A 4-year holiday, then 50% cuts for 9 more years — Vietnam’s CIT incentives still look attractive on paper. But with the 15% global minimum tax, large groups may find it “exempt in Vietnam, topped up at home”. Understand incentives before pricing the project.
The incentive frame: holidays/cuts by location and sector
Vietnam’s CIT incentives run on two axes:
- By location: projects in difficult/extremely difficult socio-economic zones (listed) get deeper holidays — “incentives for investing in hard places”.
- By sector: high tech, renewables, key infrastructure, supporting-industry products — incentivised sectors under the Investment Law.
The common formula: full exemption for the first years (from the first profitable year), then 50% reduction for following years, then the standard rate. Exact spans (how many years) are project-specific — check the law and the project’s investment certificate.
Conditions: not automatic
Incentives are not automatic — all must hold:
- Eligibility: the right location/sector; honouring commitments (capital, schedule, technology).
- Separate accounting: incentivised income separately booked from non-incentivised income — mixing forfeits the mixed part.
- Clean record: serious tax/customs violations can disqualify incentives.
- Self-declaration: claim it yourself — but prove eligibility at audit.
The common mistake: “heard it’s a 4-year holiday” without checking project eligibility — audit day brings back tax plus penalties.
The 15% global minimum tax: the new incentive cap
The Global Minimum Tax at 15% under Resolution 107/2023/QH15 (QDMTT — qualified domestic top-up) applies to multinationals with consolidated revenue of EUR 750m+: if Vietnam’s effective rate falls below 15% (thanks to incentives), the gap is topped up.
The consequence: for large groups, Vietnamese holidays may have no real value — “exempt in Vietnam, topped up at home” (or in Vietnam under QDMTT). Project pricing must use the post-top-up effective rate, not the paper incentive rate. Vietnam is studying alternative support (cash grants, training) — watch policy.
Incentives vs QDMTT: real math
- Small groups (under EUR 750m): outside QDMTT — Vietnamese incentives keep full value. Still a major competitive edge for choosing Vietnam.
- Large groups (EUR 750m+): compute worldwide tax — Vietnamese incentives + top-up at home/QDMTT jurisdictions; compare with siting elsewhere.
- Structuring: never build structures just to “hunt” incentives — PPT (see EXP-4026) can deny them; incentives need real activity.
- Negotiation: for big projects, advance agreement with tax authorities on incentive conditions prevents later disputes.
Beyond CIT: the total package
Do not look at CIT alone — the new-FDI package also has:
- Import duty: exemption on machinery/equipment forming fixed assets (incentivised projects).
- Land rent: time-bound land-rent exemption/reduction by location/sector.
- VAT: 0% or exemption for some project-serving goods/services.
- Other support: labour training, industrial-park infrastructure, “green lane” procedures.
Price the total package — many projects with “modest CIT holidays but 15 years of free land rent” show better IRR.
Pre-investment checklist
- Pin the project’s incentivised location/sector — check current lists, not “old experience”.
- Compute the effective rate (with/without QDMTT by group size) over the project life.
- Check maintenance conditions (capital, schedule, technology) — only count what you can honour.
- Set up separate accounting from day one — fixing later is expensive.
- Tax advisers: confirm incentive conditions + QDMTT impact in writing before board approval.
Frequently asked questions
What CIT incentives do new FDI projects get?
A multi-year full exemption then 50% reduction, by location (difficult zones) and incentivised sectors; plus import-duty and land-rent incentives. Exact spans are project-specific — check the law and investment certificate.
How does the 15% global minimum tax affect incentives?
For groups with EUR 750m+ revenue (Resolution 107/2023), effective rates below 15% are topped up — Vietnamese holidays may have no real value (‘exempt in VN, topped up at home’).
Are incentives automatic?
No — location/sector eligibility, separate accounting of incentivised income, clean compliance record, and provable eligibility at audit are all required.
Are small groups hit by the global minimum tax?
No — under EUR 750m consolidated revenue stays outside QDMTT; Vietnamese incentives keep full value, still a major edge.
Contact FLAT Law Firm
FLAT Law Firm works with tax advisers on investment incentives: confirming conditions, computing effective rates (with/without QDMTT), project structuring. Contact us before board approval.