Setting up a Manufacturing & Trading Business in Vietnam’s Free Zones, a Brief Guide

Foreign individuals and entities are flocking to Vietnam's free zones, looking to enjoy the tax benefits. Learn about Vietnam's free zonse in this article.

Foreign individuals and entities are flocking to Vietnam’s economic free zones in recent years, looking to form their manufacturing companies and enjoy the tax benefits for the distribution and export of their products. There are significant industrial zones in Vietnam, and they have emerged as important hubs for different industries, ranging from light to heavy. Here is a comprehensive guide.

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Free Zones in Vietnam

1. VSIP (Vietnam-Singapore Industrial Park)

This industrial park was built in 1996 and is known as one of the best world-class industrial parks. VSIP has industrial parks in 6 provinces throughout Vietnam, including Quang Ngai, Hai Duong, Nghe An, Hai Phong, Binh Dinh & Bac Ninh.

Electronics, automotive components, consumer products, and medicines are some of the major investment projects in VSIP.

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2. HPIP (Hiep Phuoc Industrial Park)

This industrial park is located in Ho Chi Minh City’s Nha Be District. Over 4,000 hectares of industrial property, HPIP contains ready-built facilities. Due to its proximity to Ho Chi Minh City, Vietnam’s financial center, as well as its sophisticated road system, export operations are thriving in this industrial zone.

3. Phuoc Dong Industrial Park

Also known as PDIP this industrial park is situated between Trang Bang district and Go Dau district, this free zone is considered one of the most innovative and environmentally focused commercial and manufacturing parks in Vietnam.

PDIP’s major investment industries are biofuel, steel components, logistics, support services, construction materials, and textiles.

4. The Economic Zone of Dinh Vu-Cat Hai

This 22,540-hectare industrial zone is an essential coastal free zone in Vietnam strategically located in Hai Phong.

The main industries in this free zone are machinery, electronics, and communications, chemical, scientific, and electrical equipment.

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Reasons to Set up a Business in Vietnam Free Zone

Setting up a company in the right Vietnam free zone can serve as a strategic advantage for businesses in the long run. Currently, Vietnam has 250 industrial and export processing zones in four major economic zones: Southern Key Economic Zone (SKEZ), Central Key Economic Zone (CKEZ), Northern Key Economic Zone (NKEZ), and Mekong River Delta Economic Zone (MeKEZ).

RELATED: EU-Vietnam Free Trade Agreement and Opportunities Offered

Below are the reasons why foreign entrepreneurs establish their firms in free zones in Vietnam:

1. Reap the Tax Benefits

  • Companies can enjoy reduced corporate income tax with a tax rate of 10% for a maximum of 15 years
  • Foreign and local employees are eligible for a 50% reduction in personal income tax
  • Approved projects are exempted from corporate income tax for a maximum of 4 years

2. Enjoy Additional Government Incentives

  • High-technology projects have a 10% income tax rate reduction for a maximum of 30 years
  • Socialized projects such as education and health are qualified for a 10% reduced tax rate throughout the entire project
  • Imported, manufactured, or processed goods within the industrial zones are exempted from value-added tax (VAT) and excise tax
  • Raw materials imported for manufacturing in Vietnam industrial zones are eligible for a 5-year tax holiday

3. More Benefits for Trading Companies

  • Tariff cuts are applicable for company with goods traded in the ASEAN regions
  • Areas with difficult socio-economic conditions get support from the government for their infrastructure development
  • Companies can have access to the government’s preferential grants and are exempted from land rental fees
  • Easy accessibility to low-cost labor with US$96 to US$138 monthly minimum wage

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Tomas Svoboda - Cekindo - Vietnam Country Manager

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Tomas is the co-founder & Chief Business Development Officer responsible for Vietnam. His role is to define the key potential of the Vietnamese market and to ensure that Incorp's branch in Vietnam provides its clients with smooth and hassle-free market entry solutions.