Investors in solar, wind or environmental treatment projects often ask how many points of VAT preference the project receives. The honest answer is that VAT carries no project-based incentive mechanism of the kind corporate income tax does. The real value a renewable project obtains from VAT lies in two different mechanisms — full crediting of construction-phase input VAT and the investment project refund — and this article stays strictly within that VAT scope.
Legal basis
- Law on Value Added Tax 48/2024/QH15: the rate system of 0% (Article 9), 5% (Article 10) and 10% (Article 11) applies by the nature of the goods or services; the law provides no rate reduction based on the type of investment project.
- Article 14 of Law 48/2024: a project on the credit method credits input VAT on purchases serving taxed activities, subject to non-cash payment evidence for transactions of VND 5 million or more.
- Article 15 of Law 48/2024: a business with a new investment project on the credit method whose uncredited input VAT on goods and services used for investment reaches VND 300 million or more is entitled to a refund — the most important mechanism for capital-intensive energy projects.
- Decree 181/2025/ND-CP: refund files are classified by risk management — refund-first for compliant taxpayers, inspection-first for first-time or risky files.
- Import VAT on equipment is paid to customs at importation and then credited or refunded under Articles 14 and 15; import-duty exemptions and CIT incentives belong to separate legal frameworks, not to VAT.
Why there is no preferential VAT rate for green projects
Unlike CIT, which offers preferential rates and holidays by encouraged sector, VAT is an indirect tax charged per transaction on goods and services. Commercial electricity sold by a solar or wind project bears the standard rate under Article 11 of Law 48/2024; it does not drop merely because the project sits in the renewable sector. A financial model that assumes a bespoke preferential output rate for the project has no basis in current VAT law.
That does not leave the project worse off. During construction, the project has almost only input VAT on equipment, works and services and no output VAT yet; if the credit and refund mechanisms work as designed, that tax returns to the project cash flow instead of becoming capitalised cost.
The two mechanisms that create real value: credit and project refund
The first mechanism is crediting: the project company registers for the credit method from the investment stage, gathers invoices and import VAT receipts across all equipment and construction packages, and credits them against output VAT once electricity sales begin, or accumulates them toward a refund. The non-cash payment condition from VND 5 million per transaction must be controlled inside the contractor payment process itself, because inputs failing it are denied.
The second mechanism is the Article 15 refund: once uncredited input VAT used for investment reaches VND 300 million, the project may file for a refund instead of waiting years to absorb it against revenue. For a large power project this refund is often a significant component of construction-phase cash planning; timing depends on whether the file is classified refund-first or inspection-first under the risk rules of Decree 181/2025.
Imported equipment and the myth of an incentive certificate
Equipment imported for the project still pays import VAT at customs like ordinary goods; that tax is not lost, but becomes input VAT to credit or refund under the mechanisms above. Where a project enjoys import-duty exemption for fixed-asset equipment, that is a preference of export and import duty law — it does not exempt the import VAT, and the two taxes must be budgeted separately.
Because VAT has no project incentive, there is likewise no VAT incentive certificate for the project to obtain. The decisive documents are the ordinary investment and tax files: the investment registration certificate, registration for the credit method, and the refund dossier filed with the managing tax authority. Investors should require advisers to state which tax each claimed incentive belongs to before it enters the financial model.
Frequently asked questions
What VAT incentives do renewable energy and environmental projects receive?
VAT has no project-based incentive: output electricity and services are taxed by the nature of the goods and services under Law 48/2024. The practical benefit is full input crediting under Article 14 and a refund of uncredited input VAT of VND 300 million or more for a new investment project under Article 15.
Is imported equipment for the project exempt from VAT?
No. Imported equipment still pays import VAT at customs; the amount paid becomes input VAT that is credited or refunded to the project under Articles 14 and 15 of Law 48/2024. Any exemption belongs to import duty under export and import duty law — a different tax from VAT.
Which authority confirmation does the project need?
No authority issues a VAT incentive confirmation for a project, because a project-based incentive mechanism does not exist in this tax. The project simply completes its investment file as required, registers for the credit method, and files the refund dossier with its managing tax authority once the Article 15 conditions of Law 48/2024 are met.
How should a project plan VAT cash flow during construction?
Treat import VAT and domestic input VAT as a recoverable advance: register for the credit method from the start, control non-cash payment evidence across every contractor package, and schedule the refund filing as soon as uncredited input VAT passes VND 300 million, rather than waiting until the plant generates power.
This article has been quality-reviewed by the FLAW AI Legal Council
