By Alexander Chipman Koty
Established in 1998, Hanoi’s Hoa Lac High-tech Park (HHTP) was Vietnam’s first high-tech park and is currently the country’s largest. While Vietnam has over 190 industrial parks and plans to increase this number to 500 by 2020, HHTP is one of only three national-level high-tech parks, alongside Saigon High-tech Park and Danang High-tech Park. The HHTP was created with the intention to become Vietnam’s leading high-tech industry cluster for manufacturing, research and development, and innovation.
Due to start-up difficulties and incomplete infrastructure, the park initially struggled to attract high profile investors. However, Vietnam has rapidly industrialized since the park’s establishment, becoming a leading recipient of foreign direct investment and an increasingly prominent electronics manufacturer. As a result, the HHTP has become equipped with higher quality infrastructure, and is beginning to fulfill its promise as a tech hub. While Ho Chi Minh City has pulled ahead as Vietnam’s most popular area for investment, Hanoi can be particularly advantageous for operations with supply chains in China due to the city’s proximity to the border.
In 2016, the HHTP attracted nine new projects with a combined registered capital of US$200 million and multinationals, such as Mitsubishi, are making plans to invest and build factories. In total, the park has US$3 billion registered capital across 78 projects. According to the Vietnamese government, about 12,600 people are living and working in the park. With recent plans approved in 2016 for further expansion, it is expected that the HHTP’s permanent and working population will reach 229,000 by 2030.
The park is situated west of the capital city of Hanoi in the Thach That district and the Quoc Oai district. It is well-located; about 30 km from downtown Hanoi, 60 km from Noi Bai International Airport, 20 km from Son Tay Port, and 150 km from Cai Lan Port and Hai Phong Deep-sea Port. Hanoi National University and other education and training institutions are located adjacent to the park, offering research and development capabilities and a stream of skilled labor.
The HHTP has a total area of 1,586 ha, which is subdivided into smaller zones with different functions:
Much of the park is equipped with modern infrastructure, such as a wastewater treatment plant with a capacity of 6,000 m3 per day, water capacity of 3,000 m3 per day, and 22 kV electricity supply. There is also a substantial amount of unused land for investors looking to create a long-term presence and build from the ground-up rather than renting an existing facility.
Vietnam’s deep and affordable labor pool has made it one of the main alternatives to China for electronic components manufacturing, attracting investment from tech giants such as Foxconn, Intel, Panasonic, and Samsung. The government hopes that by attracting investment from foreign tech leaders, Vietnam can benefit from knowledge spillover effects and access to advanced technology. Accordingly, the HHTP offers a variety of incentives to attract foreign investment depending on the level and nature of investment.
Preferential corporate income tax rates
The HHTP offers corporate income tax exemptions and preferential rates for new investments. Vietnam’s standard corporate income tax rate is 20 percent. The timeframe for tax incentive eligibility is calculated from the project’s first year of taxable income, or from the fourth year of a project in the event that it has no taxable income within the first three years.
- New investment projects will benefit from a corporate income tax exemption for four years beginning from the first year of taxable income. For the following nine years, investments have a preferential tax rate of 10 percent. The complete incentives span 13 years, but can only be applied within the first 15 years of the project. For example, if a project does not have taxable income until its fifth year, it would not be able to access the last three years of the preferential tax rate.
- New large scale investment projects using high or new technology enjoy a preferential tax rate of 10 percent for 30 years from the start of the project.
- A preferential 10 percent tax rate is available for the duration of projects for income derived from education socialization (such as vocational training, health, culture, sports, and environment).
Preferential duty rates
- Year 1-4: 0 percent tax rate
- Year 5-13: 5 percent tax rate
- Year 14-15: 10 percent tax rate
- After year 16: 22 percent tax rate
Import duty exemptions
- For goods imported to create fixed assets of investment projects;
- For goods imported for direct use in scientific research and technological development; and
- For raw materials, supplies, and accessories which cannot be domestically produced for a period of five years after the start of manufacturing operations.
In addition to preferential tax rates and exemptions, the park has streamlined investment procedures, and simplified the process for hiring foreign workers. Moreover, the park’s management will assist in liaising with relevant government authorities and acquiring the requisite documentation and licenses.
To be eligible for the HHTP’s incentives, investments must fulfill certain criteria ensuring that they are high-tech projects, as per 2008’s Hi-tech Law No. 21/2008/QH12 and 2006’s Decision No. 27/2006/QD-BKHCN. The HHTP has four main areas of focus: information technology, biotechnology, new material technology, and automation technology. Additionally, the park’s management has a list of products that are prioritized for investment and those that are eligible for investment. The list is periodically updated and can be found here.
At least five percent of the project’s labor force participating in research and development work must hold a university degree or higher. Total expenses for research and development work in Vietnam, including construction of technical and engineering infrastructure, must constitute at least five percent of annual turnover, or one percent for expenses for research and development activities carried out in Vietnam, such as staffing costs. Further, one third of technology in production lines must be automated. Operations must also comply with Vietnamese sanitation, environmental, and technical standards.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
Dezan Shira & Associates Brochure
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.
An Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.
Managing Contracts and Severance in Vietnam
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.