Legal regulations relating to foreign companies not eligible for tax incentives

In practice, many foreign enterprises are not subject to tax incentives due to issues relating to business lines, investment locations, legal procedures, or non-compliance with commitments made during their operation. The following article will provide readers with situation, definition, and legal matters and regulations regarding foreign companies not eligible for tax incentives. 

I. Current situation of foreign companies not eligible for tax incentives

In recent years, Vietnam has continued to improve its legal framework on taxation and investment incentives in order to attract foreign capital and investors and also ensure transparency and fairness in the business market. However, in practice, a significant number of foreign-invested companies fail to satisfy the conditions required to enjoy tax incentives under applicable regulations. The reasons stem from various factors, such as selecting business lines not included in the list of encouraged investment sectors, operating in locations without being incentivized areas, or failing to properly fulfill commitments regarding capital scale, technology, and disbursement ratios.

In addition, changes to prevent abuse of preferential policies have caused many foreign enterprises to become confused or unable to adapt in a timely manner. A lack of comprehensive understanding of the legal framework, procedures for proving eligibility for incentives, or non-compliance with declaration and reporting obligations are also common reasons leading to ineligibility for incentives.

Such situations not only deprive enterprises of cost-related competitive advantages but may also lead to tax risks such as tax arrears, late payment sanctions, or intensive tax inspections. The above matters demonstrates that properly assessing eligibility for incentives and strictly complying with the law are urgent requirements for all foreign companies operating in Vietnam in the current period.

II. What is a foreign company not eligible for tax incentives?

In order to encourage foreign investment, Vietnamese law provides various tax incentive policies, including incentives related to corporate income tax and import–export tax. However, not all foreign-invested enterprises are entitled to these incentives. Properly determining what constitutes a company that is not eligible for tax incentives, causes thereof, and appropriate remedial measures is a crucial step for enterprises to avoid tax risks and ensure effective legal compliance.

1. Definition of a foreign company not eligible for tax incentives

A foreign company not eligible for tax incentives is a foreign-invested enterprise operating in Vietnam that does not meet the statutory conditions to enjoy tax exemptions, reductions, or preferential tax rates.

It may result from the enterprise not operating in incentivized sectors or locations, failing to meet requirements regarding project scale, technology, or disbursement ratios, or violating obligations during its operation.

2. Circumstances leading to ineligibility for tax incentives

Circumstances that may lead to a foreign company being ineligible for tax incentives include:

• Operating in business lines that are not included in the list of incentivized investment sectors, such as conventional trading or services with limited technological content.
• Implementing projects in locations that are not economic zones, high-tech zones, or areas with difficult socio-economic conditions, which are typically eligible for tax incentives.
• Failing to satisfy statutory conditions regarding capital scale, technology, or socio-economic impact.
• Failing to complete tax incentive registration procedures or failing to declare incentives within the prescribed time limits, resulting in denial of incentives.
• Violating tax or investment obligations, such as delayed project implementation, failure to meet disbursement schedules, or lack of supporting documents for incentives.
• Changing project objectives or business lines compared to the initially approved dossiers, causing the project to no longer meet incentive conditions.

These circumstances demonstrate that ineligibility for incentives often arises from inconsistencies between the enterprise’s actual operations and mandatory legal regulations. 

3. Solutions when the foreign company is not eligible for tax incentives

When the enterprise falls into a situation of ineligibility for tax incentives, the following measures may be considered: 

• Reviewing the entire investment and tax registration dossiers to identify the reasons for denial of incentives.
• Adjusting project objectives or business lines if the enterprise is able to restructure its operations to meet current incentive conditions.
• Supplementing dossiers and submitting additional explanations to tax authorities to demonstrate compliance with statutory conditions.
• Assessing the possibility of applying other incentive policies based on the nature of the investment, such as incentives for manufacturing enterprises, high-tech application, or technology transfer projects.
• Seeking in-depth legal advice to determine whether the enterprise may file complaints, petitions, or requests for reconsideration of tax authority decisions.
• Establishing a tax compliance rule to avoid tax arrears, sanctions, or tax inspections.

Handling such matters should be based on a comprehensive legal assessment, aiming to adjust or supplement conditions so that the enterprise may lawfully access incentives while ensuring long-term tax safety.

III. Legal regulations relating to foreign companies not eligible for tax incentives

Vietnamese law provides relatively strict regulations on the conditions, scope, and procedures for enjoying tax incentives applicable to foreign investors. Where enterprises fail to meet these conditions, tax authorities have grounds to deny incentives or recover improperly applied tax benefits. Below are main legal provisions and procedures to be noted.

1. Relevant regulations in handling cases of ineligibility for tax incentives

Legal provisions governing tax incentive conditions and denial thereof are stipulated in the following legislative instruments:

• Law on Investment 2020, as amended in 2020: Articles 15 and 16 provide for forms of investment incentives and eligible beneficiaries, including incentives such as corporate income tax incentives (application of lower tax rates for a definite period or throughout the project duration; tax exemptions and reductions, and other incentives under corporate income tax law), import duty exemptions for goods imported to create fixed assets, and imported raw materials, supplies, and components for production in accordance with export–import tax law.
• Law on Corporate Income Tax 2025: Article 12 on principles and eligible entities for corporate income tax incentives; Article 13 on preferential tax rates; Article 18 on conditions for applying tax incentives.
• Law on Export and Import Duties 2018, 2025: Clause 3 Article 5 on preferential tax rates; Article 16 on tax exemptions; Article 18 on tax reductions.

The legal system clearly defines criteria and conditions for foreign enterprises to enjoy tax incentives. If these conditions are not satisfied, tax authorities are entitled to deny incentives, recover improperly granted incentives, or impose sanctions in accordance with the law.

2. Procedures for enjoying tax incentives for foreign companies

Although entitlement to incentives depends on the subject and business sector, the legal procedure generally includes the following steps:

• Step 1: Determining eligibility conditions: The enterprise must assess whether the project falls within incentivized sectors or incentivized locations (according to Articles 15 and 16 of the Law on Investment 2020, as amended in 2025).
• Step 2: Recording incentives in the Investment Registration Certificate (if applicable): FDI enterprises must register incentives in their investment dossiers or make adjustments when necessary (pursuant to Articles 38, 40, and 41 of the Law on Investment 2020, as amended in 2025).
• Step 3: Declaring tax incentives to tax authorities: Declaring incentives in annual corporate income tax returns and tax incentive declaration forms.
• Step 4: Separately accounting for incentivized income: If income is not separately accounted, tax authorities may refuse the application of incentives.
• Step 5: Demonstrating incentive eligibility during tax inspections: Enterprises must present investment dossiers, operating licenses, documents evidencing compliance with business lines and locations, financial records, and detailed reports.
• Step 6: Conclusion by tax authorities: If conditions are satisfied, incentives may continue to be applied.

Such procedures require FDI enterprises to fully comply with investment and tax laws, ensure transparent declarations, and accurately substantiate eligibility.

IV. Questions regarding foreign companies not eligible for tax incentives

During investment activities in Vietnam, many foreign companies have difficulties in determining and maintaining eligibility for tax incentives. Understanding common issues enables enterprises to proactively mitigate risks and avoid tax recovery or sanctions. 

1. May the foreign company request reconsideration of a decision denying tax incentives?

Pursuant to Article 147 of the Law on Tax Administration 2019, enterprises have the right to request reconsideration (file complaints) if they believe that a tax incentive denial decision is inconsistent with the law or based on incomplete information.

A complaint must be accompanied by additional evidence proving eligibility for incentives and must comply with procedures prescribed under the Law on Complaints 2010.

2. How can the foreign company determine whether it falls into the category of ineligibility for tax incentives?

To make such determination, the enterprise should:

• Compare its project against incentive conditions relating to business sector, location, project scale, technology, and disbursement progress;
• Review its Investment Registration Certificate and tax incentive registration dossiers to determine whether incentives have been granted;
• Consult local tax authorities or legal advisors for an accurate assessment.

Self-assessment based on applicable laws and investment dossiers is a crucial step in timely identifying ineligibility.

3. What information must the foreign company provide to prove that it is not ineligible for tax incentives?

To demonstrate eligibility, the enterprise should provide:

• Investment Registration Certificates and tax incentive certificates;
• Project dossiers, including information on business lines, location, scale, and disbursement progress;
• Financial statements and tax reports evidencing compliance with tax obligations;
• Documents proving project implementation in accordance with commitments to state authorities.

Transparent and complete documents is a main basis for tax authorities to confirm the enterprise’s entitlement to tax incentives.

4. Which organizations can assist foreign companies in remedying ineligibility for tax incentives?

Organizations that may assist include:

• Tax authorities and Departments of Finance: Providing procedural guidance, reviewing dossiers, and supplying information on incentive conditions;
• Tax consulting firms, tax agents, and lawyers specializing in FDI: Providing review services, advising on project adjustments, or tax declarations;
• Foreign business associations in Vietnam (VAFIE, AmCham, etc.): Sharing experiences and guidance on legal compliance.

Coordination between State authorities and professional advisors helps enterprises quickly identify solutions to mitigate legal risks.

5. What should foreign companies do to avoid becoming ineligible for tax incentives?

Foreign companies should:

• Assess projects prior to investment to ensure compatibility with incentivized sectors and locations;
• Properly and timely register tax incentives in investment dossiers;
• Comply with investment commitments regarding disbursement schedules, capital scale, and technology;
• Ensure transparent tax declarations and separately account for incentivized income;
• Periodically consult lawyers or tax experts to stay updated on legal changes.

Proactive compliance and thorough preparation of dossiers help enterprises maintain tax incentive entitlements and minimize risks of tax recovery or sanctions. 

V. Are you looking for a reputable lawyer to handle issues relating to foreign companies not eligible for tax incentives?

Handling tax incentive issues for FDI enterprises is often complex and requires in-depth knowledge of investment and tax law. Specialized lawyers can assist with:

• Reviewing investment registration and tax incentive dossiers;
• Advising and formulating remedial solutions when enterprises are ineligible for incentives;
• Representing enterprises in negotiations, complaints, or dispute resolution with tax authorities;
• Guiding full compliance with tax obligations and maintaining long-term incentive entitlements.

Engaging a reputable lawyer helps enterprises reduce legal risks, protect their interests, and optimize benefits from tax incentive policies in Vietnam.

The above information is for reference purposes only. For detailed advice tailored to specific cases, please contact NPLaw for immediate consultation.