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MACROECONONY & FINANCE

POLICIES ON INVESTMENT INCENTIVES

TO ATTRACT FOREIGN INVESTMENT IN VIET NAM

LE NHU QUYNH

Abstract: Policy for investment incentives is one of the methods that many countries use to attract foreign direct investment (FDI)
capital. In Viet Nam, this method is widely applied and has made a significant contribution to attracting FDI capital. However, there
are still limitations and inadequacies, making its effectiveness not high. The paper will study the status of investment incentive
policies in Viet Nam, evaluate achievements and weaknesses, and propose some solutions for Viet Nam in the process of completing
these policies.

Keywords: Policies, investment incentives, attract, FDI capital.
Received: September 4 , 2022 development of production and business, increasing
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Revised: October 12 , 2022 exports, and promoting enterprises to invest capital in
Accepted: December 2 , 2022 areas with difficult natural conditions to create equal
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Status of Viet Nam’s investment incentive policies development among regions in the country, forming a
aimed at attracting foreign direct investment capital reasonable economic structure, and creating sustainable
and stable income for the economy.
Over the past 35 years, Viet Nam has continuously Since 2011, the Government has been implementing
improved institutions and investment incentive policies tax reform phase 4. During this period, the global financial
to attract and manage foreign investment resources better. crisis, along with the growth based on the exploitation
Regulations related to incentives to attract FDI capital of natural resources, low-quality, and cheap labor, and
appear in many different documents, such as the Law on capital, has slowed the economic growth rate of Viet Nam,
Investment, the Law on Corporate Income Tax, the Law requiring Viet Nam to change its growth model towards
on Land, and other sub-law documents. advancing quality and ensuring quality sustainability.
Currently, investment incentive policies to attract FDI In addition, international economic integration needs
capital in Viet Nam mainly focus on tax incentives and to be promoted in the direction of quality improvement
land incentives, as follows: and in-depth development. A new Law on Tax has been
Preferential tax policies promulgated, and the Law amending and supplementing
the Law on Tax during this time has also been given to
Preferential tax policies in Viet Nam are clearly accommodate the above changes.
reflected in the incentives for corporate income tax and Viet Nam’s current average corporate income tax rate
import and export tax. is 20%, specified in Article 11 of the Circular No. 78/2014/
The first is policies on corporate income tax. TT-BTC. Article 19 of the Circular No. 78/2014/TT-BTC,
In each stage of socio-economic development, the which is amended in the Circular No. 96/2015/TT-BTC,
Law on Corporate Income Tax has contributed to creating stipulates preferential tax rates for each specific case, for
an equal environment, being in line with international instance, enterprises with a tax rate of 10% for 15 years,
practices, encouraging entities to invest in production and ones with a tax rate of 10% throughout the operation
business, facilitating investors to invest in production and period, ones with a tax rate of 15%, ones with a tax rate of
business, and helping businesses increase accumulation. 17% for 10 years, or ones with a tax rate of 17% during its
Accordingly, this tax rate has been adjusted to suit the operation period. Article 20 of the Circular No. 78/2014/
situation of socio-economic development at different TT-BTC of the Ministry of Finance, which is amended
stages. (Corporate tax rate, from 32% in 1997, had reduced in Circular No. 96/2015/TT-BTC, stipulates cases of tax
to 28% in 2001, 25% in 2009, 22% in 2014, and 20% from exemption for 4 years and a reduction of 50% of the
January 1, 2016). payable tax for the next 9 years, cases of tax exemption
From 1987 to 2010, to implement tax reform in phases for 4 years and reduction of 50% of the payable tax for the
1, 2, and 3 and encourage investment while still ensuring next 5 years, and cases of tax exemption for 2 years and
revenue, the State reduced the tax burden by lowering reduction of 50% of the payable tax for the next 4 years.
tax rates, simplifying the tax system, and expanding the The current average corporate income tax in the
taxable subjects (Le Minh Huong, 2020). Tax policy clearly world is 23.54%. Africa has the highest average tax rate,
showed its conformity with the Government’s economic reaching 27.97%, and countries of the G20 have the lowest
development orientations, including encouraging the one, which is 26.75% (see Figure 1).
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