Is investment in expanding solar energy business eligible for investment incentives according to the law?

What is expansion investment?

Pursuant to Clause 5, Article 3 of the Law on Investment 2020, the regulations on expansion investment projects are as follows:

“Article 3. Explanation of terms

In this Law, the following terms are understood as follows:

…

Expansion investment project is an investment project that develops an active investment project by expanding scale, increasing capacity, innovating technology, reducing pollution or improving the environment.”

According to Clause 3, Article 15 of the Law on Investment 2020, the subjects applying investment incentives are as follows:

“Article 15. Forms and subjects of application of investment incentives

…

3. Investment incentives are applied to new investment projects and expansion investment projects.”

Thus, for expansion investment projects, investment incentives will be applied.

What are the forms of incentives for expansion investment?

Pursuant to Clause 1, Article 15 of the Law on Investment 2020, regulations on forms of investment incentives include:

– Corporate income tax incentives, including applying a lower corporate income tax rate than the normal tax rate from time to time term or entire duration of investment project implementation; Tax exemption, tax reduction and other incentives according to the provisions of law on corporate income tax;

– Exemption from import tax for goods imported to create fixed assets; raw materials, supplies, and components imported for production according to the provisions of law on export tax and import tax;

– Exemption or reduction of land use fees, land rent, land use tax;

– Accelerated depreciation, increasing deductible expenses when calculating taxable income.

Thus, when investors make expansion investments that meet the eligibility conditions, they will enjoy incentives on corporate income tax, import tax, land use tax,…

What conditions are met to enjoy expanded investment incentives?

Pursuant to Clause 4, Article 18 of Circular 78/2014/TT-BTC (supplemented by Clause 2, Article 10 of Circular 96/2015/TT-BTC) regulating enterprises with investment projects that enjoy corporate income tax incentives due to meeting conditions on investment incentive fields and investment incentive areas, incentives are determined as follows:

– Enterprises with investment projects that enjoy corporate income tax incentives because they meet the conditions for investment incentive fields will have income from the investment incentive field and income such as liquidation of scrap and waste products of products in the investment incentive field, exchange rate differences directly related to revenue and expenses of the preferential field, interest on demand bank deposits, and directly related income. Others also enjoy corporate income tax incentives.

Enterprises with investment projects that enjoy corporate income tax incentives because they meet preferential conditions for the area (including industrial parks, economic zones, and high-tech zones), the income eligible for corporate income tax incentives is all income arising from production and business activities in the preferential area, except for the income mentioned in Points a, b, c, Clause 1 of this Article.

+ Enterprises with investment projects in the field of transportation business are entitled to corporate income tax incentives because they meet preferential conditions for the area (including industrial parks, economic zones, high-tech zones), then the enterprise is entitled to corporate income tax incentives for income from transportation service activities based on the area where the investment project is established in the area that enjoys tax incentives and has a departure or destination point in the area where the investment project is established.

+ Enterprises with investment projects that are entitled to corporate income tax incentives because they meet the conditions of the area generating income outside the area where the investment project is implemented will:

++ If this income arises in an area that is not in an investment incentive area, it will not be eligible for corporate income tax incentives according to local conditions.

++ If this income arises in an area with investment incentives, you will enjoy corporate income tax incentives according to local conditions. The determination of corporate income tax incentives for this income is determined for each area based on the time and corporate income tax incentives of the enterprise in the area where the investment project is implemented.

– Enterprises subject to the 20% tax rate are entitled to apply the 20% tax rate on all of the enterprise’s income, except for the income mentioned in Points a, b, c, Clause 1 of this Article.

Thus, state incentives for expansion investment are quite attractive. If your business has an investment project that meets the conditions for preferential fields and areas, it will enjoy corporate income tax incentives and other amounts according to the provisions of law.