Tax Incentives for Businesses Involved in Supporting Industries: Decree 57
- Vietnam recently issued Decree 57 for businesses involved in supporting industry projects to qualify for corporate income tax incentives.
- The Decree came into effect on June 4, 2021, is retroactive, and is welcomed by businesses given the current business environment.
- Investors should study the Decree carefully and consider taking advantage of the CIT incentives given the substantial tax savings.
Vietnam issued Decree No. 57/2021/ND-CP (Decree 57) allowing enterprises access corporate income tax (CIT) incentives for those businesses invested in projects manufacturing prioritized supporting industry products before 2015. Decree 57 went into effect on June 4, 2021.
While projects involved in supporting industries were always eligible for CIT incentives, projects that began operations before January 2015 were unable to avail CIT incentives. Decree 57 allows those manufacturing projects that meet the required criteria and that began operations before January 2015 to be eligible for CIT incentives.
Decree 57 highlights
Eligible businesses are therefore entitled to CIT exemption for four years, 50 percent CIT reduction for nine years, and a 10 percent preferential tax rate for the first 15 years on income coming from the project. In addition, as per the Decree, the incentive is retroactive, meaning the business can claim back the additional tax paid with a request to the tax authorities.
In addition, manufacturing projects that are claiming or have claimed CIT incentives under other incentive programs can claim CIT under Decree 57 for the remaining period.
CIT incentives for projects supporting the supporting industry have been detailed in Circular 21/2016/TT-BTC which include industries such as textile and garments, footwear, electronics, and so on.
The new decree has been welcomed by businesses and is worth incorporating due to the significant tax savings that are possible given the business environment particularly due to the effects of the pandemic.
Supporting industries remain priority for government
Decree 57 comes on the heels of Resolution 115 last year promoting the development of supporting industries for the 2020-2030 period.
Vietnam’s supporting industries are increasingly developing and play an essential role in Vietnam’s participation in global supply and value chains. The sector’s development also helps the economy grow in a more sustainable manner, avoid the middle-income trap, and attract quality foreign investment with positive technological spillover.
Supporting and building up the supporting industry sector is one of the priority areas for Vietnam’s government as it will help Vietnam develop into a hi-tech manufacturing base shifting from a low-cost manufacturing center. Decree 57 is the latest regulation in line with this vision.
Investors unsure of how to apply the incentives for their business should seek professional tax advice to avail of the CIT incentives.