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 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.
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.