Amid deep economic integration, Vietnam continuously adjusts CIT policies to attract investment while ensuring stable revenue. Recent changes, including the global minimum tax, stricter transfer pricing controls, and selective tax incentives, have significantly impacted FDI enterprises. This article by DNP Vietnam Law Firm analyzes CIT incentives, their benefits for FDI businesses, and the implications of recent policy adjustments.
1. Current Application of Corporate Income Tax Incentives for FDI Enterprises:
Since 2011, Vietnam has undergone the fourth phase of tax reform to adapt to economic fluctuations and promote sustainable growth. The corporate income tax (CIT) policy has been adjusted to enhance competitiveness and attract investment.
One of the most significant changes was the reduction of the standard CIT rate from 25% to 22% (in 2014) and further down to 20% (in 2016) under Law No. 32/2013/QH13. At the same time, tax incentives were expanded for enterprises investing in industrial zones (excluding areas with favorable conditions) and expansion projects.
Accordingly, Law No. 71/2014/QH further supplemented tax incentives for the agricultural sector, supporting industries, high technology, and large-scale investment projects. Notably, since 2013, policymakers have shifted tax incentives from applying to newly established enterprises to focusing on income from projects in prioritized sectors and locations, optimizing the effectiveness of investment attraction.
2. Positive Impacts of CIT Incentives on FDI Enterprises:
Corporate income tax incentives have played a crucial role in attracting and maintaining FDI flows into Vietnam, bringing several economic benefits:
- Reducing tax burdens, increasing competitiveness: The reduction in CIT rates from 25% to 22% (2014) and 20% (2016) has helped FDI enterprises save costs, optimize profits, and expand investments.
- Encouraging investment in priority sectors: Tax incentives targeting high technology, supporting industries, agriculture, and industrial zones have effectively guided FDI into strategic sectors.
- Increasing economic contribution: FDI enterprises contribute over 20% of Vietnam’s GDP, with the export rate reaching 66.87% of the country’s total export value in 2013.
- Driving business development: Flexible tax policies have helped FDI enterprises strengthen their financial capacity, create jobs, and boost domestic supply chains.
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3. Recent Changes in CIT Policies:
3.1. Implementation of a Global Minimum Tax of 15%:
- Vietnam has issued Resolution No. 107/2023/QH15 to align its tax policies with the OECD’s global minimum tax regulations.
- Multinational corporations with annual revenues of EUR 750 million or more will be subject to a minimum 15% tax rate. This affects major corporations such as Samsung, Intel, LG, and Foxconn.
3.2. Stricter Transfer Pricing Control and Tax Avoidance Prevention:
- The Vietnamese tax authorities have strengthened transfer pricing control.
- Decree 132/2020/ND-CP mandates transparent reporting on transfer pricing to prevent FDI enterprises from artificially reporting losses to evade taxes.
3.3. Selective Adjustment of CIT Incentives:
- Tax incentives are maintained but focused on high technology and innovation.
- Some incentives have been reduced to prevent unfair competition between FDI enterprises and domestic businesses.
The information provided is for reference only. For further details, please contact us using the information below.
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