More specific and practical incentives for industrial parks (IP), export processing zones (EPZ) and economic zones (EZ) are offered by the Vietnamese Government in Decree No. 29/2008/ND-CP of March 14 (the Decree) in order to attract greater foreign investment in these zones.
Mechanisms and policies applicable to IPs, EPZs and EZs under the Decree have been derived from those previously stipulated in Decree No. 36/CP of April 24, 1997, as well as investment incentives and support for EZs and border-gate EZs under operating regulations issued by the Prime Minister. While removing some provisions on investment, land and foreign exchange management which are no longer appropriate, the Decree adds a provision permitting EPZs and EP enterprises to enjoy incentives applicable to IPs and non-tariff areas in order to ensure compliance with WTO rules on export subsidies.
The new regulations do not specify corporate income tax rates applicable to IPs and EZs but stipulate that these zones are treated as geographical areas eligible for investment incentives and that projects in these zones are eligible for investment incentives and may benefit from preferential policies regarding corporate income tax, value-added tax, export tax and import duties applicable to some localities and domains as specified in the Investment Law.
Once approved by the Prime Minister, the following investment projects in IPs or EZs are entitled to the highest corporate income tax incentive: investment projects in domains or sectors eligible for special investment incentives and implemented in localities facing exceptional socio-economic difficulties; investment projects on construction and commercial operation of infrastructure in non-tariff areas in EZs; projects on investment in hi-tech domains; major projects that are important to branch or sector development or regional socio-economic development.
Regarding income tax on high income earners (personal income tax), a 50% reduction of personal income tax is offered to Vietnamese and foreigners working and earning taxable incomes in EZs. This provision is applicable to all types of EZ, including border-gate EZs. At present, there are 23 border-gate EZs established under the Prime Minister’s decisions and currently operating under different preferential mechanisms. Though some large EZs like Dung Quat (Quang Ngai), Nhon Hoi (Binh Dinh), and Van Phong (Khanh Hoa) have already enjoyed personal income tax relief at this level as provided in separate legal documents, smaller EZs (Nghi Son in Thanh Hoa, for instance) are yet to enjoy relief at this level. It is therefore necessary to unify provisions governing EZs and border-gate EZs in order to create uniform legal grounds for enforcement.
The Decree also allows expenses for investment in building, operation or lease of apartment buildings and infrastructure for IP and EZ workers to be accounted as reasonable expenditure and subtracted upon calculating taxable incomes of enterprises with investment projects in IPs and EZs. This provision aims to encourage enterprises to invest in building accommodations for workers and daycare facilities for their children, helping them improve their living conditions and realize social security policies.
Visas and EZs
Under the Decree, foreigners and overseas Vietnamese working, investing in or doing business in EZs and their family members may be granted multiple visas with a validity term suitable to their working periods in EZs to reside or temporarily reside for a definite time in these zones. Compared to Article 44 of the Investment Law stipulating that foreign investors, specialists and technical workers working on a regular basis under investment projects in Vietnam and their family members are entitled to extendable multiple visas which are valid for five years, this provision extends the category of eligible entities and frees visa holders from carrying out administrative procedures for applying for new visas.
Citizens from districts in bordering nations opposite to Vietnamese districts in which EZs are located are required to produce only border identity cards or laissez-passers issued by bordering countries’ authorities when traveling through these EZs. If they want to travel to other places in provinces where EZs exist they should obtain single and termed travel permits from provincial police offices.
Passport holders who are ineligible for visa exemption (for example, citizens of a neighboring or third country) are now exempt from entry visas and may stay in border-gate EZs for 15 days at most. If these persons wish to travel to other areas of
Vehicles carrying cargo under business contracts between foreign partners and Vietnamese enterprises from neighboring countries or a third country are allowed to enter border-gate EZs. If these vehicles go further to receive or deliver goods at other places outside border-gate EZs, they should comply with current relevant regulations.
Ship crew members and vehicle drivers or assistant drivers may enter or leave border-gate EZs with passports, crew member registers, border identity cards or laissez-passers issued by foreign authorities.
Tourists from neighboring countries may travel to any province or city of
The Prime Minister’s approval of the master plan on development of Vietnam’s border-gate economic zones up to 2020 (under Decision No. 52/2008/QD-TTg) has been applauded by legal experts as important and significant to the unification of organizational and operational models of these zones, allowing them to apply preferential policies in calling for investment capital and enterprises investing in these zones to enjoy tax, import, export, and entry and exit incentives.
Temporary residence
Investors and workers in EPZs and EP enterprises and people having working relationships with agencies, organizations and enterprises in EPZs and EP enterprises may enter and leave these zones and enterprises within a day. They are not allowed to sojourn in EPZs and EP enterprises unless so permitted by EPZ management boards.
In case of necessity, foreign experts may temporarily reside in enterprises in IPs or EPZs under regulations of provincial People’s Committees, provided that:
l their temporary residence is for production or business operation of these enterprises;
l they are not accompanied by their families and relatives;
l they complete procedures for registration and declaration of temporary residence under current regulations on entry, exit and residence of foreigners in
l host enterprises can arrange separate accommodations for them and commit to ensure security, order and normal operation of IPs or EPZs during their temporary residence.
An objective set forth by the Government for 2006-10 is to attract more than 5,000 projects capitalized at a total registered capital of around USD 30 billion in development of production in IPs and ensure a total disbursed investment capital of USD 10-16 billion. Incentives provided for in the Decree would help facilitate the achievement of this objective.
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