To further incentivize the development and operations of industrial clusters in Vietnam, on March 15, 2024, the Government issued Decree No. 32/2024/ND-CP ("Decree 32") to replace Decree No. 68/2017/ND-CP ("Decree 68") and Decree No. 66/2020/ND-CP ("Decree 66") regarding the management and development of industrial clusters with several amendments and supplements to better align with practical conditions.
1. Adjusting regulations on industries, occupations, and business establishments encouraged to invest in or relocate to industrial clusters ("Industries"):
Contrary to Decree 68, which regulated small-scale Industries focused on sectors and occupations closely tied to local economies and addressing existing issues, Decree 10 adjusts towards encouraging high-tech, environmentally friendly Industries, and sustainable development. Accordingly, local handicraft industries are only allocated up to 10% of the industrial cluster's land area.
2. Adjusting regulations on investment in technical infrastructure construction of industrial clusters in a stricter manner:
a. Stringently regulating the selection of project investors for technical infrastructure construction in industrial clusters:
Decree 32 adds requirements that enterprises wishing to be project investors for technical infrastructure construction in industrial clusters must demonstrate their experience and provide relevant documents and materials to prove their experience. Decree 66 had regulated the selection of project investors for technical infrastructure construction in industrial clusters through selection (instead of designation of investors), but only on a non-mandatory basis, meaning it was encouraged and prioritized. In contrast, Decree 10 mandates the selection of project investors for technical infrastructure construction in industrial clusters in all cases.
b. Project investors for technical infrastructure construction in industrial clusters are not allowed to transfer land use rights:
Decree 32 abolishes the right to transfer land use rights for the common technical infrastructure invested by the technical infrastructure project investor of the industrial cluster; thus, the technical infrastructure project investor of the industrial cluster only has the right to sublease land attached to common technical infrastructure and sell assets attached to the industrial land.
3. Adjusting regulations on incentives and support for investment in industrial clusters in a more favorable direction:
Decree 68 stipulated that manufacturing and business investment projects in industrial clusters were exempt from land rent for 7 years, and investment projects for technical infrastructure business in industrial clusters were exempt from land rent for 11 years, and were only entitled to other incentives if they met other conditions as prescribed.
Decree 32 extends and provides higher-level incentives to enterprises investing in technical infrastructure as well as production in industrial clusters; specifically, industrial clusters identified as areas with difficult socio-economic conditions, investment in technical infrastructure is a specially privileged industry for enterprises investing in technical infrastructure. Under current regulations, enterprises investing in technical infrastructure as well as production in industrial clusters may enjoy the following incentives:
- Exemption from corporate income tax for the first 2 years and a 50% reduction for the next 4 years, enjoying a corporate income tax rate of 17% for a period of 10 years.
- Exemption from import tax for imported goods used to create fixed assets; exemption from import tax for raw materials, supplies, components (similar to cases where they cannot be domestically produced) used for production of the project within 5 years from the start of production.
- Exemption from land rent during the basic construction period (up to a maximum of 3 years from the date of land lease decision) and continued exemption from land rent for 15 years after the land rent exemption period during the basic construction period.
Accordingly, Decree 32 extends the time period for enterprises investing in industrial clusters to be exempt from land rent from 7 or 11 years to 15 years, while also applying additional preferential policies on personal income tax, import tax.
Decree 32 also adds a very noteworthy provision that the State supports (in other words, the State provides capital and does not require repayment) up to 30% of the total investment capital of the project to invest in technical infrastructure construction of industrial clusters. The support fund does not count towards the total investment of the project for calculating land rent, infrastructure usage fees for projects investing in industrial clusters. While Decree 68 stipulated that the State only considers providing loans of up to 70% of the total investment capital of the technical infrastructure construction project of the industrial cluster. Thus, Decree 32 provides even more special incentives for technical infrastructure construction projects of industrial clusters to encourage enterprises to invest in industrial clusters.
Furthermore, Decree 32 also abolishes provisions on incentives specifically for craft village industrial clusters as stipulated in Decree 68. This also reflects the State's policy of encouraging the development of high-tech, environmentally friendly, and sustainable industries and no longer prioritizes industrial and handicraft industries of the village type.
Decree 32 takes effect from May 1, 2024.
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