SUPPORTING INDUSTRY, INVESTMENT INCENTIVES AND ELIGIBILITY CONDITIONS

As part of the industrialization and modernization agenda, supporting industry is regarded as playing a pivotal and foundational role in advancing key manufacturing sectors such as electronics, automotive, mechanical engineering, textiles, and footwear, etc. To attract investment and foster deeper integration of domestic enterprises into global supply chains, the State has introduced and considered the application of targeted incentive mechanisms for projects operating within the supporting industry sector. Nevertheless, eligibility for such incentives is contingent upon the fulfillment of specific legal requirements as prescribed by law.

What investment incentives are available for projects manufacturing supporting industry products?

Investment projects engaged in the manufacturing of supporting industry products may be entitled to a range of incentives, including preferential policies on taxation, credit access, land lease, and water surface lease.

Tax incentives

Income derived from activities related to the manufacturing of supporting industry products is eligible for a preferential corporate income tax rate of 10% for a period of 15 years. Enterprises are exempt from corporate income tax for the first 4 years, followed by a 50% reduction in payable corporate income tax for the subsequent 9 years. Projects are exempt from import duties on goods imported for the purpose of forming fixed assets, in accordance with applicable regulations. Regarding value-added tax, enterprises may choose from various value-added tax declaration methods, including monthly, quarterly (provisional), or annual filing, depending on their business scale and operational preferences.

Credit policies

Investment projects in the manufacturing of supporting industry products falling within the List of priority sectors for development are eligible to access investment credit loans at preferential interest rates from the State’s investment credit sources. These projects may also obtain short-term loans in Vietnamese dong from credit institutions or branches of foreign banks, subject to the maximum interest rates prescribed by the State Bank of Vietnam from time to time.

In addition, such projects may be eligible for concessional loans from the Vietnam Environment Protection Fund to finance components related to pollution treatment and environmental protection within the project.

Additional incentives for small and medium-sized enterprises

Investment projects implemented by small and medium-sized enterprises may be eligible to borrow up to 70% of the total investment capital from credit institutions, subject to guarantees provided by licensed credit guarantee organizations. To qualify, the enterprise must meet specific legal requirements regarding collateral, equity capital, and outstanding debt ratios, as stipulated by relevant regulations.

In addition, SMEs may benefit from exemptions or reductions in land and water surface rental fees. Projects of a special nature or those that deliver exceptional economic efficiency may be entitled to further support under preferential policies.

Additional incentives for projects located in areas with challenging socio-economic conditions

Investment projects located in regions classified as having difficult or extremely difficult socio-economic conditions are entitled to additional investment incentives in accordance with the regional classifications defined under the Law on Investment and relevant regulatory frameworks.

Eligible projects and conditions for receiving investment incentives in supporting industry?

Investment incentives are considered for projects engaged in the manufacturing of supporting industry products – i.e., products used as inputs for the production of finished goods in Vietnam.

Products eligible for preferential treatment include those listed in the List of Supporting industry products prioritized for development, comprising raw materials, materials, components, and spare parts supplied for the manufacturing of finished products in the following sectors: (i) Textiles and garments; (ii) Leather and footwear; (iii) Electronics; (iv) Automobile manufacturing and assembly; (iv) Mechanical engineering; (v) Supporting industries for high-tech industries. This list is specified in detail in the Annex to Decree No. 111/2015/NĐ-CP.

Projects eligible for consideration include new investment projects, which are: (i) Implemented for the first time, or independent from existing projects; or (ii) Currently operating and undergoing scale expansion, capacity enhancement, and technological innovation to manufacture supporting industry products by applying new equipment and new production processes, resulting in at least a 20% increase in production capacity.

In addition to enterprises whose income from the project has not yet benefited from corporate income tax incentives, enterprises that have fully utilized tax incentives under other preferential conditions, or those currently enjoying such incentives, may also be considered for eligibility confirmation under the investment project category for manufacturing supporting industry products.

Legal requirements enterprises should note?

Enterprises must complete the procedure to request confirmation in order to be eligible for incentives

To qualify for incentives, supporting industry investment projects must fully meet the prescribed conditions and are required to submit a confirmation request to the competent local authority where the project is implemented, or to the Department of Industry, Ministry of Industry and Trade (depending on the specific project).

The application dossier for incentives must include a detailed explanatory report on the current status, financial capacity, production capability, and project safety, along with documentation on environmental protection and product quality assurance.

The legal procedure must be completed within 30 working days, provided that the project meets all regulatory requirements.

Post-Incentive compliance inspection for supporting industry manufacturing investment projects

In addition to meeting requirements during the initial “pre-approval” stage, projects must continuously maintain the prescribed conditions and operate in accordance with the registered investment objectives. Furthermore, they are required to comply with the “post-incentive compliance inspection” procedures.

If an enterprise has been granted confirmation and incentives by the competent State authority but is subsequently found, during the post-inspection phase, to fail to meet the conditions, to provide false declarations, or to misuse the incentive policies, all incentives granted will be revoked. Simultaneously, the enterprise will be obligated to reimburse the full amount of incentives previously received in accordance with applicable regulations.

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LINCON accompanies investors to successfully complete the procedures of application for incentive confirmation on supporting industry

LINCON Law Firm provides comprehensive and specialized legal services in the field of Investment. Our attorneys accompany clients through one or multiple stages of the process, including due diligence, assessing the project’s adaptation with legal requirements, supporting procedural implementation, providing legal opinions, and delivering specialized legal services as requested:

(i) Comprehensive and in-depth consultation on legal procedures;

(ii) Due diligence on project status and evaluation of eligibility for incentives;

(iii) Reviewing and drafting application dossiers;

(iv) Post-incentive compliance verification;

(v) Legal risk prevention recommendations.

With years of reputable experience delivering professional and dedicated legal services, LINCON aspires to be a trusted partner – not only safeguarding investors’ rights but also contributing to establishing solid legal foundations for all transactions and legal procedures.