Government Tax Incentives for SMEs Looking to Relocate to Vietnam

Considering Vietnam for your next expansion?

The Vietnamese government is proactively taking crucial steps to improve business conditions through fiscal reforms and upgrading incentives for companies investing in Vietnam, including SMEs. The incentives mentioned in this article are related to taxes, in order to incentivize more companies to set up their business in Vietnam. As a reminder, the standard corporate tax rate in Vietnam is 20% 

Tax incentives for specific sectors

Companies that have their operations in the following domains are eligible for a 10% CIT incentive for the project’s lifetime:

• Education (only the education activities)
• Culture
• Sport (only for the actual sport, not for extras)
• Environment (solar energy) 

Note: For the previous categories, you will only have the tax incentives for the actual activities directly related to that sector. For example, if you run a private school, the CIT reduction is only for tuition fees, it will not apply to merchandise sold at the shop located at your school. 

Moreover, for a new investment project located in an area that does not fall under the encouraged category, the government will offer tax holidays of four years as well as a 50% tax reduction for the next five years. 

Law: 14/2008/QH12

IT Production

Vietnam has advocated high-tech projects extensively for the last few years. Consequently, such companies are eligible for 15 years of CIT reductions, detailed as follows:

CIT incentives for the first 15 years, in detail:

• First 4 years: exempt to CIT completely
• Next 9 years: 50% tax reduction of the 10% rate
• Next 2 years: 10% CIT

Science & Technology

Besides being eligible not to pay corporate income tax (CIT) for four years, industries reliant on science and technology will have their CIT lowered by 50% for a period of nine years.

Furthermore, such businesses are also entitled to a concession while paying land and water surface lease fees. It is also possible for them to apply for low-interest loans from state financial institutions. However, to reap these benefits, the companies should be involved in production or sale of goods associated with scientific/technological R&D or innovation.

Related Reading: The Right Way to Set Up Your Tax & Accounting Operations in Vietnam

Agriculture

CIT Incentives

In accordance with current Corporate Income Tax (CIT) regulations, companies that fall under the agriculture sector will get the benefit of zero CIT foreverpreferential tax rates and tax holidays. However, they should meet the following eligibility requirements:

Eligibility for Tax-Exemption

• Income generated by cooperatives involved in farming, aquaculture, and salt production.
• Income earned by cooperatives involved in farming, forest management, fisheries, and salt production under difficult socioeconomic conditions.
• Income generated from agriculture, aquaculture, and husbandry in socioeconomically challenging regions.
• Income generated from fishing activities.

10% Tax Rate

• Income generated from the cultivation, protection, and planting of forests; livestock production, aquaculture, and agriculture in economically disadvantaged areas.
• Managing forests in socioeconomically difficult areas.
• Propagation, crossbreeding, and production of plant varieties; production, refinement, and extraction of salt.
• Investment in post-harvest preservation of agriculture products.

15% Tax Rate

• Income generated from agriculture, aquaculture, and livestock management in regular areas (not in the most difficult socioeconomic areas).

Circular: 78/2014/TT-BTC

Support for Female Entrepreneurs

In order to increase women’s ownership of SMEs by 35%, the National Strategy on Gender Equality 2011-2020 directed government ministries to streamline the implementation of the strategy across the country.

Moreover, the “Project 939”, launched by the government in mid-2017, (“Supporting women in starting businesses in the period 2017-2025”), is a significant initiative that aims to increase the number of start-ups run by women and provide consultancy services to them.

As part of its efforts to mainstream entrepreneurship among women in national policies, the government also needs to ensure that companies run by women have substantial representation in all relevant incentives and programmes. This is only for local companies, started by women of Vietnamese nationality.

Government Laws on Incentives mention above: 

Circular: 78/2014/TT-BTC

Law: 14/2008/QH12

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