Incentives to investment in electronic components production
Electronic components production is one of the supporting industries prioritized for development in Vietnam. The government has adopted many more favorable incentive policies when foreign investors build factories for electronic components production. Since then, Vietnam has attracted more and more high-quality foreign investment capital from big giants such as Samsung, Foxconn, Intel, LG and Panasonic. In this article, Bizlawyer would provide necessary information about the incentives of investment in electronic components production.
Under Annex 1 of Decree No. 118/2015/ND-CP, electronic components production is a preferential investment industry. Accordingly, investors will have investment incentives of corporate income tax, import tax, and land use duties.
1. Investment incentives of electronic components production
- Corporate income tax (CIT): If investors carry out projects relating to the production of technology products prioritized for development under Article 1.5(đ) of the Law on tax amendment 2014, such investors will be levied the CIT rate of 10% within 15 years. During this period, their payable CIT will also be exempted in the first no more than 4 years and be reduced by 50% no more than the next 9 years.
According to Article 5.4 of Circular No. 83/2016/TT-BTC, if these projects are located in areas with difficult socio-economic conditions under Annex II of Decree No. 118/2015/ND-CP, the investors have their own discretion to choose the most favorable incentive of CIT for them.
- Import tax: According to Article 4.5 of Circular No. 83/2016/TT-BTC, as the electronic components production is listed in the Annex 1.B of Decree No. 118/2015/ND-CP, the goods imported into Vietnam to form fixed assed for the project will be exempted from import tax.
- Land use duties: According to Article 6.2 of Circular No. 83/2016/TT-BTC, the investors will receive a 50% reduction of non-agriculture land use tax under Article 10.1 of Law on Non-agriculture land use tax 2010 for electronic components production projects. If these projects are located in areas with difficult socio-economic conditions under Annex II of Decree No. 118/2015/ND-CP, the non-agriculture land use tax will be exempted under Article 9.1 of Law on Non-Agriculture land use tax 2010.
2. Conditions for entitlement to investment incentives
With respect to projects for which an Investment Registration Certificate (“IRC”) is issued: When an investor propose an investment project of electronic components productions to an investment licensing authority, the investor should research on investment incentive/s applicable for that project. Under the investor’s proposal and relevant laws, the investment incentive/s shall be recorded in the IRC or the written investment policy decision by the investment licensing authority with the following particulars:
(a) The eligible entities and conditions for entitlement to such investment incentive
(b) The basis for application of the investment incentive in accordance with the law on tax and the law on land.
With respect to projects which do not require an IRC to be issued
Investors are entitled to investment incentives without performance of the procedures for issuance of an IRC if they satisfy the conditions for entitlement to investment incentives. In this case, the investors shall, on the basis of conditions for entitlement to investment incentives, themselves determine investment incentives and perform the procedures for entitlement to investment incentives at the tax authority, financial authority or customs office
corresponding to each type of investment incentive.
We hope that this article can solve problems that foreign investors are concerned in electronic components production. Bizlawyer – a solid legal funcrum, is always willing to advise our potential client.