Vietnam is among the countries located in the area with the
world's highest sunshine allocation in a year on the
world's solar radiation map. It is an advantage for Vietnam to
develop solar power industry, especially in the context of
increasing demand for electricity and potential risks of
traditional electricity production sources.
To encourage investment in renewable energy projects, the Ministry
of Industry and Trade (MOIT) has proposed the first Draft Decision
of the Prime Minister on incentives for solar power projects,
especially in terms of investment capital, tax and land use right.
These incentives would apply for power generation projects using
the photovoltaic method. The following analysis is based on the
latest Draft Decision and would be subject to further changes when
the official Decision is adopted.
Investment incentives
Investment capital: Investors may mobilize capital from domestic
or overseas organizations and individuals to invest in solar power
projects. Such projects are entitled for investment credit and
export credit incentives. In particular, investors could apply for
a loan of up to 70% of the total investment capital of their
project with a term of maximum 12 years. Moreover, investors could
also enjoy export credit incentives in the form of a loan of up to
85% of the export/ import contract value or L/C value also with a
term of maximum 12 years.
Import duty: Solar power projects are exempted from import duty on
goods imported to create fixed assets of the projects; components,
materials and semi-finished products which are not available at
home for the project's operation.
Corporate income tax: solar power projects will also enjoy the same
corporate income tax exemption and reduction as projects in sectors
receiving investment incentives according to the current
regulations on taxation. For example, corporate income tax rate of
10% will be applied for 15 years, tax exemptions within 4 years and
tax reduction by 50% in the next 9 years.
Land: Solar power projects, lines and transformer stations
connected to the national grid enjoy the same exemptions and
reductions in land use, land rental as projects being entitled for
special investment treatment. Such incentives, among other things,
include exemption of land rental within 3 years from the operation
date of the project.
Who will be the off-taker
According to the Draft Decision, the Electricity of Vietnam (EVN) or its authorized member units will be the power purchaser. The power sale and purchase will be conducted by negotiating and signing the power sale and purchase agreement according to the template agreement stipulated by the MOIT. Term of the agreement is 20 years from the commercial operation date of the project. We are following up on the issuance of the template agreement by the MOIT. Please contact us if you need to get the information.
Feed-in-tariff rate
EVN is responsible for buying the whole electric output from
solar power projects with the electric buying price at the point of
electricity receipt to be 1,800 dong/kwh and 3,500 Vietnamese
dong/kWh (equivalent to 12 UScents/kWh and 16.7Uscents/kWh).
For solar power projects installed on the roof of houses and
connected to the grid, if the electricty generated is more than
that consumed, the difference would be bought at the point of
electricity receipt is 3,150 Vietnamese dong/kWh (not including
VAT, equivalnet to 15Uscents/kWh). This price will be adjusted
based on the fluctuation rate between Vietnamese dong and USD. If
the electricty generated is less than that consumed, the electricty
received from the grid must be paid at the normal commercial price
that the electricty purchaser charges.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.