Over the past few years, Vietnam has been a key destination for high-tech companies due to the availability of natural resources, low labor costs and the plurality of incentives provided by its government for the implementation of new projects.
Being the fastest-growing economy in Southeast Asia, the country also presents an advantageous geographical position: foreign entrepreneurs investing in Vietnam can easily gain access to ASEAN’s market of over 600 million people.
Vietnam maintains strong economic relations with many countries which facilitates cooperation in the technology industry. Announcing a massive partnership with the USA on the development of semiconductors in September 2023, the country tends to become a leading hub in this specific sector.
An innovation and regulatory framework in favor of semiconductors projects investment
On February 12th 2024, the Vietnamese Government unveiled a national semiconductor strategy composed of several major initiatives such as new tax incentives, science funds allowance and the possibility to join research collaborations with private companies. Given this announcement, it is worth mentioning that Vietnam’s regulation on semiconductors already presents abundant opportunities for foreign individuals and organizations who are planning to invest in the country.
For instance, Circular 21/2016/TT-BTC arranges corporate income tax incentives to be applied to the income of enterprises from implementing projects in the manufacture of supporting industry products.
Decision No. 29/2021/QD-TTg implementing regulation of the 2020 Law on Investment (LOI) also set up incentives policies on eligible investments plans such as semiconductors projects:
- Corporate income tax rate reduction and exemption for a certain limited duration, depending on the investment project.
- Land and water surface rent exemption for a certain limited duration, depending on the investment project.
In addition, the Government provides non-financial support for Research and Development. Among others, Resolution No. 124/NQ-CP, issued on September 3rd, 2020, set up a plan for the development of human resources in the high-tech industry by 2030. The program ensures that Vietnam will be able to provide in the near future highly skilled labor forces specialized in semiconductors. Vietnam’s comparative advantage over other nations in the region would be the availability of young engineering talent at a lower cost.
The construction of the National Innovation Center and the development of High Tech Parks were recently initiated following Decree 10/2024/ND-CP which sets a general innovation framework that can directly benefit semiconductors investors and their projects.
From a local-based incentives perspective, Resolution 98/2023/QH15 also launched a pilot program to attract investment in green initiatives, such as hi-tech and clean energy projects, in Ho Chi Minh City. The program outlines specific requirements and benefits for strategic investors, including a tax incentive that allows them to claim 150% of their actual Research and Development (R&D) expenses as a deduction against their Corporate Income Tax (CIT). Furthermore, these investors will receive priority treatment in customs procedures and may be eligible for simplified import and export tax processes, subject to certain conditions.
Which option is more suitable to invest in the semiconductor industry?
Organizations and individuals who want to invest in the semiconductor industry in Vietnam have two major options:
- Developing a project from its inception; or
- Acquiring shares in an existing company
When choosing the first option, investors can establish a project by themselves or go through a bidding process and develop a project proposed by the Government agency.
While the administrative procedure related to the establishment of an independent investment project aims at ensuring the project’s feasibility and necessity, the bidding process procedure focuses on the ability of the investor to meet specified requirements predefined by the Government’s agency. Acquiring shares in an existing company is subject to verification regarding the market competition and consumers’ interests. Depending on the situation and the project of the investor, one option can be more suitable than the other.
Contact our team at RBA to discuss your project and receive advice on the most suitable options for your investment in Vietnam.
