Can enterprises receive tax exemptions/reductions if they implement emission reduction projects?

Currently, Vietnam has been implementing several tax incentive policies for enterprises carrying out greenhouse gas emission reduction projects, especially those related to renewable energy, energy saving, waste treatment, and environmental protection. Although there is no separate tax specifically dedicated to the issuance or trading of carbon credits, enterprises implementing carbon projects can still benefit from tax incentives through policies applied according to their industry or operational sector.

Specifically, regarding Corporate Income Tax (CIT), enterprises investing in the environmental sector, clean energy, or cleaner production technology may be eligible for a preferential tax rate of 10% for 15 years, CIT exemption for the first 4 years, and a 50% reduction for the subsequent 9 years, as stipulated in the Law on Corporate Income Tax 2008 and Decree 218/2013/ND-CP (Articles 4, 15, 16).54 Furthermore, equipment and technology serving emission reduction projects that cannot be manufactured domestically will be exempt from import duty, pursuant to the Law on Import and Export Duties 2016 (Article 16) and Decree 134/2016/ND-CP.55 Concurrently, for raw materials used in projects applying biofuels or clean energy, enterprises may also be exempt from or eligible for a reduction in environmental protection tax according to Circular 152/2011/TT-BTC.56

Additionally, Vietnam's Ministry of Finance is proposing amendments to the Law on Corporate Income Tax (CIT) to exempt income derived from carbon credits and green bonds from tax, a notable step in the process of perfecting the national carbon market institutional framework for the 2025-2028 period, aligning with the orientation of promoting green growth and sustainable development.57

However, it should be noted that Vietnam has not yet applied a separate tax on carbon credits, and regulations regarding the trading or income derived from credits are still under development. Therefore, when implementing a project, enterprises should prepare clear technical documentation, seek confirmation from the Ministry of Agriculture and Environment that the project falls under the tax incentive sector, and concurrently collaborate with legal, financial, or independent auditing consultants to accurately determine the level of incentives to be enjoyed.

References

54. The Government of Vietnam. (2013). Decree No. 218/2013/NĐ-CP detailing and guiding the implementation of the Law on Corporate Income Tax. Thư viện Pháp luật. https://thuvienphapluat.vn/van-ban/Doanh-nghiep/Nghi-dinh-218-2013-ND-CP-huong-dan-thi-hanh-Luat-thue-thu-nhap-doanh-nghiep-217811.aspx
55. The Government of Vietnam. (2016). Decree No. 134/2016/NĐ-CP detailing a number of articles and measures to implement the Law on Export Tax and Import Tax. Thư viện Pháp luật. https://thuvienphapluat.vn/van-ban/Xuat-nhap-khau/Nghi-dinh-134-2016-ND-CP-huong-dan-Luat-thue-xuat-khau-thue-nhap-khau-323602.aspx
56. Ministry of Finance. (2011). Circular No. 152/2011/TT-BTC guiding the implementation of Decree No. 67/2011/NĐ-CP detailing a number of articles of the Law on Environmental Protection Tax. Thư viện Pháp luật. https://thuvienphapluat.vn/van-ban/Thue-Phi-Le-Phi/Thong-tu-152-2011-TT-BTC-huong-dan-Nghi-dinh-67-2011-ND-CP-huong-dan-Luat-thue-131987.aspx
57. VietnamPlus. (2024, May 22). Ministry proposes tax exemption on income from carbon credits. VietnamPlus. https://en.vietnamplus.vn/ministry-proposes-tax-exemption-on-income-from-carbon-credits/287340.vnp