Legal regulations on tax incentives, tax exemptions and reductions for enterprises

1. What are tax incentives?

Tax incentives can be understood as the application of tax policies separate from the general provisions of tax law in order to create more favorable treatment for one or several specific groups of taxpayers. In simple terms, tax incentives are a combination of provisions of the tax law under which taxpayers enjoy certain priorities compared to other subjects in tax relations with the State.

2. What are corporate income tax incentives?

Corporate income tax is a tax that directly affects the interests of enterprises.

Therefore, the State uses preferential policies on tax rates and incentives on tax exemption and reduction periods to influence capital investment and production and business organization of enterprises.

Corporate income tax incentives are the State's creation of certain conditions for corporate taxpayers to conduct production, business or service provision in the following fields, geographical areas, categories, and industries. The model states that the State encourages development in order to reduce tax burden, attract investment, support and help enterprises in the process of operation, contributing to the realization of socio-economic development goals.

3. Corporate income tax incentives

There are two types of income tax incentives for enterprises: Incentives on tax rates and incentives on tax exemption and reduction periods. As follows:

a. Incentives on corporate income tax rates

According to regulations, tax incentives will include two main levels: 10% tax incentives and 17% tax incentives. This offer is applicable to many different target groups.

10% tax incentive:

• Within 15 years:

Applicable to enterprises implementing investment in new projects, including: Projects in extremely difficult economic areas, high-tech development fields, port projects, airports, railway stations and other industries. other particularly important processes under the Prime Minister's decision.

• Extend the application period but not exceeding 15 years:

Applied to enterprises implementing high-tech investment projects, especially important works under the Prime Minister's decision; New investment projects in the field of production, the minimum investment capital scale of 12 trillion VND and a number of other strict requirements.

• During the operation period:

Applicable to enterprises operating in the fields of: education and training, vocational training, or judicial expertise, culture, health, sports, environment; activities of publishers and press agencies; investment in social housing business; cultivation - husbandry - processing of agricultural, aquatic and seafood products in difficult economic areas; agriculture - forestry - fishery - salt production does not belong to difficult and especially difficult economic areas of cooperatives.

Preferential tax rate 17%:

• Within 10 years:

Applicable to enterprises earning income from the implementation of new investment projects: In economically disadvantaged areas, or projects in one of the following fields: production of energy-saving products, steel high-class machinery for agriculture - forestry - fishery - salt production, developing traditional industries...

• During the operation period:

Apply to People's Credit Funds, Cooperative Banks or microfinance institutions.

b. Incentives on tax exemption period

• Tax exemption for 4 years, 50% reduction of payable tax for the next 9 years:

  • Income from the implementation of new investment projects, with tax incentives of 10% for 15 years.

  • Income from implementing new investment projects in the field of socialization in areas with difficult and extremely difficult socio-economic conditions.

• Tax exemption for 4 years, 50% reduction of payable tax for the next 5 years: Income of enterprises from the implementation of new investment projects in the field of socialization.

• Tax exemption for 2 years, 50% reduction of tax payable in the next 4 years:

  • Incomes from the implementation of new investment projects in areas with difficult socio-economic conditions, or areas with tax incentives of 20% for 10 years.

  • Income from implementing new investment projects in industrial parks.

Note: The tax exemption and reduction period is calculated from the first year the enterprise has taxable income from the project enjoying tax incentives. If the enterprise has no taxable income in the first 3 years, the tax exemption and reduction period will be calculated from the 4th year when the enterprise has income from the new project.