What is an export processing zone? Consulting on investment in establishing businesses in export processing zones (EPZs)

Establishing a business in an export processing zone brings many outstanding benefits, such as reducing production costs, tax exemptions and easily exporting goods to international markets. Making investments in export processing zones helps businesses maximize these advantages, optimize business efficiency and achieve sustainable success. The following article will comprehensively answer the mechanisms, policies and benefits of investing in export processing zones.

What is an Export Processing Zone? The Difference Between Industrial Zones and Export Processing Zones

Export processing zones, according to Clause 15, Article 3 of the Law on Investment 2020, and further explained by Clause 2, Article 2, Decree 35/2022/ND-CP are defined as a specialized industrial space with the goal of production and export. Unlike normal industrial zones, export processing zones have their own legal characteristics, separated from outside areas by non-tariff regulations.

Key differences:

• An industrial park is an area with defined geographical boundaries, specializing in the production of industrial goods and providing services for industrial production.
• Export processing zones are industrial zones specializing in producing export goods, providing services for export production and export activities; separated from the outside area according to regulations applicable to non-tariff areas specified in the law on export tax and import tax.

Role and Characteristics of Export Processing Zones

Export processing zones play an important role in the economic development strategy, attracting foreign investment and promoting exports. Outstanding features of export processing zones include tax incentives, a favorable business environment and professional infrastructure.

The role of export processing zones:

• Attract foreign investment: Tax incentives and favorable administrative procedures help attract foreign investment, promote international cooperation and economic growth.
• Increase export capacity: With modern infrastructure and low production costs, export processing zones help businesses easily export goods, thereby increasing export value.
• Developing technology and production skills: Export processing zones promote the application of advanced technology and improve human resources skills, meeting the needs of sustainable production.

Investment Activities in Export Processing Zones

Types of Businesses Allowed to Operate

According to current regulations, types of businesses allowed to operate in export processing zones include:

• Enterprise with 100% foreign capital;
• Joint venture enterprise;
• Domestic enterprises meet export conditions.

Investment Incentives For Businesses

Because of its contribution to the economy, investment activities in export processing zones have been paid attention by the government and create many development opportunities for businesses, incentives can include:

• Corporate income tax: Enterprises in export processing zones enjoy preferential tax rates of 20% for 10 years (according to Circular No. 78/2014/TT-BTC). In addition, for the first 4 years, businesses are exempt from corporate income tax, and 50% tax reduction for the next 9 years for income from new investment projects.
• Export – import tax: Goods in export processing zones are not subject to export tax or import tax when transferred between non-tariff zones, imported for production in export processing zones, or exported abroad (according to the Law on Export and Import Duties 2016).
• Value Added Tax (VAT): Goods transferred, temporarily imported for re-export of imported raw materials for production are not subject to VAT (according to Circular No. 219/2013/TT-BTC). Export processing enterprises can also apply 0% VAT on export, import, construction, installation of works abroad, and international transportation.

Process of Establishing a Business in an Export Processing Zone

According to the provisions of Clause 1, Article 26 of Decree No. 35/2022/ND-CP, the establishment process includes the following steps:

Step 1: Establish an investment project
Investors prepare and establish investment projects according to legal requirements.

Step 2: Register business and apply for Investment Certificate

• Case 1: If establishing an export processing enterprise and applying for an Investment Registration Certificate at the same time, the investor must submit a commitment on the ability to meet the conditions for inspection, customs supervision, export tax, and import tax. The registration agency that issues the Investment Registration Certificate records the objective of establishing an export processing enterprise.
• Case 2: If not concurrent with the Investment Certificate issuance procedure, the investor must submit an application including project documents and commitment. The registration agency issues the Certificate of export processing enterprise within 03 working days.
• Case 3: If the project is subject to investment policy approval, the investor submits a commitment along with the application for policy approval. The registration agency issues the Certificate of Export Processing Enterprise within 03 working days after receiving the written approval of the policy.

Step 3: Rent space in the export processing zone
After completing the registration procedures, the investor proceeds to rent space in the export processing zone to carry out production activities.

Investment Consulting at Long Phan

Long Phan provides comprehensive consulting services, supporting businesses from the planning stage to actual implementation in export processing zones.

The services we provide include:

• In-depth advice to customers on the implementation of investment projects in export processing zones;
• Customer representatives carry out administrative procedures related to investment such as: Applying for investment licenses, business registration…;
• Advise customers on rights and obligations related to investment activities in export processing zones;
• Support customers in solving difficulties and problems that arise throughout the investment process;
• Help customers draft and review documents related to investment activities.

The establishment of export processing zones not only creates attractive investment opportunities but also helps businesses take full advantage of preferential policies and professional infrastructure for sustainable development. To achieve optimal results, it is extremely important to receive in-depth investment advice. If you want to learn more or need support in the process of establishing a business in an export processing zone, do not hesitate to contact Long Phan via the hotline: 0906735386.