Decision 29/2021/QD-TTg on special investment incentives

DECISION

On special investment incentives^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government; and the November 22, 2019 Law Amending and Supplementing a Number of Articles of the Law on Organization of the Government and the Law on Organization of Local Administration;

Pursuant to the June 17, 2020 Law on Investment;

Pursuant to the June 3, 2008 Law on Enterprise Income Tax; the June 19, 2013 Law Amending and Supplementing a Number of Articles of the Law on Enterprise Income Tax; and the November 26, 2014 Law Amending and Supplementing a Number of Articles of the Law on Taxes;

Pursuant to the Government’s Decree No. 46/2014/ND-CP of May 15, 2014, on collection of land rental and water surface rental; and the Government’s Decree No. 135/2016/ND-CP of September 9, 2016, amending and supplementing a number of articles of the Decrees on collection of land use levy, land rental and water surface rental;

Pursuant to the Government’s Decree No. 31/2021/ND-CP of March 26, 2021, detailing and guiding a number of articles of the Law on Investment;

At the proposal of the Minister of Planning and Investment;

The Prime Minister promulgates the Decision on special investment incentives.

Article 1. Scope of regulation and subjects of application

1. This Decision provides the levels, duration, and conditions for the application of special investment incentives for investment projects specified in Clause 2, Article 20 of the Law on Investment.

2. This Decision applies to state agencies, organizations and individuals related to special investment incentives mentioned in Clause 1 of this Article.

Article 2. Interpretation of terms

1. Vietnamese enterprises means enterprises and cooperatives established and operating under Vietnam’s law and not falling into one of the cases specified in Clause 1, Article 23 of the Law on Investment.

2. Total expenses for research and development activities means all expenses for research and development activities of investment projects, which shall be determined under Clause 4, Article 3 of this Decision.

Article 3. Criteria on high technology, technology transfer, Vietnamese enterprises participating in value chains, and domestic production value

1. Projects satisfying the high technology criterion specified at Point d, Clause 6, Article 20 of the Government’s Decree No. 31/2021/ND-CP of March 26, 2021, detailing and guiding a number of articles of the Law on Investment (below referred to as Decree No. 31/2021/ND-CP) are identified as follows:

a/ A level-1 hi-tech project is that involving hi-tech application, research and development activities and hi-tech product manufacturing, and fully satisfies the following 3 conditions:

- The revenue from hi-tech products accounts for at least 70% of the project’s total annual net revenue;

- The project’s total annual expense for research and development activities accounts for at least 0.5% of the total net revenue minus the input value (including value of imported and domestically purchased materials and components for manufacturing activities);

- The ratio of workers directly engaged in research and development activities is at least 1% of the project’s total number of workers.

b/ A level-2 hi-tech project is that involving hi-tech application, research and development activities and hi-tech product manufacturing, and fully satisfies the following 3 conditions:

- The revenue from hi-tech products accounts for at least 80% of the project’s total annual net revenue;

- The project’s total annual expense for research and development activities accounts for at least 1% of the total net revenue minus the input value (including the value of imported and domestically purchased materials and components for manufacturing activities);

- The ratio of workers directly engaged in research and development activities is at least 2% the project’s total number of workers.

2. Vietnamese enterprises participating in value chains specified at Point d, Clause 6, Article 20 of Decree No. 31/2021/ND-CP are identified as follows:

a/ Vietnamese enterprises participating in value chains at level 1 are those falling into cases in which Vietnamese enterprises not defined in Clause 1, Article 23 of the Law on Investment participate in value chains and satisfy both the following conditions:

- They account for between 30% and 40% of the total participating enterprises and perform contracts on assembly and supply of components and materials and provision of services for manufacturing products.

- They contribute at least 30% of product costs.

b/ Vietnamese enterprises participating in value chains at level 2 are those falling into cases in which Vietnamese enterprises not specified in Clause 1, Article 23 of the Law on Investment participate in value chains and satisfy both the following conditions:

- They account for more than 40% of the total participating enterprises and perform contracts on assembly and supply of components and materials and provision of services for manufacturing products.

- They contribute at least 40% of product costs.

3. Added value means the cost price of all goods and services minus expenses payable to foreign partners (excluding imported or on-spot import materials with certificates of origin of Vietnam under current regulations), including:

a/ Expenses for input materials, depreciation of fixed assets being machinery and equipment, and expenses for imported tools and instruments;

b/ Royalties, technology transfer charges, management expenses, selling expenses, financial expenses, and other expenses payable to foreign partners.

4. Total expenses for research and development activities include:

a/ Annual current expenditures for research and development activities; 

b/ Expenses for training and training support activities for workers engaged in research and development activities of economic organizations, science and technology organizations, and training institutions in Vietnam;

c/ Expenses for research and development cooperation with organizations and individuals; expenses for hiring of, or donation for organizations and individuals to implement research and development projects of enterprises;

d/ Royalties, charges for transfer of ownership and use rights of industrial property subject matters for research and development activities; registration charges for recognition or protection of inventions or utility solutions in Vietnam;

dd/ Depreciation of investment in infrastructure facilities and fixed assets for research and development activities.

5. Workers directly engaged in research and development activities include those who hold collegial or higher degree and satisfy both the following criteria:

a/ The ratio of collegial degree holders does not exceed 30%;

b/ The workers have signed labor contracts with a term of at least 1 year or indefinite-term labor contracts with research and development divisions or divisions with similar functions of enterprises.

6. Technology transfer criterion shall be identified as follows:

a/ Level-1 technology transfer

- The concerned investor possesses a certificate of transfer of technologies promoted to be transferred in accordance with the law on technology transfer;

- The investor has carried out technology transfer for fewer than 3 Vietnamese enterprises within 5 years from the date of obtaining the investment registration certificate or investment policy approval decision or reaching the written agreement with a competent state agency.

b/ Level-2 technology transfer

- The concerned investor possesses a certificate of transfer of technologies encouraged to be transferred in accordance with the law on technology transfer;

- The investor has carried out technology transfer for 3 Vietnamese enterprises or more within 5 years from the date of obtaining the investment registration certificate or investment policy approval decision or reaching the written agreement with a competent state agency.

For an investment project with land allocated or leased by the State, or permitted to change the land use purpose, the 5-year time limit specified at Point a or b of this Clause shall be counted from the date the investor receives a decision on land allocation, land lease or land use purpose change. In case the investor has already received such decision, but the land handover is delayed, the 5-year time limit shall be counted from the date of actual land handover.

Article 4. Principles of application and adjustment of special investment incentives

Special investment supports or incentives specified in this Decision must comply with Clause 6, Article 20 of Decree No. 31/2021/ND-CP, and adhere to the following principles:

1. Special investment incentives are applicable to new investment projects and expanded investment projects.

2. Special investment incentives shall be specified in investment registration certificates or investment policy approval decisions or written agreements with competent state agencies.

3. During the period of enjoyment of special investment incentives, economic organizations will be eligible for the incentives corresponding to the conditions they actually satisfy for the remaining period of incentive enjoyment. The remaining period of incentive enjoyment is the period of incentive enjoyment based on conditions actually satisfied by the enterprises minus the number of years during which the enterprises were previously entitled to enterprise income tax exemption or reduction, preferential enterprise income tax rates, or land rental or water surface rental exemption or reduction.

4. Except the case specified in Clause 3 of this Article, an economic organization which fails to fulfill its commitments and satisfy the conditions for enjoyment of special investment incentives shall be handled as follows:

a/ If not yet eligible for special investment incentives, it will not be entitled to the incentives specified in this Decision;

b/ If having made declarations for enjoyment of special investment incentives but failing to satisfy the conditions for enjoyment of the incentives, it will not be entitled to special investment incentives and, at the same time, is required to declare and refund the incentive amounts it has received for the years it fails to satisfy the conditions for incentive enjoyment (if any), and pay late-payment interests and fines for violations in accordance with the law on tax administration.

5. The time for application of preferential tax rates and duration for enterprise income tax exemption or reduction must comply with the law on enterprise income tax. The time for application of land rental and water surface rental exemption or reduction must comply with the land law.

Article 5. Enterprise income tax rates

1. The preferential tax rate of 9% for 30 years shall be applied to income earned by economic organizations from the implementation of investment projects specified at Point b, Clause 2, Article 20 of the Law on Investment.

2. The preferential tax rate of 7% for 33 years shall be applied to income earned from investment projects falling into one of the following cases:

a/ Investment projects (including also expansion of such projects) to establish innovation centers and research and development centers with a total investment of VND 3 trillion or more and the disbursed amount of at least VND 1 trillion within 3 years from the date of grant of investment registration certificates or investment policy approval decisions.

b/ Investment projects specified at Point b, Clause 2, Article 20 of the Law on Investment which satisfy one of the following 4 criteria:

- Being level-1 hi-tech projects;

- Involving Vietnamese enterprises participating in value chains at level 1;

- Having the added value accounting for between over 30% and 40% of total costs of final output products provided by economic organizations;

- Satisfying the criterion on level-1 technology transfer.

3. The preferential tax rate of 5% for 37 years shall be applied to income earned from activities of objects or investment projects falling into one of the following cases:

a/ The Vietnam National Innovation Center established under the Prime Minister’s decision.

b/ Investment projects specified at Point b, Clause 2, Article 20 of the Law on Investment and satisfying one of the following 4 criteria:

- Being level-2 hi-tech projects;

- Having Vietnamese enterprises participating in value chains at level 2;

- Having the added value accounting for over 40% of the total costs of final output products provided by economic organizations;

- Satisfying the criterion on level-2 technology transfer.

Article 6. Duration of enterprise income tax exemption or reduction

1. To grant 5-year enterprise income tax exemption and 50% reduction of payable tax amounts for subsequent 10 years for income earned by economic organizations from the implementation of investment projects specified in Clause 1, Article 5 of this Decision.

2. To grant 6-year enterprise income tax exemption and 50% reduction of payable tax amounts for subsequent 12 years for incomes earned by economic organizations from the implementation of investment projects specified in Clause 2, Article 5 of this Decision.

3. To grant 6-year enterprise income tax exemption and 50% reduction of payable tax amounts for subsequent 13 years for income earned from objects or activities of economic organizations that implement investment projects specified in Clause 3, Article 5 of this Decision.

Article 7. Incentives on land rental and water surface rental

1. To grant land rental and water surface rental exemption for 18 years and 55% reduction of payable rental amounts for the remaining period for economic organizations implementing investment projects specified in Clause 1, Article 5 of this Decision.

2. To grant land rental and water surface rental exemption for 20 years and 65% reduction of payable rental amounts for the remaining period for economic organizations implementing investment projects specified in Clause 2, Article 5 of this Decision.

3. To grant land rental and water surface rental exemption for 22 years and 75% reduction of payable rental amounts for the remaining period for subjects or economic organizations implementing investment projects specified in Clause 3, Article 5 of this Decision.

Article 8. Organization of implementation

1. Economic organizations shall make declaration of their satisfaction of the law-specified criteria and conditions; and carry out procedures for certification of their satisfaction of the law-specified criteria and conditions (if any) and procedures for enjoyment of special investment incentives in accordance with law.

2. Tax administration offices and finance agencies shall consider granting special investment incentives in accordance with the law on tax administration and the land law.

Article 9. Effect and implementation responsibility

1. This Decision takes effect on the date of its signing.

2. After 5 years of implementation of this Decision, the Ministry of Planning and Investment shall summarize and evaluate the impacts and effectiveness of the policies on special investment incentives and report them to the Prime Minister for consideration and appropriate adjustment.

3. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, and related agencies shall implement this Decision.-

For the Prime Minister
Deputy Prime Minister
PHAM BINH MINH