The Vietnamese Ministry of Finance issued Circular No. 43/2019/TT-BTC which came into effect on August 26, 2019, with provisions to incentivize investments in the country’s economic or industrial zones. According to the recent circular, various tax incentives are provisioned to enhance standards of living and quality of life in the industrial zones.
The tax incentives are especially beneficial to those who invest in condominium units or housing developments, operation, or rental. It also applies to infrastructure developments in industrial and economic zones for employees’ medical, cultural, and recreational needs. A foreign investor should be cognizant of all the incentives that the government has provisioned before expanding to an industrial zone in Vietnam.
Income Tax Incentives for Investments in Industrial Zones
Investing in employee facilities qualifies investors for a tax break on their earnings. There are two types of tax breaks available to them:
- Fixed asset value: the depreciation costs of the facilities can be deducted as deductible expenses in corporate income tax.
- Other expenses: The rest of the costs that can be deducted are listed in the corporate income tax law.
Why Housing Investments in Industrial Zones Are Vital?
The growth of industrial zones is the primary driver of increased employment and the upliftment of the local economy. However, several obstacles may prove to impede the development. Consequently, the circular was adopted to address the issues listed below.
Lack of Housing at Industrial Zones
According to the Vietnam General Confederation of Labor, just 1.5 million of the 2.7 million people employed in Vietnam’s industrial zones have suitable accommodation in or near the industrial zones. Moreover, foreign laborers account for more than half of the workforce.
Opportunities for Investors
The number of workers migrating into industrial zones is undeniably high, and so are the number of opportunities available for real estate and property developers as well as investors. These less developed areas, particularly in central Vietnam, provide investors with greater opportunities to invest in real estate, housing, and infrastructure and secure great returns. Moreover, these areas struggle to retain competent workers, which is why improvements in amenities can entice people to this less developed area.
For instance, Samsung spends heavily on modern housing and facilities for its 100,000 employees in industrial zones in Vietnam’s Nguyen Bac Ninh districts.
Foreign Investments in Industrial Zones in Vietnam
The organizations that invest in employee infrastructure and amenities frequently experience a rise in talent acquisition and retention, fostering their market competitiveness.The Circular ensures that investors that participate in Vietnamese industrial zones will receive additional benefits, allowing for long-term and sustainable investments. Vietnam aspires to compete with China as the next industrial export destination.
According to the most recent data, there are now 9,853 foreign direct investment (FDI) projects in industrial zones, amounting to total registered capital of USD 197,8 billion. Apart from FDI projects, there are 9,140 local investment projects with a total registered capital of USD 89.2 billion.
To summarize, industrial zones in Vietnam are critical for attracting more foreign direct investment (FDI) and propelling the country’s economy ahead. As a result, the Circular lays out a slew of business and personal income tax incentives to boost FDI in industrial zones.
How Cekindo can Assist
Investing in Vietnam’s industrial zones can be a time-consuming process. Cekindo’s comprehensive business solution services will not only assist you with registering your company but will also ensure that you stay on top of all legal compliances. Following incorporation, we also provide HR and accounting services.