UPDATE Tax incentives for supporting industry development

Tax incentives for the development of supporting industries is one of the policies launched by the State to contribute to promoting the development of enterprises in the supporting industrial zones. To step by step promote the general economy of the developed country. 

1. Business cases are prioritized for support

According to Decree 57/2021/ND-CP, enterprises are entitled to corporate income tax incentives as follows:

  • Enterprises that have investment projects to manufacture products on the list of supporting industrial products implemented before January 1, 2015 in accordance with the law and have been granted a certificate of production incentives by a competent authority. supporting industrial products.
  • Enterprises producing supporting industry products whose incomes from this project are enjoying or have fully enjoyed CIT incentives under other conditions (not incentives from the development of supporting industries) will enjoy CIT for the remaining period (from the tax period granted by the competent authority a certificate of incentives for production of supporting industry products).

2. How to determine the tax incentive period

According to Decree No. 57/2021/ND-CP (Decree 57), the Government has just issued an additional clause 2 Article 20 Decree No. 218/2013/ND-CP (amended and supplemented in Clause 20 Article 20) 1 Decree No. 12/2015/ND-CP) to determine the tax incentive period, enterprises need to identify the time during which they are entitled to corporate income tax incentives under other preferential conditions. After the expiration of the period of enjoying CIT incentives according to other incentives, enterprises will be entitled to CIT incentives according to the conditions of production of supporting industry products.

Specifically, the remaining tax incentive period will be equal to the tax incentive period according to the conditions of production of supporting industry products minus the tax incentives enjoyed under other conditions.

3. Specific examples of the case of enjoying CIT incentives

The CIT incentives that enterprises are entitled to under the conditions of production of supporting industry products are:

  • Preferential CIT rate 10% for 15 years
  • CIT exemption for 4 years, 50% reduction of payable tax for the next 9 years.

Thus, for example, enterprise A in 2015, implementing a project in an industrial park is entitled to incentives according to the local conditions: tax exemption for 2 years and a 50% reduction in CIT payable for the next 4 years). If the enterprise has generated taxable income since 2015, the enterprise is entitled to incentives according to the local conditions in the tax period 2015, 2016. By 2017, the enterprise’s above project will be granted a certificate of certification. preferential industrial production. Up to 2017, enterprises have enjoyed the incentive of tax exemption for 2 years and reduction of 50% of CIT payable for 2 years. Thus, from the 2017 tax period, enterprises will enjoy the following tax incentives:

  • The time to enjoy the 10% tax incentive is: 15 years – 0 years = 15 years (because the business has not yet enjoyed the 10% tax incentive according to local conditions).
  • CIT exemption period: 4 years – 2 years = 2 years.
  • The time to reduce 50% of payable tax is: 9 years – 2 years = 7 years.

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Tax incentives for supporting industrial development help businesses reduce business costs and improve profits 

With attractive supporting industry development tax incentives, businesses will save business costs and have more capital to expand production development. That is also the goal set by the state to promote industry and raise the status of Vietnam’s economy. 

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