Incentive Policies And Registration Procedures For The Operation of Rooftop Solar Power Projects

Nowadays, rooftop solar power system projects in Vietnam have attracted a lot of attention from both domestic and foreign investors. Especially since the Prime Minister issued Decision no. 13/2020/QD-TTg to promote the development of solar energy in Viet Nam. In addition, rooftop solar power projects are also subject to investment incentive policies under the prevailing regulations.

With the aim to legally operate in Vietnam, rooftop solar power projects must comply with the requirements of Vietnam’s prevailing regulations on conditions and registration procedures for operating in Vietnam.

Through this article, BLawyers Vietnam would like to share with you about the investment incentive policies and registration procedures for operating such projects.

A. INCENTIVE POLICIES FOR ROOFTOP SOLAR POWER SYSTEM (“RSPS”)

1. Investment incentive policies

RSPS projects will be classified as industry “Manufacturing of new materials, new energy, clean energy, renewable energy”, making them eligible for special investment incentives. As a result, when investors implement RSPS projects, they will be eligible to deduct 50% of the project’s security money.

Other cases in which the projects may receive investment incentives include:

• The investment project is located in a socio-economic disadvantaged area or extremely disadvantaged area;
• The investment project has an investment capital of at least VND 6,000 billion when satisfying fully conditions as prescribed;
• The project locating is located in rural areas and employs at least 500 regular annual employees or uses disabilities accounting for at least 30% of the annual average number of employees in accordance with law;
• Investment Start-up projects; and
• Other projects as prescribed by law.

2. Tax incentive policies

In addition to investment incentives, investors will receive tax incentives under the regulations during the project implementation period. The following tax incentive policies may be available to investors in RSPS projects:

2.1 Corporate income tax

Tax rate of 10% for 15 years and 4 years of tax exemption, 50% reduction of tax payable amount for the next 9 years for the enterprises’ income from implementation of new investment projects;

1. 4 years of tax exemption, 50% reduction in payable tax amount for the next 5 years for enterprises’ income from new socialization investment projects in areas that are not on the list of difficult socio-economic conditions or extremely difficulty socio-economic conditions;
2. 2 years of tax exemption and 50% tax amount reduction for the next 4 years for the incomes from new socialization investment projects in the areas with difficult socio-economic conditions and enterprise’s income from new investment projects in industrial parks (except for industrial parks located in socially and economically advantaged areas).

2.2 Import tax

1. Import tax exemption on goods permitted for the creation of fixed assets; and
2. Consideration of the import tax exemption for domestically materials, supplies and components that cannot be produced within 05 years from the start of production.

2.3 Value added tax (“VAT”)

The State will refund VAT for the following projects:

1. New investment projects are in the investment phase;
2. The registered charter capital is fully contributed;
3. Satisfying the prescribed conditions for business investment;
4. Registering to pay VAT by tax credit method;
5. Having unreduced VAT amounts on purchased goods and services used for investment; and
6. The remaining VAT amount is at least VND 300 million.

2.4 Exemption and reduction of land use rent, land rent, land use tax (if any)

Investors should identify the eligible investment incentives and proceed with investment incentives procedures for each type of investment incentives at tax agencies, financial agencies, customs agencies, and other competent agencies.

B. REGISTRATION PROCEDURES FOR THE RSPS PROJECT’S OPERATION

By law, RSPS refers to a solar system in which solar panels are installed on the roof of the construction with no more than 1 MW in power and directly or indirectly connected to the Buyers’ power grid with up to 35kV. Furthermore, it must have a capacity of solar cells greater than 16% or modules greater than 15%.

If meeting the basic RSPS conditions listed above, the investor initiates the registration procedures for RSPS project’s operation.

To get an overview of the process of registration procedures for carrying out the RSPS project, investors can refer to the following process:

1. Step 1: Applying for a Decision on Investment Policy (the project is subject to Investment Policy Approval);
2. Step 2: Applying for an Investment Registration Certificate (for foreign investors);
3. Step 3: Applying for an Enterprise Registration Certificate;
4. Step 4: Applying for other operating licenses including:
   • Construction Permit; and
   • Fire Prevention and Fighting System Certificate.

The specific procedure is as follows:

1. Applying for the Decision on Investment Policy (for projects subject to Investment Policy Approval)

1.1 Required documents

The Investor must determine whether the RSPS project is subject to Investment Policy Approval by the National Assembly, Government or Provincial People's Committee.

The investors then submit the dossier for the Investment Policy Approval including:

1. Request for implementation of the investment project;
2. Documents certifying the investors’ legal status;
3. Documents proving the investors’ financial capacity;
4. Proposal for the investment project;
5. Land use rights certificate or another document certifying the right to use the site for the implementation of the investment project;
6. BCC contracts for investment projects in the form of BCC; and
7. Other relevant documents (if any).

1.2 Implementation procedures

The procedures for applying for a Decision on Investment Policy are determined by the competent authorities who approve the investment policy.

i. The investor submits the dossier to the Ministry of Planning and Investment (“MPI”) for the project approved by the National Assembly.

Estimated time: at least 105 days from the date of receiving the valid dossier and completion of the procedures prescribed by law.

ii. The investor submits the dossier to the MPI for the project approved by the Government.

Estimated time: at least 58 days from the date of receiving the valid dossier and completion of the procedures prescribed by law.

iii. The investor submits the dossier to the Department of Planning and Investment (“DPI”) for the project approved by the Provincial People’s Committee.

Estimated time: within 35 working days form the date of receiving the dossier, DPI must notify the investor of the result.

After 50 working days, the Provincial People’s Committee approves the investment policy. If refusing, it must notify in writing with clear reasons.

iv. For investment projects are approved by the Management Board of the economic zone, the Management Board of the economic zone decides on approval for the investor simultaneously with the investment registration certificate.

1.3 Registration for a deposit account

After obtaining the Decision on Investment Policy, investors register a deposit account with the DPI. Investors must deposit the number of their deposits into accounts or obtain guarantees from credit institutions or foreign bank branches established under Vietnamese law on deposit obligations.

As a result, the deposit level is calculated as a percentage of the investment capital of the investment project using the progressive principle as follows:

1. For capital up to VND 300 billion, the level is 3%;
2. For capital of over VND 300 billion to VND 1,000 billion, the level is 2%;
3. For capital of over VND 1,000 billion, the level is 1%.

The RSPS projects are discounted by 50% of the above deposits as they are subject to investment incentives for renewable energy investment projects.

2. Applying for an Investment Registration Certificate (“IRC”)

2.1 For the project is subject to Investment Policy Approval

The investors implement investment projects after the investment policy has been approved for investment projects that apply for Investment Policy Approval under Section 1.

To obtain the IRC, the investors must complete the following procedures at DPI:

1. Step 1: Submitting the Decision on Investment Policy and the investors approval;
2. Step 2: Receiving the IRC within 05 working days from the date of receiving the written approval.

2.2 For the project is not subject to Investment Policy Approval

For the project is not subject to investment policy approval, the investors shall submit the dossier under Section 1.1 to DPI to obtain the IRC.

The investors shall submit the dossier under Section 1.1 for operating investment projects, in which a proposal for investment projects is replaced by a report on investment project implementation from the time of implementation to the time of application for the IRC.

Within 15 days from the date of receiving the valid dossier, DPI must issue the IRC.

3. Applying for an Enterprise Registration Certificate (“ERC”)

Investors must identify industries and industry codes related to the RSPS projects’ implementation to register with the State agency.

3.1 Required documents

For a single-member limited liability company:

1. An application form for enterprise registration;
2. Company’s charter;
3. Legal documents of the legal representative; and
4. IRC (in the case of issuance of IRC).

For a multi-member limited liability company, a joint-stock company:

1. An application form for enterprise registration;
2. Company’s charter;
3. List of members for the multi-member limited liability companies; list of founding shareholders and list of shareholders being foreign investors for the joint-stock companies;
4. Copies of the following documents:

• Legal documents of the legal representative;

• Legal documents of individuals, members of the company, founding shareholders, foreign investors being individuals;

• Legal documents of organizations for founding members, shareholders, foreign investors being organizations;

• Legal documents of individuals, for authorized representatives of members, founding shareholders, shareholders being foreign investors being organizations and written dispatch of authorized representatives;

v. IRC (in the case of issuance of IRC).

3.2 Procedures for implementation

1. Step 1: Submitting an application at the Business Registration Office where the enterprise is headquartered;

1. Step 2: The Business Registration Office shall check the dossier and request for supplement (if any);

1. Step 3: Obtaining the ERC.

4. Applying for other operating licenses

4.1 Construction Permit (“CP”)

Pursuant to regulations, RSPS is considered as a construction under the prevailing Law on Construction. Thus, a must of obtaining the CP to proceed the installation is for a RSPS project.

However, some construction projects that are exempt from CP.

Depending on situation of construction works when installing RSPS, investors must obtain the following corresponding licenses:

1. New Construction Permit: issued for new projects, constructions, or projects, constructions that have not been commended but whose CP extension period has been expiry.

1. Repair and renovation permit: if the building where the RSPS system was installed has been granted a CP, but when installing the RSPS, changes are made to the original construction structure of the building.

After obtaining all compulsory permits, the project owner must send a notice prior to at least 03 working days in advance of the starting date of the construction, including the case of CP exemption.

4.2 Fire Prevention and Fighting System Certificate (“FPFSC”)

FPFSC is a compulsory license to operate the RSPS project as prescribed by law.

Depending on the specific cases, especially based on the scale of the project, the investor must first be granted a design approval certificate. If the RSPS project is implemented in an existing building that satisfies fire protection conditions, certification of satisfaction of conditions must still be applied for. Besides, if the design of an existing building has changed or the system installation of the new building has not been appraised design, the owner must submit a dossier on request for design appraisal to be granted the FPFSC. 

The results of fire protection design appraisal are one of the grounds for considering, approving planning, approving projects, appraising construction designs, and granting the CP.

The Police Department of Police Department of Fire Prevention and Fighting is the agency implementing the issuance of FPFSC.

Following the competition of the proceeding procedures, the investor shall register the connection registration and sign a power purchase contract with the Electricity buyer under the contract form and the electricity purchase price prescribed by the Ministry of Industry and Trade. However, Decision No. 13/2020/QD-TTg promulgating the Electricity Purchase Price Schedule takes effect for RSPS projects from 01 July 2019 to 31 December 2020 and there are no new guiding documents on the electricity purchase prices are issued. Therefore, investors who invest after 31 December 2020 must suspend the signing of power purchase contracts until issuing new guidance.

In summary, the RSPS project is currently being encouraged by the State of Vietnam to develop and receive many investment and tax incentive policies. In addition, investors must also comply with the registration procedures for operating and related licensing to ensure the implementation and development of the RSPS system in Vietnam.