percent reduction for nine years from the first year taxable income is earned.
Projects expanding their business scope, upgrading production capacity or changing to new production technology, satisfying criteria on increasing the original cost of fixed assets (to a minimum of US$900,000), and increasing the original cost proportion of fixed assets (to a minimum of 20 percent) or of design capacity (to a minimum of 20 percent), are able to access either CIT incentives during the remaining operational period, if any, or CIT exemptions or reductions on the increased revenue created by the expansion.
The period of tax exemption or reduction on this additional revenue from expanded projects is equal to the tax exemption or reduction period for new projects in the same area or sector qualifying for CIT incentives.
When an investment project meets various requirements for enjoying CIT incentives, investors can choose the most favorable incentives.
Projects in sectors subject to special investment incentives or being implemented in areas with very difficult socioeconomic conditions are entitled to receive import tax exemptions on imported goods that constitute fixed assets and exemptions for a period of five years from the start of production on imported materials and components not produced in Vietnam.
Projects investing in hotels, offices, apartments and houses, apart from commercial centers, technical services, supermarkets and golf courses, as well as resorts, amusement parks, clinics and training, in addition to culture, finance, banking, and insurance, and also audit and consulting services, are exempt from paying import tax for imported goods that constitute fixed assets, but only for the first time.
Projects enjoying these exemptions cannot enjoy other import tax exemptions.
Non-agricultural land use tax
Projects in sectors subject to special investment incentives or being implemented in areas with very difficult socioeconomic conditions will be exempt from non-agricultural land use taxes.
A project with total capital of at least $273 million that is disbursed within three years from the date an investment license or investment policy decision is issued is exempt from paying import tax on goods constituting fixed assets and for imported materials and components that are not produced in Vietnam, for a period of five years from the date production begins and is also exempt from paying non-agricultural land use tax.
After the three-year period, if the project does not disburse this amount the investors can no longer access such tax incentives. Import tax and non-agricultural land use tax incentives do not apply to projects in mineral exploitation and the production of goods and services subject to special consumption tax, except for automobile production.
Projects in sectors subject to investment incentives or implemented in areas with very difficult socioeconomic conditions or in rural areas and have at least 500 employees are entitled to a 50 percent reduction on non-agricultural land use tax.