Vietnam has emerged as a manufacturing powerhouse, drawing global attention for its robust export-oriented zones that fuel the nation’s economic growth. Among the myriad zones fostering industrial development for manufacturing in Vietnam, two stand out prominently: Tan Thuan Export Processing Zone and Linh Trung Export Processing Zone.
What is an Export Processing Zone?
An Export Processing Zone (EPZ) is a particular area within a country where companies focus on making goods primarily to sell to other countries.
What is an Export Processing Enterprise (EPE)
According to Decree No. 82/2018/ND-CP, Export Processing Enterprises (EPEs) are companies formed and functioning within an export processing zone (EPZ) or focusing on producing goods for import while operating within an industrial or economic zone.
EPEs also need to have fenced boundaries, ports, entrance, and exit doors, and meet the customs authorities’ criteria regarding areas without tariffs and import/export duty regulations.
What Are the Advantages of Setting up an EPE inside an EPZ?
EPZs are attractive to EPEs because they provide duty-free trade and inexpensive labor, making them an ideal location. These zones are often found within industrial or economic areas and focus on manufacturing goods for export. Additionally, they offer tax incentives, lower land rental fees, and exemption from export taxes on their products and materials.
EPEs are often associated with seaports and airports, enhancing the effectiveness of their exports. Thanks to their location within EPZs, these businesses receive special tax benefits.
EPEs are typically liable for the standard corporate income tax (CIT) rate set at 20 percent. However, they might be eligible for a reduced tax rate if the government supports their products or if they operate in economically disadvantaged regions.
In addition, when dealing with foreign entities or other EPEs in transactions, they aren’t required to pay import/export duties (such as import/export VAT and taxes), but they still need to pay corporate income tax (CIT) based on their gross profit.
2 Ho Chi Minh Export Processing Zones for Manufacturing in Vietnam
Tan Thuan Export Processing Zone
As the first export processing zone in Vietnam, Tan Thuan Export Processing Zone is located in District 7, on a peninsula surrounded by the Saigon River, covering 300 hectares of land. Just 4 kilometers away from downtown District 1, Tan Thuan Export Processing Zone is surrounded by districts 4, 5, and Nha Be District, where available labor is abundant.
Location: District 7, Ho Chi Minh City (4 km from the downtown)
Linh Trung Export Processing Zone
The Linh Trung Export Processing Zone, a collaborative effort between Vietnam and China, is strategically situated on the outskirts of Ho Chi Minh City. This government-backed initiative comprises three distinct export processing zones (EPZ). EPZ 1, covering 62 hectares and established in 1995, focuses on light industry, export processing, and machinery. Following its success, EPZ and Industrial Park (IP) 2, spanning 61.7 hectares and established in 2000, offers leased standard factory buildings, enhancing the zone’s infrastructure and attractiveness to potential investors.
Linh Trung is considered a remarkable achievement in Vietnam’s industrial development. Linh Trung I benefits from strong infrastructure connections, especially with the nearby national highway 1A, and operates at full capacity with 31 investors. Vietnam’s EPZ sites have reportedly achieved a total export volume surpassing USD 1.971 billion, providing job opportunities for 75,000 local workers.
Location: Thu Duc dictrict, Ho Chi Minh City