In the context of global supply chain restructuring, Vietnam’s manufacturing market is experiencing a series of policy and market dynamic changes. For enterprises intending to invest in Vietnam, it is crucial to deeply understand these changes, especially newly introduced tax incentive policies, increasingly stringent environmental regulations, and changes in the labor market. The following is an in-depth interpretation of three major new changes to help enterprises better respond to challenges and seize opportunities.

1. Introduction of New Tax Incentive Policies

Policy Background and Analysis:

The Vietnamese government has recently introduced a series of new tax incentive policies to further attract foreign enterprises, especially investments in green manufacturing and high-tech fields. Specifically, these policies extend the corporate income tax (CIT) exemption period and half-reduction period, while providing additional reductions and financial support for green energy and high-tech manufacturing industries. This policy change directly targets the current global trend of green economic transformation, attempting to establish Vietnam as a regional center for green economy and technological innovation.

According to the latest document released by the Ministry of Finance of Vietnam (2023 version), eligible foreign enterprises can enjoy up to 8 years of CIT exemption, followed by 4 years of half-reduction. Especially for high-tech projects and green energy projects, in addition to tax reductions, they can also enjoy tax-free treatment for equipment imports. These measures significantly reduce the operating costs of foreign enterprises, especially in the initial investment stage, enhancing Vietnam’s attractiveness as an investment destination.

How should enterprises utilize these preferential policies? The key lies in good pre-tax planning and compliance preparation. It is recommended that enterprises cooperate with Vietnamese tax advisory companies or companies like Wanqibang before investing to conduct detailed tax impact analysis and ensure that the selected projects and fields meet the requirements of the latest policies. Additionally, enterprises need to apply for corresponding tax incentives in a timely manner to avoid missing opportunities due to untimely reporting.

Potential Issues and Suggestions:

How to confirm if a project qualifies for tax incentives?

Enterprises need to carefully read the tax incentive policy documents issued by the Ministry of Finance of Vietnam, clearly listing the industries and investment conditions. Additionally, it is recommended to regularly contact local professional institutions to obtain real-time policy interpretations and application guidance.

How to apply for tax incentives?

Applying for tax incentives requires submitting a detailed investment project proposal and relevant supporting documents to the Ministry of Planning and Investment (MPI) of Vietnam. Enterprises can obtain the latest application information through the following contact details:

• Website: www.mpi.gov.vn
• Phone: +84 24 08043485

2. Tightening of Environmental Regulations

Policy Background and Analysis:

In recent years, Vietnam has continuously strengthened environmental protection supervision, with new environmental regulations requiring manufacturing enterprises to meet higher standards in wastewater and exhaust gas treatment. Especially for high-pollution industries such as chemicals, pharmaceuticals, and metal processing, requirements are more stringent, and compliance costs have correspondingly increased.

The amendment to the Environmental Protection Law issued by the Vietnamese government in 2022 clearly states that all new and expanded industrial projects must meet the latest emission standards and need to regularly submit Environmental Impact Assessment (EIA) reports. For non-compliant enterprises, the government will take severe penalties or even suspend production for rectification. While this policy change may increase enterprises’ environmental compliance costs, it also brings new market opportunities for environmental protection technology and equipment providers.

For enterprises, the first thing to do is to fully understand and comply with the new environmental regulations. It is recommended that enterprises cooperate with local environmental consultancy companies (such as GreenID) before setting up factories to conduct compliance reviews and necessary equipment upgrades. Additionally, enterprises should consider maintaining communication with the Ministry of Natural Resources and Environment (MONRE) of Vietnam to ensure completion of necessary facility renovations and compliance reviews before the new policies take effect.

Potential Issues and Suggestions:

How to quickly adapt to and meet new environmental standards?

Enterprises should promptly hire professional environmental consultants to conduct detailed compliance reviews and technical upgrades. At the same time, they can contact the Ministry of Natural Resources and Environment (MONRE) of Vietnam for the latest policy information and technical support:

• Website: www.monre.gov.vn
• Phone: +84 24 3795 6868

How to deal with the risk of environmental non-compliance?

Enterprises violating environmental regulations will face severe penalties, limited-time rectification, or suspension of production for rectification. It is recommended that enterprises reserve a certain environmental protection budget to cope with sudden compliance upgrade requirements and ensure operational stability amid policy changes.

3. Changes in the Labor Market

Market Background and Analysis:

With the rapid expansion of Vietnam’s manufacturing industry, significant changes have occurred in the labor market. Especially in the northern region, the shortage of skilled workers has become increasingly serious, directly leading to rising wage levels. To address this challenge, the Vietnamese government is working to raise the national minimum wage standard and promote vocational education and training to address labor shortages.

In the investment process, enterprises should focus on the dynamic changes in labor costs and supply. When recruiting highly skilled workers, it is necessary to provide more competitive salaries and benefits. Additionally, by cooperating with local vocational education institutions, enterprises can develop targeted skill training programs that both meet production needs and effectively retain talent.

Potential Issues and Suggestions:

How to better cope with rising labor costs? Enterprises can consider various ways to cope, such as providing attractive career development opportunities and training programs to enhance employee loyalty and work efficiency. Regular labor market research and salary level analysis help formulate reasonable employment strategies.

How to obtain the latest labor market data? Enterprises should maintain contact with the Ministry of Labor, Invalids and Social Affairs (MOLISA) of Vietnam to obtain the latest labor market data and policy trends:

• Website: www.molisa.gov.vn
• Phone: +84 24 3825 2961

Through an in-depth interpretation of the above policy and market changes, we can see that while Vietnam’s investment environment is constantly optimizing, it also poses higher requirements for foreign enterprises. In the process of entering Vietnam, enterprises need to formulate flexible response strategies targeting new policy and market conditions. By deeply understanding the dynamics of Vietnam’s labor market, enterprises can not only plan and prepare in advance but also effectively reduce operational risks and increase investment returns.

Summary and Recommendations

As an investment destination full of opportunities, Vietnam has a rapidly growing economy, abundant labor resources, and a favorable policy environment. However, the Vietnamese market also comes with challenges of policy changes, environmental requirements, and market competition. For Chinese enterprises intending to set up factories in Vietnam, it is crucial to deeply understand local policies and regulations, make good compliance preparations, and maintain close communication with local institutions.

Before entering the Vietnamese market, enterprises should conduct detailed market research, legal risk assessment, and environmental compliance reviews to formulate investment strategies that conform to local actual conditions. At the same time, fully utilize the tax incentive policies and investment support provided by the Vietnamese government to ensure the long-term development of enterprises in Vietnam.

Specific recommendations are as follows:

Regularly review policy changes: Maintain close communication with local government departments (such as the Ministry of Planning and Investment, Ministry of Finance, Ministry of Natural Resources and Environment of Vietnam, etc.) to timely understand and respond to policy changes, especially new policies in tax and environmental fields.

Enhance cross-cultural management capabilities: Enterprises should pay attention to the impact of cultural differences on management efficiency, adopt targeted cross-cultural training and management measures to ensure smooth collaboration between local teams and headquarters.

Optimize supply chain management: Establish flexible and diversified supply chain networks to ensure rapid adjustment and recovery of operations in the face of unexpected events (such as natural disasters or port closures).

Pay attention to labor market dynamics: Enterprises should closely monitor changes in Vietnam’s labor market and formulate reasonable salary and benefit strategies to attract and retain local talent.

Utilize preferential policies and financial support: Fully utilize the tax incentive policies, environmental subsidies, and skill training support of the Vietnamese government to reduce operating costs and enhance market competitiveness.

Through the above strategies and measures, enterprises can better establish themselves in the Vietnamese market and maintain competitive advantages in increasingly fierce international competition. We hope this article provides practical references for enterprises’ investment decisions in Vietnam.