How Can an Investment Project Lose Investment Incentives in Vietnam?

What Does Withdrawal of Investment Incentives Mean?

Withdrawal of investment incentives refers to the termination or adjustment of preferential policies previously granted to an investment project when the project no longer satisfies the legal conditions for incentives.

The withdrawal of incentives may result in:

• Tax reassessment
• Termination of tax incentives
• Adjustment of land rental incentives
• Administrative penalties
• Additional financial obligations

Under the Investment Law 2020, businesses are responsible for determining their own eligibility for incentives and maintaining those conditions throughout project operations. If the conditions are no longer satisfied, authorities may revoke the incentives.

In What Cases Can Investment Incentives Be Withdrawn?

1. The Project No Longer Operates in an Incentivized Sector

Many projects receive incentives because they operate in prioritized sectors such as:

• High technology
• Supporting industries
• Software production
• Logistics
• Renewable energy

However, incentives may be adjusted or withdrawn if the business:

• Changes its business activities
• Changes its production model
• No longer satisfies the conditions for incentivized industries

2. Failure to Meet Incentive Location Conditions

Some projects receive incentives because they are located in:

• Disadvantaged areas
• Especially disadvantaged areas
• Economic zones
• High-tech parks

If the business changes project locations or fails to operate at the registered location, the incentives may no longer apply.

3. Failure to Implement the Project on Schedule

Project implementation progress is an important condition for maintaining incentives.

Authorities may consider withdrawing incentives if the business:

• Delays project implementation for an extended period
• Fails to contribute committed capital
• Fails to commence operations on time
• Suspends operations improperly

In many cases, investment authorities conduct inspections before continuing incentive approval.

4. Violations of Technology or Environmental Commitments

Many projects currently receive incentives because they satisfy conditions related to:

• High technology
• Environmental standards
• Energy efficiency
• Green transformation

If businesses fail to maintain the committed standards, incentives may be reduced or terminated.

Examples include:

• Using technology different from registered documents
• Violating environmental regulations
• Failing to meet green production standards

5. Incorrect Tax Incentive Declarations

This is currently one of the most common risks.

Businesses may face tax reassessment and withdrawal of incentives if they:

• Incorrectly determine eligibility conditions
• Apply the wrong preferential tax rates
• Incorrectly account for incentivized income
• Fail to maintain supporting documents

Under Vietnamese regulations, businesses are responsible for self-declaration and legal compliance regarding investment incentives.

Consequences of Investment Incentive Withdrawal

Tax Reassessment

Tax authorities may:

• Recover improperly exempted or reduced taxes
• Apply late payment interest
• Impose administrative penalties

This is often the largest financial impact on businesses.

Adjustment of Land Obligations

If land incentives are withdrawn, businesses may be required to:

• Repay land rental incentives
• Adjust land rental rates
• Fulfill additional financial obligations

Impact on Legal and Investment Records

Violations related to investment incentives may affect:

• Investment records
• Project expansion plans
• Business reputation with authorities
• Future eligibility for incentives

Which Authorities Handle Investment Incentive Withdrawal?

Depending on the type of incentive, responsible authorities may include:

• Tax authorities
• Industrial Park Management Boards
• Departments of Finance
• Departments of Planning and Investment
• Customs authorities
• Natural resources and environment authorities

These agencies have the authority to inspect and review incentive compliance.

What Should Businesses Do to Avoid Losing Investment Incentives?

Regularly Review Incentive Conditions

Businesses should periodically review:

• Business sectors
• Tax incentive conditions
• Project implementation progress
• Legal documents
• Environmental and technology compliance

to ensure continued eligibility.

Maintain Complete Supporting Documentation

Important documents include:

• Investment Registration Certificate (IRC)
• Technology documents
• Financial statements
• Tax accounting records
• Land and factory lease agreements
• Environmental reports

Proper documentation helps businesses respond effectively during inspections.

Seek Professional Legal and Tax Advice

Many FDI businesses currently use professional consultants to:

• Review incentive conditions
• Assess tax risks
• Evaluate compliance maintenance
• Prepare for inspections

This helps reduce risks of tax recovery and penalties.

Current Trends in Investment Incentive Management

Vietnamese authorities are increasingly strengthening inspections related to:

• Corporate income tax incentives
• Transfer pricing
• High-tech qualification conditions
• Large-scale FDI projects
• Environmental and ESG commitments

As a result, businesses should prioritize legal compliance from the early investment stage.

Conclusion

Investment incentives may be withdrawn if projects fail to maintain eligibility conditions related to industry, location, implementation progress, technology, or tax declarations.

To avoid tax reassessment and legal penalties, businesses should proactively review incentive conditions, maintain proper documentation, and comply fully with Vietnamese regulations throughout project operations.

References

• Investment Law 2020
  https://thuvienphapluat.vn/van-ban/Dau-tu/Luat-Dau-tu-2020-427301.aspx
• Decree 31/2021/ND-CP
  https://thuvienphapluat.vn/van-ban/Dau-tu/Nghi-dinh-31-2021-ND-CP-huong-dan-Luat-Dau-tu-470262.aspx
• Law on Tax Administration 2019
  https://thuvienphapluat.vn/van-ban/Bo-may-hanh-chinh/Luat-Quan-ly-thue-2019-387712.aspx
• Ministry of Planning and Investment of Vietnam
  https://www.mpi.gov.vn
• Ministry of Finance of Vietnam
  https://mof.gov.vn