Tax Incentives in Vietnam: Foreign Investors’ Guide

Vietnam offers a wide range of tax incentives, such as reduced corporate income tax rates, exemptions on land rent, and import duty relief, for businesses operating in priority sectors and designated regions. These incentives are a central part of Vietnam’s strategy to attract foreign capital while fostering growth in underdeveloped areas and prioritised sectors.

For investors, understanding how tax incentives in Vietnam work and how to qualify is crucial for making strategic, informed financial decisions for their business operations.

Overview of Vietnam’s Tax System for Foreign Investors

Foreign-owned businesses in Vietnam are subject to several key taxes, and understanding them is key to structuring your business operations effectively. It also helps to identify any applicable incentives that increase cost-efficiency in the long run.

The major taxes that foreign-owned businesses face in Vietnam include:

• Corporate Income Tax (CIT): Has a standard rate of 20%. Projects located in priority sectors or regions may qualify for preferential rates of 10%, 15%, or 17%, along with tax holidays and reductions.
• Value-Added Tax (VAT): Generally implemented at 10%, with a 0% rate for exports and exemptions on certain goods or services such as education, software, and healthcare.
• Import and Export Duties: Duties depend on product type. Exemptions are available for equipment, machinery, and raw materials not produced domestically and used for qualifying investment projects.
• Personal Income Tax (PIT): Applies to both local and foreign employees, with progressive rates for residents (up to 35%) and a flat rate for non-residents at 20%.
• Other Local Taxes and Fees: These include land-use fees and rents, along with special consumption tax on items such as alcohol, tobacco, automobiles, and luxury goods.

Types of Tax Incentives in Vietnam

Vietnam’s tax incentive framework is meticulously designed to drive investment into priority industries and targeted locations for development and growth. The key to maximizing these benefits for your operations is in knowing how they work. 

Corporate Income Tax (CIT) Incentives

CIT incentives are one of the most profitable tax benefits for investors, as reduced rates will directly increase your cash flow and project returns. The main preferential rates available are 10%, 15% and 17%, each designed for different types of projects and locations:

• 10%: Applies to high-tech projects, R&D, environmental protection, education, healthcare, and certain infrastructure projects, often for 15 years.
• 15%: Applies to large-scale agricultural enterprises, rural cooperatives, and certain socialized projects that support farming and rural development. This rate applies throughout the project’s life.  
• 17%: Applies to projects in encouraged sectors such as manufacturing and high-tech components, enterprises in disadvantaged socio-economic areas (excluding extremely disadvantaged ones), and certain infrastructure projects. Lasts for 10 years, starting from the first year the project generates revenue.

Note that preferential rates are often paired with tax holidays and phased reductions. For example, projects that qualify for the 10% rate benefit from the CIT exemption for several years, followed by a period of reduced tax, while projects with the 17% rate will receive shorter exemption periods.

Exact holiday periods and reduction schedules will vary by project type and location, with eligibility depending on your sector, investment scale, geographic classification, and fulfillment of investment commitments. Additionally, these incentives must be applied for and approved during the investment licensing process.

Import and Export Duty Incentives

When it comes to import and export duties, Vietnam’s customs department offers several key exemptions and reliefs to reduce upfront costs for foreign investors. Key incentives include:

• Imported Equipment Exemptions: Machinery, tools, and production line equipment that cannot be sourced locally are exempt from import duties, provided that they are used directly for your project.
• Raw Material Relief: Inputs used in producing export-oriented goods may qualify for duty relief or exemption, reducing costs for manufacturers targeting overseas markets.
• Processing and Re-Export Exemptions: Goods that are temporarily imported for processing, assembly, or repair and then re-exported are exempt from import and export duties.

To access these incentives, you must maintain clear records, demonstrate eligibility, and secure approval at the time of import for your business.

Value-Added Tax (VAT) Incentives

The VAT system in Vietnam provides relief for exporters and businesses in priority sectors with different rates depending on the nature of goods and services, as follows:

• 0% VAT: Applies to exports of goods and services, international transport, software services provided overseas, and construction projects abroad.
• 5% VAT: For essential goods and services such as clean water, unprocessed agricultural products, education, medicine, R&D, and certain housing projects.
• VAT-Exempt: Covers a wide range of activities, including agricultural production, small-scale business providers, financial services, core medical services, public transportation, and imports tied to R&D.
• IT and Software: Software products and core IT services, such as development and maintenance, enjoy VAT incentives. Ancillary services like web hosting and data storage may not qualify.

Transactions must be carefully documented to secure these VAT incentives, especially for exports where proof of overseas delivery and payment is required. For IT and service providers, a clear classification of activities is essential to avoid disputes.

If you have excess input VAT, you can apply for refunds, provided that you have maintained proper invoices, customs declarations, and evidence of payment from your overseas clients. Refunds are subject to strict documentation reviews and can improve liquidity for export-oriented enterprises.

Land Rent and Land-Use Fee Incentives

To further encourage investment in economic zones and underdeveloped regions, the Vietnamese government offers reduced or waived land rental fees for eligible projects. These incentives are structured by location and sector:

• Economic and Industrial Zones: Those operating within approved zones benefit from partial or full exemptions on land rent during their initial project years.
• Disadvantaged Areas: Provinces with difficult socio-economic conditions (e.g., Bac Kan, Cao Bang, Ha Giang, Lai Chau, Son La) qualify for substantial concessions –
  • Extremely Disadvantaged Areas: Full exemption from land rent for the lifetime of the project.
  • Disadvantaged Areas: Up to 11 to 15 years of exemption for projects in encouraged sectors, or 7 years for general investment.
• Land-Use Levy Reductions: In disadvantaged areas, you may receive up to a 75% reduction. In extremely disadvantaged areas, full exemption is granted.
• Long-Term Leases: Those eligible can secure extended lease terms at reduced rates, providing certainty for large-scale and capital-intensive projects.

Priority Sectors and Locations for Tax Incentives in Vietnam

As a foreign investor entering the market, it is important to acquire insight into these available tax incentives to secure the most effective preferential tax treatments and maximize returns. Here are the priority sectors and locations for tax incentives in Vietnam:

Category	Examples	Incentive Highlights
High Technology and R&D	IT, biotechnology, advanced manufacturing, and research centers	Preferential CIT (10%), extended tax holidays, and R&D support.
Supporting Industries	Automotive, electronics, and textiles component manufacturing.	Reduced CIT (15%-17%), duty exemptions on imported raw materials.
Education and Healthcare	Schools, universities, hospitals, specialized clinics.	CIT incentives, land rent reductions.
Renewable Energy and Environmental Projects	Solar, wind, waste treatment, water management.	CIT reductions, import duty exemptions on equipment.
Agriculture and Rural Development	Agro-processing, forestry, aquaculture, and rural livelihood projects.	CIT incentives (15%), land-use fee reductions in rural provinces.
Economic Zones and High-Tech Parks	Saigon Hi-Tech Park (HCMC), Hao Lac Hi-Tech Park (Hanoi)	Special tax regimes, long-term land lease incentives.
Industrial Zones in Disadvantaged Provinces	Lai Chau, Ha Giang, Son La, Kon Tum, Gia Lai, Dak Lak.	CIT 10%-17%, land rent exemption (7 to 15 years).
Border Areas and Islands	Quang Ninh (China border), Phu Quoc Island.	Strategic tax incentives, land rent waivers.
Extremely Disadvantaged Areas	Provinces listed in Decree 218/2013.	Full land rent exemption, longest tax holidays.

How to Apply for Tax Incentives in Vietnam with Emerhub

Applying for tax incentives in Vietnam involves preparing detailed investment documents and securing approvals from local authorities while staying compliant with strict requirements. Emerhub’s local tax experts can help you identify and structure your investment plans to fully take advantage of available incentives offered by the Vietnamese government. 

Here’s a detailed overview of how our tax and accounting service can help you apply for tax incentives in Vietnam:

1. Identify Relevant Tax Incentives: Our business experts will identify the suitable tax incentives that is applicable to your operations based on the location and sector your business operates in. 
2. Prepare Documentation: We will prepare the necessary documentation for the application, which may include your project proposal, financial projections, investment registration certificate, business plan, and proof of eligibility.
3. Application Submission: Depending on which tax incentive you are eligible for, our consultants will submit your application to the relevant governing authority. This includes the Ministry of Planning and Investment, the Provincial People’s Committee, or the industrial zone’s management board.
4. Approval and Compliance: The processing and approval timeline depends on the incentive and the local authority overseeing the application. Upon approval, our experts can assist you in maintaining compliance by meeting annual reporting deadlines and audits while you fulfill your investment commitments.

Strategies and Risks of Using Tax Incentives in Vietnam

How to Maximize Vietnam Tax Incentives

To maximize your tax incentives, you need to structure your projects effectively by aligning with the incentivized priority sectors and locations as promoted by the Vietnamese government. Plus, the country’s network of over 80 Double Taxation Agreements (DTAs) creates opportunities for you to reduce withholding taxes on cross-border transactions.

In certain cases, you can combine tax incentives with protections under international investment treaties, offering both financial advantages and legal safeguards. Since many incentives are reliant on sustained operations, long-term planning is essential. Any premature withdrawal from Vietnam could result in a hefty loss for your business.

Risks and Limitations of Tax Incentives in Vietnam

As lucrative as these incentives sound, you must also be aware of their limitations. These incentives are subject to change as the government priorities continue to evolve, which affects long-term certainty. Furthermore, not all industries qualify for incentives, even if they are open to foreign investment.

Any errors in tax reporting, misclassification of business activities, or failure to maintain the set requirements can result in immediate revocation of your incentives. As such, authorities will actively conduct reviews of your projects to ensure ongoing eligibility and compliance.

Schedule a consultation with our tax experts to get tailored guidance on securing the right tax incentives in Vietnam.