September 10, 2024 /SemiMedia/ — Vietnam is drafting a series of incentives for chip companies, including tax breaks, expedited export procedures, subsidies, and accelerated visas, as the rapidly developing nation draws increasing attention from global giants like Nvidia and Besi. The proposed Digital Technology Industry Law (DTI) outlines additional incentives, such as allowing companies to deduct 150% of their research expenses from pre-tax income and offering 10-year rent-free land use rights.

These initiatives aim to capitalize on opportunities created by the U.S.-China tech rivalry, which has prompted semiconductor companies to diversify their supply chains. However, the Vietnamese government faces the challenge of ensuring that these measures comply with the new global minimum tax treaty.

In recent years, Hanoi has seen visits from top U.S. chip executives, including Intel CEO Pat Gelsinger and Nvidia CEO Jensen Huang, spurring discussions on semiconductor investments. Vietnam plans to bolster its position as a hub for established semiconductor companies by investing in energy, infrastructure, and workforce training, although these areas still lag behind more industrially advanced nations.

The DTI bill, which is currently under consultation with various ministries and private sector representatives, includes fast-tracked approvals and tax exemptions for imports and personal income on projects valued at $160 million or more. The Ministry of Information and Communications aims to finalize the bill by October, with potential implementation by mid-2025.

While aiming to attract semiconductor investments, Vietnam is also navigating compliance with the 15% global minimum tax rate proposed by the OECD and supported by over 140 countries. Deloitte Vietnam Tax Leader Thomas McClelland noted that these incentive policies could strain the national budget and introduce additional administrative requirements.

Despite challenges such as power shortages, skill gaps, and export restrictions, Vietnam remains a promising destination for the chip industry. Companies like Dutch semiconductor equipment maker Besi and Nvidia, which is supporting local AI factory initiatives, have already begun to invest in the country.