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Practical Guide for Foreign Investors (2026-2027)
1. Background: Why Vietnam is changing its FDI incentive system
Vietnam historically attracted foreign investors through very generous tax incentives, such as:
- Corporate income tax (CIT) holidays (4–9 years)
- Preferential CIT rates (5–10%)
Long-term tax reductions
However, the OECD Global Minimum Tax (Pillar 2) requires multinational companies with global revenues of €750 million or more to pay at least 15% effective tax worldwide.
If Vietnam taxes below 15%, the investor's home country can collect the difference.
As a result:
- Vietnam's traditional tax incentives lose their effectiveness
The government risks losing tax revenue to other countries
Vietnam therefore implemented the Global Minimum Tax from 1 January 2024 and began redesigning its entire FDI incentive framework.
2. Who is affected by the new rules
The global minimum tax applies only to large multinational groups.
Threshold
A company is affected if:
- Global consolidated revenue ≥ €750 million
Typical companies affected in Vietnam
Examples include:
- semiconductor manufacturers
- electronics manufacturers
- large technology groups
major automotive and industrial producers
Many of Vietnam's largest investors fall into this category.
3. Vietnam's key policy response: Investment Support Fund
The central instrument of the new FDI strategy is the Investment Support Fund, introduced under Decree 182/2024/NĐ-CP.
Purpose
The fund replaces traditional tax incentives with direct financial support.
Types of support
Eligible investors may receive:
- Cash grants
- Subsidies for high-tech equipment
- Support for R&D activities
- Workforce training funding
- Infrastructure support
Technology transfer support
Unlike tax incentives, these subsidies do not reduce the corporate tax rate, so they remain compliant with OECD Pillar 2 rules.
4. Priority sectors for new investment incentives
Vietnam is now targeting high-quality FDI rather than volume-based investment.
The following sectors receive priority support:
- Semiconductors
- Artificial intelligence
- Digital technologies
- Advanced manufacturing
- Renewable energy
- Biotechnology
- High-tech electronics
Research and development centers
These sectors are considered strategic for Vietnam's long-term economic development.
5. Practical implications for foreign investors
1. Tax incentives are no longer the main attraction
Traditional tax holidays may still exist, but for large multinational groups:
the effective tax rate will ultimately be at least 15%
2. Investment negotiations will focus on subsidies
Investors should expect negotiations with authorities to focus on:
- government support packages
- infrastructure commitments
- workforce training programs
R&D incentives
3. Increased compliance obligations
Large multinational companies must prepare for:
- Pillar 2 reporting obligations
- calculation of effective tax rate
compliance with top-up tax rules
4. Strategic investment screening
Vietnam increasingly evaluates projects based on:
- technology level
- environmental impac
- innovation potential
- supply chain contribution
Labor-intensive projects with limited technological value receive lower priority.
5. Opportunities for foreign investors
Despite the tax reform, Vietnam remains highly attractive due to:
- strong economic growth
- political stability
- expanding manufacturing base
- strategic position in global supply chains
- strong government commitment to high-tech investment
The new incentive model may even provide larger total financial support, particularly for large technology projects.
Conclusion
Vietnam is undergoing a fundamental transformation of its foreign investment incentive system due to the implementation of the OECD Global Minimum Tax.
The country is moving away from a tax-holiday-driven FDI model toward a system based on direct financial support, innovation incentives, and strategic sector development.
For multinational investors, the practical implications are clear:
- the minimum effective tax rate will be 15
- traditional tax incentives will play a smaller role
- investment negotiations will increasingly focus on government subsidies, infrastructure support, and R&D incentives
At the same time, Vietnam continues to actively compete for global investment, particularly in high-technology and strategic industries.
Foreign investors who align their projects with Vietnam's innovation and industrial policy priorities will continue to find significant opportunities in the Vietnamese market
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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
