Prime Ministerial Decision No. 19/2015/QD-TTg is expected to attract more hi-tech investment from foreign companies to Vietnam when it comes into effect on August 1, 2015.
Decision No. 19 adds to criteria defined by the Law on Investment to define hi-tech enterprises as those with:
- at least 70 percent of total annual net revenue derived from hi-tech products;
- at least one percent of total annual net revenue allocated to research and development (R&D) activities, or at least 0.5 percent for enterprises with total capital over VND100 billion (US$4.59 million) and more than 300 employees; and
- at least five percent of employees of small and medium enterprises involved in R&D activities educated to at least bachelor degree level or higher, or at least 2.5 percent of the workforce but no less than 15 employees for enterprises with total capital over VND100 billion (US$4.59 million) and more than 300 employees.
Tax Incentives for Hi-Tech Enterprises
In Vietnam, business carrying out activities defined as hi-tech are eligible for tax incentives. A corporate income tax rate of 10 percent for 15 years is applicable to new projects in hi-tech zones, and eligible hi-tech projects. Incomes of hi-tech enterprises and hi-tech agricultural enterprises may be exempt from taxes for up to four years, and may be eligible for a 50% reduction in tax for the following nine years.
Of late, many foreign hi-tech firms have raised their investment capital and moved their factories from other countries to Vietnam. Samsung has opened a US$1.4 billion consumer electronics complex in Ho Chi Minh City. Meanwhile, another hi-tech giant LG plans to increase its investment to US$1.5 billion in the manufacturing complex in Hai Phong City from now to 2028 and relocate its TV production from Thailand to Vietnam.
Hi-Tech, Low-Cost
Incentives for hi-tech firms are of course not the only reason to relocate to Vietnam. The young, educated and low-cost workforce is another primary factor. Regarding costs, minimum monthly wages in Vietnam are determined by the region the business is located in. These are as follows:
- Region I: VND 3.1 million (US$142)
- Region II: VND 2.75 million (US$126)
- Region III: VND 2.4million (US$110)
- Region IV: VND 2.15 million (US$99)
Source: vietnam-briefing
Key words: New Criteria, defining, hi-tech enterprises, Vietnam
