Vietnam offers a competitive and transparent tax incentive framework designed to attract foreign direct investment (FDI). Foreign investors operating in eligible sectors and locations may benefit from preferential corporate income tax rates, tax holidays, and import duty exemptions, provided that statutory conditions are fully satisfied.

This article outlines the key tax incentives available to foreign investors in Vietnam and highlights important compliance considerations.

1. OVERVIEW OF TAX INCENTIVES FOR FOREIGN INVESTORS IN VIETNAM

An Overview of Tax Incentive Policies Applicable to Foreign Investors in Vietnam

1.1. Legal Framework Governing Tax Incentives

Tax incentives for foreign investors in Vietnam are regulated under:

• The Law on Investment
• The Law on Corporate Income Tax
• Relevant Government Decrees and guiding Circulars
• Vietnam’s international trade and investment commitments

Under Vietnamese law, foreign-invested enterprises (FIEs) are subject to the same tax regime as domestic enterprises, while qualifying projects may enjoy preferential tax treatment.

1.2. Conditions for Foreign Investors to be eligible for Tax Incentives

Foreign investors in Vietnam are eligible for tax incentives only if their investment projects meet the conditions prescribed under Vietnamese investment and tax laws. Tax incentives are not automatically granted and must be claimed in accordance with statutory requirements.

In general, tax incentives apply to projects implemented in incentivized sectors or preferential geographical areas, such as high-tech industries, research and development, software production, education, healthcare, environmental protection, and projects located in areas with difficult or extremely difficult socio-economic conditions.

In addition, the investment project must be legally established and properly licensed, including the issuance of an Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC), where applicable. Tax incentives are granted only within the registered scope of the investment project.

Certain incentives may also be subject to specific conditions regarding investment capital, project scale, or operational performance. Foreign investors are required to maintain full compliance with accounting, tax declaration, and reporting obligations throughout the project’s operation in Vietnam.

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2. SUMMARY OF TAX INCENTIVES PROVIDED UNDER VIETNAMESE INVESTMENT LAW

Summary of Tax Incentive Mechanisms under Vietnam’s Investment Law

2.1. Corporate Income Tax Incentives

Under Vietnamese investment regulations, corporate income tax (CIT) incentives are granted based on the investment sector, project location, and nature of the investment. Pursuant to Article 19 of Decree No. 320/2025/ND-CP (and its guiding provisions), eligible investment projects may enjoy preferential CIT rates for a fixed period or for the entire duration of operation.

Key Notes for Foreign Investors:

• Preferential tax rates are project-based, not automatically applicable to all enterprise income.
• Eligibility depends on both the nature of the investment and the actual implementation location of the project.
• In practice, tax incentives are confirmed at the licensing stage, typically reflected in the Investment Registration Certificate (IRC) or relevant approval documents.
• Preferential tax treatment is subject to ongoing compliance with investment conditions, accounting, and tax regulations throughout the project’s operation.

Tax incentives are applied in accordance with the prevailing tax and investment regulations at the time of project licensing and may be subject to change under Vietnamese law.

2.2. Import Duty Incentives

Foreign investors in Vietnam may benefit from import duty exemptions or reductions when importing goods serving eligible investment projects. Key incentives include:

• Exemption from import duty on machinery, equipment, specialized vehicles, and construction materials that cannot be manufactured domestically and are used to form fixed assets of an investment project.

• Import duty exemption for raw materials, supplies, and components imported for production in projects operating in prioritized sectors or located in incentivized areas, for a prescribed period.

• Duty-free import of goods used for scientific research, technological development, and innovation activities.

These incentives help reduce initial investment costs and enhance the financial efficiency of foreign-invested projects in Vietnam.

2.3. Exemptions and Reductions of Land Use Fees, Land Rental, and Land Use Tax

Eligible foreign investors may receive exemptions or reductions of land use fees and land rental, particularly for projects that:

• Are implemented in disadvantaged areas;

• Operate in priority industries;

• Utilize land efficiently or invest in large-scale, long-term projects.

The duration and level of land-related incentives depend on the project’s location and investment scale.

2.4. Accelerated Depreciation and Increased Deductible Expenses for Corporate Income Tax Purposes

To support capital-intensive projects, foreign-invested enterprises may apply:

• Accelerated depreciation for fixed assets, allowing faster recovery of investment capital.

• Increased deductible expenses for corporate income tax purposes, subject to statutory limits.

These mechanisms reduce taxable income in the early stages of project operation, improving cash flow.

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3. INCENTIVES BY INVESTMENT SECTORS AND LOCATIONS

Sector-Specific and Location-Based Tax Incentives in Vietnam

3.1. Incentivized Investment Sectors

Pursuant to Clause 1, Article 15 of the 2025 Law on Investment, incentivized investment sectors are sectors prioritized for investment attraction in order to achieve the following objectives:

a) Development of science and technology, innovation, digital transformation, digital technology industries, and the semiconductor industry;

b) Development of the green economy, circular economy, sharing economy, digital economy, and new economic models;

c) Development of industrial clusters and value chains; attraction of investments with modern governance, high added value, spillover effects, and connectivity to global production and supply chains;

d) Development of renewable energy, new energy, and clean energy; ensuring national energy security;

dd) Development of agriculture and forestry; protection of the environment and natural resources; development of the marine economy;

e) Construction and development of infrastructure systems;

g) Development of education and training, healthcare, high-performance sports, and national culture;

h) Development of key chemical industries, key mechanical industries, supporting industries, and the pharmaceutical industry;

i) Other objectives as prescribed by the Government.

3.2. Incentivized Investment Locations

Incentivized investment locations include:

a) Areas with difficult socio-economic conditions and areas with particularly difficult socio-economic conditions;

b) Industrial zones, industrial clusters, export processing zones, high-tech zones, high-tech agricultural zones, concentrated digital technology zones, free trade zones, international financial centers, and economic zones.

Note for Foreign Investors:

Investment incentives in Vietnam are not applied automatically based solely on general sector or location classifications. Based on the incentivized sectors and locations prescribed by law, the Government issues and periodically updates the List of Incentivized Investment Sectors and the List of Incentivized Investment Locations, and determines which sectors are considered specially incentivized. Therefore, foreign investors should always verify whether their specific project falls within the current applicable lists at the time of licensing and throughout project implementation to ensure eligibility for investment incentives.

4. IMPORTANT CONSIDERATIONS FOR FOREIGN INVESTORS

Key Considerations for Foreign Investors when Applying Tax Incentives

When investing in Vietnam, foreign investors should carefully assess not only the availability of investment incentives but also the legal and practical conditions attached to their application. Key considerations include:

• Eligibility is conditional, not automatic: Investment incentives are granted only if the project fully satisfies statutory requirements regarding sector, location, scale, technology, and implementation timeline.

• Reliance on official incentive lists: Incentives are determined based on the Government-issued Lists of Incentivized Sectors and Locations, which may be amended over time. Investors should confirm applicability at both the licensing stage and during project operation.

• Proper registration and declaration: Incentives must be clearly reflected in the investment registration documents and properly declared to tax and customs authorities in order to be applied.

• Impact of project changes: Any adjustment to project objectives, scale, location, ownership structure, or operational model may affect incentive eligibility and should be legally assessed in advance.

• Ongoing compliance obligations: Continuous compliance with tax, accounting, reporting, and investment regulations is essential to maintain incentives throughout the incentive period.

• Risk of incentive revocation: Failure to meet incentive conditions or misuse of incentives may result in tax reassessment, recovery of incentives already granted, and administrative penalties.

A thorough legal review and proactive compliance strategy are therefore crucial for foreign investors to maximize investment incentives while mitigating regulatory risks in Vietnam.

As a Vietnamese law firm specializing in foreign investment advisory, Hung Phi Law Firm supports foreign investors throughout the investment process from incentive assessment and licensing to post-investment compliance.

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5. FREQUENTLY ASKED QUESTIONS (FAQs)

5.1. Is legal consultation necessary when applying for investment incentives?

While not mandatory, legal consultation is strongly recommended due to the complexity of Vietnam’s investment and tax regulations. Professional legal advice helps ensure proper incentive identification, registration, and ongoing compliance.

5.2. Does an expanded investment project in Vietnam enjoy the same corporate income tax incentives as a new investment project?

An expanded investment project does not automatically enjoy incentives applicable to a new project. The additional income generated from the expansion may only continue the remaining incentive period of the existing project or enjoy tax exemption and reduction (excluding preferential tax rates), subject to statutory conditions. Incentives are not applicable to expansions resulting from mergers, acquisitions, or project transfers.

5.3. What happens if an investor no longer meets the incentive conditions?

If an investor fails to maintain the required conditions, the incentive may be revoked, and the investor may be required to repay the incentives already enjoyed, together with penalties or late payment interest, if applicable.

The above information outlines TAX INCENTIVES AVAILABLE TO FOREIGN INVESTORS IN VIETNAM, as provided by Hung Phi Law Firm to our clients.

Should you have any questions regarding this matter or require legal advice tailored to your specific case, please do not hesitate to contact the lawyers of Hung Phi Law Fir m for timely support and professional consultation.

Contact Information:

Hung Phi Law Firm

Phone: (+84) 962 75 28 38

Email: luathungphi@gmail.com

Website: hungphi.vn

Sincerely,