Overview of the Amended High-Tech Law
As Vietnam strides into a rapidly evolving economic landscape, the National Assembly is poised to pass the amended High-Tech Law on December 10. This revised legislation aims to shape a robust legal corridor for high-tech growth, streamline governance, and address the challenges that have stymied advancement since the original High-Tech Law was enacted in 2008.
Alignment with Socioeconomic Needs
Minister of Science and Technology Nguyen Manh Hung emphasizes that the revision is crafted to align the country’s high-tech development with its socioeconomic needs. By promoting international integration and enhancing decentralization, the amendment seeks to create an environment conducive to accelerating Vietnam’s high-tech sector.
Encouraging Domestic Ventures
A key aspect of the amended law is its dedication to encouraging domestic businesses, particularly small and medium enterprises (SMEs) and startups, to invest in research and the commercialization of high technologies. The law aims to facilitate collaboration between research institutions, universities, and high-tech enterprises, generating market-friendly innovations from academic research.
Prioritizing Foreign Investment
The draft legislation also puts a spotlight on foreign-invested enterprises (FIEs) that are committed to transferring core technologies and fostering partnerships with domestic firms. This provision is crucial for bolstering national technological capabilities, steering clear of foreign investments grounded exclusively in outdated technologies or low-cost labor models.
Classification of High-Tech Enterprises
The new law introduces a tiered system categorizing high-tech enterprises into two levels:
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Tier 1: This classification benefits enterprises with over 30% equity held by domestic investors that receive core technologies at the innovation and development level. These firms can enjoy significant corporate income tax incentives, including a four-year tax exemption, a 50% reduction for the subsequent nine years, and a mere 10% tax rate for 15 years.
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Tier 2: This category encompasses most other high-tech enterprises, offering incentives of a two-year tax exemption, a 50% reduction for four years, and a 15% tax rate.
Streamlining Administrative Procedures
To reduce bureaucratic hindrances, the draft proposes the elimination of the high-tech enterprise status certificate, replacing it with a self-assessment mechanism grounded in established criteria. This aims to simplify operational processes for businesses seeking to qualify as high-tech enterprises.
Establishing High-Tech Urban Areas
Furthermore, the amended law introduces regulations for the creation of ‘high-tech urban areas.’ These dedicated spaces are envisioned to foster high-tech research, development, and application, linking technological advancements with sustainable urban development.
Experts’ Perspectives and Call for Refinement
Despite broad support for the draft, many members of the National Assembly (NA), along with economic experts and local leaders, stress the need for further refinement. In particular, there are calls for clearer definitions of incentives tailored for high-tech enterprises to ensure effectiveness and maintain a balance between FIEs and domestic firms.
A key concern revolves around the generalized wording in the draft concerning incentives. While previous regulations articulated explicit benefits tied to land, corporate income tax, and VAT, the amended draft merely mentions that high-tech enterprises “shall receive incentives and support in accordance with the law.” Experts caution that this vagueness could weaken policy commitments and obscure long-term investment expectations.
Gaps in Implementation Mechanisms
The NA’s Committee on Science, Technology, and Environment has noted a disconnect between strategic intent and actual implementation mechanisms in the draft, particularly regarding incentive policies. Chairwoman Nguyen Thanh Hai has emphasized that existing provisions should be preserved while expanding on the highest levels of incentives available to high-tech enterprises, aligning them with national development goals.
Disparities Between FIEs and Domestic Firms
Under current regulations, high-tech enterprises could access top-tier incentives, but the amended draft limits these benefits primarily to Tier 1 enterprises. Concerns have been raised that this creates an imbalance, particularly for FIEs that may qualify on technical grounds but lack domestic capital ownership, relegating them to Tier 2 and subjecting them to stricter incentives.
Recommendations for Harmonization
NA Deputy Pham Hung Thai has proposed a comprehensive review of the incentive systems for high-tech firms and urban areas to promote coherence within the law. This includes ensuring that administrative procedures, land incentives, credit access, and infrastructure support are harmonized and aligned with related laws, such as the Law on Investment and the Land Law.
Safeguarding Incentives Amid Policy Changes
Bui Ngoc Tuan from Deloitte Vietnam raises a critical point regarding the necessity of safeguarding existing incentives to attract international investments. As Vietnam strives to scope out $40–50 billion in foreign direct investment annually through 2030, maintaining a clear and transparent transitional mechanism is vital for securing investor confidence and ensuring a stable investment environment.
The Path Forward
Through this ambitious amendment, Vietnam is not merely laying the groundwork for increased investment and innovation; it is positioning itself as a formidable player in the global high-tech arena. As stakeholders continue to refine the draft, the interplay between local enterprises and foreign investors will be crucial in charting the future of Vietnam’s technological landscape.